Over the years I’ve heard plenty of people complain about not being able to find executed oil and gas leases of their predecessors in title. Out of sight, out of mind - until they have something come up whereby it’s needed.
Oil and gas companies seem to have made it standard practice to file Memorandums of Leases as, err…, standard practice - maybe filing actual leases a year or two or three or ? later. They’re just acting in their best interest to not let others know what they’re up to - so be it, that’s unlikely to change. However…
Why wouldn’t it make sense for citizen mineral owners to spend the $30 or $40 bucks to file a fully executed lease themselves? So what if it makes it easy for the few who may ever be interested (who mostly already have a good idea of the terms anyway) to observe?
Seems to me you’ll be shoring up access to lots of detail that can be of service to your heirs. Moreover, this brings to mind another important element of the transaction, that of getting a fully executed copy of your lease into your hands in the first place. That has to be thought of at the time of the transaction.
I’ve mentioned a few pros, what might be the cons?
Todd, people lose things. People, especially heirs, can’t find wills or important papers.
The heirs won’t be able to find these leases, or understand the significance.
Recording a lease is important, (actually the owner may need to file an affidavit stating that the attached is a true and correct copy of the lease since the company probably has the original document).
I had a case where all we had was a memorandum and it wasn’t until litigation that the original lease was produced. The owner had died, and his son couldn’t find it in his father’s paperwork.
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The state isn’t looking after it. Once it is of record, then any heir or other oil company can determine the terms.
If a third party company wants to lease deep rights, it is easier on them to look at the records than to contact the mineral owner to look at the lease.
Also, what happens when the lease gets lost?
Another huge problem is that so many mineral owners sign the single original lease form sent by a landman and do not even make and keep a copy. They simply fail to understand that this is a legal document governing their royalties and property rights for decades. Also when the leasehold and related wells are sold, sometimes the buyer oil company does not receive full records from the seller and so will not have a copy of the lease to provide to the mineral owner. So when only a memorandum is filed, it can create multiple problems into the future.
Better yet, demand duplicate executed originals at consummation of the trade. Everyone walks away from the closing table with what they want. I’m afraid it’s a true fact that most citizen mineral owners do not understand the need for, or demand, an original executed document, and industry certainly isn’t going to promote that understanding.
Since your original post didn’t refer to a particular State, the same standards may not universally apply, but in Texas I think you’ll find 1) Only the Lessor/mineral interest owner signs the lease and getting back a fully executed original will require a specific provision being added, and 2) Leases often specify only a memo can be recorded.
Holding out to recieve a fully executed original and the right to record it are always possible, just like your right to say you won’t sign unless the special provisions include a Favored Nations Clause and getting the well logs. But if you make those deal killers you better have a bunch of negotiating leverage or be ready to be left out of the lease block.
Depending what NARO’s seminar suggests, maybe a majority of mineral owners will start pushing that idea, but until that happens I wouldn’t put it at the top of my negotiating priority list.
There is no reason why a lease should not be signed by both lessor and lessee and this is not an uncommon practice in Texas. Mineral owners should insist that there be 2 originals executed by both lessor and lessee, one for each party, if a memorandum is to be filed. That will provide better proof of the terms of the lease in the event of a dispute, as opposed to a lease only signed by the lessor.
@TennisDaze Yes, yes to executing 2 originals. 100% agree.
After about a week now, no one has provided any reason for the Lessee (mineral owner) to NOT file the lease themselves. Might you have a comment on that?
This seems to be a circular discussion. Best practice scan a copy of the executed document and maintain consistent digital files. I suggest Google Drive as a good option, but select a reliable repository and document the system. If you want something for litigation, then originals must be retained.
If a mineral owner has a real good lease that they use or have had to pay an attorney to prepare they might not want to file it, other than the memorandum. Why pay several thousand dollars for the lease and let someone else copy it for free?
You execute an OGL and Memo at the same time, so maintaining a copy of each is sufficient. You should request copies of the recorded documents be supplied as best practice.
It’s a good idea to even make hard copies of the Cashiers Check for the bonus money. Back up all documents up to “the cloud” that you use and copies to the Executor of your estate copies possibly.
