Lessee rights to use free of cost, gas and oil produced

I have received an offer for a 3/16 share for Grady Co. [Section 1, 5N, 6W] that seems similar to others from Apache Corp. However, in the lease offer they state:

Lessee shall have the right to use, free of cost, gas, oil and water produced on said land for its operations thereon, except water from wells of lessor.

Is this "standard"? I would hope they would remit a percentage of all oil gas and water produced. This seems totally unfair. Does anyone else have this sort of "kudo" to the lessee in their contract?

Thanks in advance. Everyone here has been most helpful

I tried to stike the same clause from the lease - but Contenential did not agree for that - I haven't signed my "new" lease agreement yet - it should be arriving this week. So I also could use some ideas about that.They did allow me to add the "free" royalty clause - just asked.Update: Yes a seperate surface rights leas/ contract will be made if they need access to our land. Thanks, Susan

I would not give them free water. The water may be worth more than the oil and gas. The water belongs to the surface, not the subsurface or minerals. If the operator insisted on the water, I would just wait for and make an election under the pooling, which will not give the operator the right to free use of your water. Operators want a lot of freebies these days, water, pipeline easements, electric easements. I would just ask what they offer for an oil and gas lease, not easements, house, car rental, no hunting or fishing, no swimming, just oil and gas because that is all they are offering a royalty on and not all of that, since they have free use of oil and gas on the premises.

Your personal water is reserved. If you want to strike the clause completely then get ready to haul or sell saltwater.

I would strike the oil, but allow them use gas for processing and pumping. If you only own minerals, then the water is a moot point.

Feel free to correct my seeming thoughts.

Tom, brine is a byproduct of oil/gas production and must be disposed of. What pray tell use do (you) think they would have for brine on the lease? I take the wording I saw to mean that they could drill a water well, free of cost. You do know that they could drill a well and it could make your own water well unproductive? Maybe you should re-read the part about "except water from wells of lessor".

In case I was unclear, the wording means to me free use of fresh water, not brine or they would not have included the language "except water from wells of lessor". The lessee is just looking for a freebee. The water may be more valuable than the oil and gas.

I can think of only one use for brine on lease and that would be in the mud mix to drill a second well, the likelihood that I would decline to allow this use of brine would be astronomically low in the event they decided to drill a second well and I doubt they would think they need to ask or gain permission beforehand to use the brine.

Tom Ed Moore said:

Your personal water is reserved. If you want to strike the clause completely then get ready to haul or sell saltwater.

I would strike the oil, but allow them use gas for processing and pumping. If you only own minerals, then the water is a moot point.

Feel free to correct my seeming thoughts.

r w

I agree with you. I was being the devils advocate. If I owned the surface, no well could be drilled for fresh water. One day, brine may be marketable if that's the only available source.

I'm waiting for 28 7N 5W where we have a 53 acre impoundment ready to be sold.

r w kennedy said:

In case I was unclear, the wording means to me free use of fresh water, not brine or they would not have included the language "except water from wells of lessor". The lessee is just looking for a freebee. The water may be more valuable than the oil and gas.

I can think of only one use for brine on lease and that would be in the mud mix to drill a second well, the likelihood that I would decline to allow this use of brine would be astronomically low in the event they decided to drill a second well and I doubt they would think they need to ask or gain permission beforehand to use the brine.

Tom Ed Moore said:

Your personal water is reserved. If you want to strike the clause completely then get ready to haul or sell saltwater.

I would strike the oil, but allow them use gas for processing and pumping. If you only own minerals, then the water is a moot point.

Feel free to correct my seeming thoughts.

Tom, I believe that brine is already marketable, that there are minerals of some value in it but that the production far exceeds the demand so most of it goes down a hole.

I believe I had a discussion with Mineral Joe in which if I remember correctly he was not getting paid for brine because his lease was merely for oil and gas. I was concerned about a similar issue in ND about the installation of turbine generators to take advantage of gas that would otherwise be flared. The gas would be used onsite and the mineral owner probably does not have an electricity lease. I wish all wells flaring gas had generators even if the mineral owner did not get paid for the gas used, there would be such a glut of electricity that the price would plummet and cheap energy is good for the economy and the American people, too bad our power grid has not been state of the art for more than 60 years and could not handle it.

I said I would rather see all wells flaring generating electricity even if the mineral owners did not get paid for the electricity, if all wells did it, I would consider it fair or at least in the public interest. If it is just done piecemeal, I think the mineral owner should get a cut at least for electricity sold.

Tom Ed Moore said:

r w

I agree with you. I was being the devils advocate. If I owned the surface, no well could be drilled for fresh water. One day, brine may be marketable if that's the only available source.

I'm waiting for 28 7N 5W where we have a 53 acre impoundment ready to be sold.

r w kennedy said:

In case I was unclear, the wording means to me free use of fresh water, not brine or they would not have included the language "except water from wells of lessor". The lessee is just looking for a freebee. The water may be more valuable than the oil and gas.

I can think of only one use for brine on lease and that would be in the mud mix to drill a second well, the likelihood that I would decline to allow this use of brine would be astronomically low in the event they decided to drill a second well and I doubt they would think they need to ask or gain permission beforehand to use the brine.

Tom Ed Moore said:

Your personal water is reserved. If you want to strike the clause completely then get ready to haul or sell saltwater.

I would strike the oil, but allow them use gas for processing and pumping. If you only own minerals, then the water is a moot point.

Feel free to correct my seeming thoughts.