The Confidentiality Clause
Oil and gas documents may include a provision obligating a land or mineral owner to keep the terms of their agreement confidential. While once seemingly limited to only atypical situations, these clauses seem to be showing up in surface use agreements and oil and gas leases with increasing frequency.
Is the inclusion of a confidentiality clause an appropriate request from an oil and gas company?
Many companies will cite confidentiality clauses as crucial to protecting the integrity of their remaining negotiations. The suggestion is that perhaps you have received a better offer than your neighbor and that they don’t want you telling everyone in the neighborhood and raising the stakes or prices in the area.
Conversely, one might argue that the cards are already stacked against the land or mineral owner in the negotiations so why does an oil and gas company need this too? If a land or mineral owner is relying solely on his or her neighbors (or maybe the county forum pages of the Mineral Rights Forum), for negotiations, then the sharing of information on lease terms, bonus, and royalty are crucial to their negotiations. If the sharing of information is prohibited, then such land or mineral owner may not have much to go on and additionally, may not be able to add anything for anyone else to benefit from at the conclusion of their negotiations if they are subject to a confidentiality clause.
Have you or would you agree to a confidentiality clause?
Confidentiality clauses are often placed near the end of a document and may or may not be noticed by a land or mineral owner. If you happened to spot that confidentiality clause, would you or have you asked for its deletion? Asking for exclusion of a confidentiality clause has a certain element of advocating for the “greater good,” in that you are seeking to use your experience to benefit others with the information you gained. For this reason, it may not always be on the radar to delete.
If you asked for deletion of a confidentiality clause, what response did you receive to your inquiry?
Companies who have already taken the time to add this clause, may be hesitant to delete it. However, it does seem that in the scheme of overall negotiations that asking for the deletion of a confidentiality clause isn’t likely to be a deal breaker for the oil and gas company, especially given that if no agreement is reached then it would be unlikely that confidentiality could be imposed on the ill-fated negotiations anyways.
Jenna H. Keller, Esq.
Attorney at Keller Law, LLC. (www.kellerlawllc.com)
Jenna H. Keller defends property rights and provides legal services to farmers, ranchers, rural property owners, and severed mineral interest owners in the areas of estate planning, natural resources (oil, gas, wind), real estate, and water.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.