Removing an Oil and Gas Lease

Do you currently have an old Oil and Gas Lease blocking the signing of a new lease which would produce different mineral formations on your property? If so there are some steps you can go through in order to possibly remove or amend the old lease, giving you the opportunity to begin profiting from other minerals under your property.

First, get the original lease.  Every lease is different with varying clauses and provisions. Once you have obtained your original lease you will want to thoroughly read your lease. Check each clause and provision to see if the Oil Company has continually fulfilled all of their leasehold obligations. It my be difficult to determine if the Oil Company has meet all of their obligations under your lease.  An experienced attorney can assist you in this process. However, the quickest way to determine if the lease should still be in effect is whether or not the lease has a well on it producing in paying quantities. Note: The lease does not have to be producing in paying quantities while in its primary term. This should be fairly easy to check since you as the lessor receive royalty checks from production. If you have not received a royalty check in a few years, there is a good chance the well is no longer producing. Keep in mind that it is possible for the well to be producing and for you to receive royalty checks, but for it to not be producing in “paying quantities”, evidenced by very small royalty payments. Finally, if you believe your lease does have production on it, the thing to look for would be a Pugh Clause. Most modern leases do have a Pugh Clause, but the majority of older leases will not. If you find a Pugh Clause they tend to be laid out fairly straight forward letting you know what formations might be available for release.

While finding a Pugh Clause or determining if your well is producing are two of the quickest and easiest ways to determine whether your lease is still being held, there are many more conditions which could void your lease. Unfortunately, the majority of them take quite a bit of time and effort to properly determine. Even determining “producing in paying quantities” can be difficult because it doesn’t have a set number. If you feel your lease has been voided by one of the above clauses, first contact the operator of the well/wells on your lease. Present to them why you believe their lease should no longer be in effect. The operator is required to inform you of what they believe the lease status is. Most likely they will do everything possible to claim it as an active lease, clearly being their best interest. If you still believe the operator is incorrect and the lease should no longer be in effect, seek an attorney who can thoroughly go through the lease and the evidence.

We hope this brief article can be of assistance to any individual seeking to terminate an Oil and Gas lease. Please remember that this article barely scratches the surface on possible situations for releasing an Oil and Gas Lease. Feel free to contact Sansone Howell PLLC with any questions you may have regarding the subject. We want you to get the full potential out of your mineral rights.