In the second term of the o & g lease, there is a reduction of acreage such as…300 acres reduced to 40 if lessee is only needing use of 40 acres for the next 5 years. This might be the Pugh Clause? Question–for pooling, wouldn’t we want the whole 300 in the pool? In the 2nd term, is it customary to ask for a higher rent? $45 mineral acre for 5 years and maybe $90 mineral acre for the 5 year extension? Is 1/6 net sometimes negotiable to 1/6 gross which is no deduction for expenses of transportation and / or processing? Any “smart” opinions? Thanx.
Bill:
Welcome to the forum. I do not know if I qualify as a "smart" opinion, but I am an oil and gas lawyer in Bakersfield and have a lot of experience in leasing from both land owner and oil company perspectives.
I presume, without confirming, that you own 300 acres. I do not know what percentage you have in this 300 acres, however. Your negotiating power typically depends upon the net acreage you hold. If the oil company is seeking an option to extend the primary term, they typically will offer an incentive to do so by offering a higher rental rate. 1/6th royalty is common now for secondary terms. You may be able to garner a bit higher, say 3/16ths if you own a significant percentage of the 300 acres.
I am unclear what you mean by the second term of the lease reducing the acreage. Typically, an oil company can reduce the acreage under lease at any time by simply quitclaiming its interest in the land that it no longer wishes to hold under lease. The provision you might be referring to may be one in which the oil company is required to continue to drill the lease and how many wells it is required to drill is set forth in the lease. Pugh clauses were included in leases (in Texas and elsewhere) to cover a historical problem whereby an oil company could drill one well and hold tens of thousands of acres based on that one well. In California, we typcially have a "drill-string" requirement whereby the lease does not automatically terminate as to undrilled land, but the oil company has an obligation to continue to drill the land until it is "drilled-up," which is defined based upon whether the wells drilled are vertical or horizontal.
Landowners need to remember that an oil and gas lease is both a grant of their real property to the oil company and a contract between them and the oil company. Thus, if you want something specific, it needs to be in the lease.
Pooling in California is not mandated by the State (unlike the Texas' Railroad Commission that sets forth forced pooling in certain instances). Thus, a pooling provision in a California lease allows the oil company to pool your lands without further consent on your part. This is typically fine unless you have a lot of acreage and then you would want to include that the unpooled land remains subject to the terms of the lease (thereby requiring the oil company to continue to drill-up the unpooled land).
Hope this helps.
JEAN M. PLEDGER
Ehrlich ▪ Pledger Law, LLP
661.323.9000
[email protected]
Cheers Jean–I have the whole 300 mineral acres. Is that a lot or a little? I’m curious about the lessor’s option for the 2nd term of 5 additional years. Am thinking of a counter offer to the O&G guy for a rent increase and a royalty increase in the 2nd term of 5 yrs. Is it normal to ask for a gross royalty vs. a net figure? Thanx for the comment–I’ll concede that you’re smarter than I…
Jean–your comments and suggestions have been huge. I greatly enjoyed our 2 telephone calls. You are welcome around my campfire, anytime–a great woman is hard to find…a great lawyer is even harder to find… Cheers
Hello Sorry if these questions have already been answered. I am new here and new to mineral rights. My family has been contacted to lease our mineral rights. As far as I know it is only 2 of us. My questions are:
1.) How do we know if more have been contacted?
2.) The for me says 320gross acres 80 net acres what is the difference between gross and net acres?
3.) Is $40. an acre and 1/6th royalty low? It is the first offer so I am guessing it is.
4.) If the lessee wants to stop before the 5yr will we need to return rents paid up front?
5.)Should we ask to get more per acre if the lease is extended?
Thank you for any help this is all new and don't want to rush into anything. :)
Hello Dear Fresno County Members:
Five relatives and I have been approached by Occidental Petroleum to lease our 311 acres of oil and mineral rights along the Monterey Shale. Apparently this involves very deep drilling. We are scheduled to meet with the leasing agent to negotiate a cost per acre for the right to lease and a royalty percentage. Are any of you members aware of a fair market
per acre lease value and royalty percentage in the Monterey Shale?
Any help would be very much appreciated.
Thanks,
Judy Ruskus
My sibs & I have been approached by Oxy Oil and subsequently farmed out to West Coast Land; they have offered $40/acre & 1/6 of recovered mineral, but I know that Oxy has paid as much as $150 and up to 20%. So, there should be room for negotiating.
I have a question: The land co. informed us we only own half of what our deed says. They won't give us a title report . . . how can I get one? I live hundreds of miles away--can I get one online from the Fresno Co. seat?
Suggest you call a title company in Fresno for a title report.
Judy ruskus