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Mineral Rights, Royalties, and Lease Agreements
Oil and gas is big in Texas, and this billion dollar industry is only getting bigger. With the implementation of new drilling technologies like hydraulic fracturing (hydro-fracking), areas that may have been deemed un-useful before are now booming with opportunity.
A primary example of this trend is the Eagle Ford Shale, a sandstone formation that stretches over a large portion of South Texas. Before the summer of 2008 it was just another shale formation, today it is the 8th largest oil and gas field in the world. There are now more than 26 oil and gas companies drilling from the formation, which is expected to yield 3 billion barrels of oil with potential output of 420,000 barrels a day.
The oil and gas boom in Texas is good for business, but could have serious implications for landowners. As the laws struggle to catch up with the lightening speed of technology, disputes over property rights, drilling, and lease agreements are bound to arise.
Lease Agreements with Drilling Companies
Most oil and gas leases work on a bonuses and royalties system. The surface estate owner signs a lease contract with an oil/gas company, allowing the company to drill on their land for a pre-determined amount of time. This contract outlines how much money the company will pay to the landowner for use of their land (royalties). From there, the surface estate owner is presented with an initial bonus check and, as time goes on, royalties as outlined by the lease contract.
Parties Involved
- The surface estate owner (the person that owns the land on top of the oil/gas)
- The mineral estate owner (often the same as the surface estate owner, but not always)
- Lessee of the mineral estate (usually an oil/gas company)
What are Oil and Gas Disputes?
Oil and gas disputes generally involve a mix of contract and property law, as applied to the possession and ownership of oil and gas. Oil and gas disputes often involve contracts, property damage, and mineral rights.
Common Oil and Gas Dispute Case Types
- Breach of Contract Claims and Contract Disputes – Negotiating oil and gas leases, general lease disputes, service agreement disputes, joint operating and operating expense disputes
- Property Damage Claims –Well and surface damage, reasonable use issues, fires/explosions, oil/chemical spills, contamination and pollution claims
- Mineral Rights – Mineral ownership rights below the surface, ownership of extracted oil and gas, royalty disputes
What is Your Land Worth?
In the complex world of oil and gas contracts, perhaps the most important part of the agreement is how royalties will be calculated. When negotiating the royalties portion of the contract, there are several choices for calculating payments- it can depend on the market price of the oil/gas or even the actual revenue received from the sale the of oil/gas. When signing a lease agreement, it is important to select the choice that will not only reap you the most benefits now, but will also protect you years down the road.
Some disputes over oil and gas leases stem from the fact that the value of the land being drilled on can increase as time goes by. Over time, oil and gas rich land can become more valuable, and since it is leased out by the acre for up to decades at a time, provisions should be in place to account for this. Additionally, with new technology changing the face of drilling (ex: hydro-fracking on shale plays) the land you are leasing out may become significantly more valuable in a relatively short amount of time. In either case, an experienced attorney can help make sure you are always compensated for what your land is worth.
Contact an Experienced Oil and Gas Disputes Attorney
Oil and gas disputes can be very complicated. Thomas J. Henry Injury Attorneys can help you through this difficult process.
Don’t let big oil and gas companies take advantage of you with confusing language or lengthy clauses. If there is a dispute, contact Thomas J. Henry Injury Attorneys immediately. You will be backed by the power and resources of a firm that can go up against the big companies and win.
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