What does it mean on a Typical lease, " Lessee shall have the right to use free of cost, gas, or and water produced on said land." What does that cover? What does that NOT cover? Applies to any OK County. Seems to show up on checks for many years. I appreciate any clarification. Thank you thank you.
I can give some historical background and why I strike that clause now. Not giving a legal opinion.
In the “old days”, this clause was used for shallow, cable tool wells and sometimes residual gas was used to go to a gas stove in the homeowner’s cabin or driller’s trailer or drip condensate was used for certain engines. Not sure what water was used for since it generally had chemicals in it.
Today, I strike the clause because the wells can produce at much higher rates and I do not want any of my products to be siphoned off without being paid for them. For example, excess gas that has no pipeline can be used to power flex fuel generators on site for the additional drilling, frac crews or for bitcoin mining operations. I have heard that the generators can power the electric grid for the wellsite and in some cases may be sold to the power grid -probably without paying the mineral owner. (from a NARO convention speaker) When I was a young roustabout, I heard stories of water tanks on site being skimmed for the oil that that was then sold without paying the royalty owner, etc. Today, frac water is being recycled and used again. Most of that water is originally fresh water that may come from onsite wells. I would like to be paid for the use of my water, if taken offsite and used again. The surface owner gets paid for any pond water, I want to get paid for my freshwater if from a well. The ownership of that water varies from state to state. Just examples of an old clause that has been interpreted differently as time goes on.
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You are such a wealth of information. I needed clarification on that sentence in our leases too and good answer. I will start striking mine as well. Thanks for all your knowledge sharing. It is so helpful to so many of us. I have been doing this for a while but I’m still learning. Bravo to you for sharing so much time with us.
I cannot recall if I ever replied to you but thank you so much for that info! very helpful. Ken Salowe
Here is an interesting update on that clause. I am in OKC at the NARO (National Association of Royalty Owners) national meeting. We had a fascinating speaker yesterday who was talking on Solar Farms, Cryptocurrency Mining and Carbon Sequestration. On the CCMining, that very clause came up. If you have it in your lease, then you will not get paid for any flared or used gas that is burned to generate electricity to run generators that power trucks full of computers that running to mine for cryptocurrency such as bitcoins. Very interesting talk.
During the legislative update session this morning, another item came up about who owns produced water. (May vary from state to state) Apparently, lithium and other rare minerals can be extracted from the water, so you don’t want to not get paid from that if it is found to be owned by the mineral owner. Water can be treated and used for other purposes such as water to frac again, agriculture use or possibly even potable water. Could be become quite valuable. We may need new clauses in our lease to handle, wind, solar, CCMining, use of water and carbon sequestration. New technology driving new wording!
I had a lengthy discussion with Mr. Cotton on this site about old leases some years ago. This is the very thing that should make old leases obsolete. No one could have known these things could/would come up.
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