or months. The secondary term is the time period af- ter the primary term, when the lease is held in force by production from the lease. So a typical lease will contain a clause that reads, ‘This lease shall remain in force for a term of 3 years and for so long thereafter as oil, gas or other mineral is produced from the leased premises.’ No production or exploration is necessary to keep the lease in effect during its primary term. The length of the primary term is one of the main points to be negotiated between the Lessor and Lessee.” Before signing a lease, landowners may and should
insert a Pugh clause into the agreement to protect their interests. The Pugh clause states that the lease shall terminate in all non-producing areas when the primary term ends or terminates.
Surface issues should be dealt with in a separate agreement.
Negotiating the lease “Today, we want to see the minerals developed on
a property in the most effi cient and productive way,” Lucas says. “Agreements should be a win-win situation for the oil company as well as the landowner. If either party gets greedy, an agreement won’t be reached. The landowner and production must work together to make an agreement successful. “When a landowner negotiates an oil and gas lease,
the only right that needs to be granted to the produc- tion company is entry to the property for building pads, drilling, completing the wells and producing,” Lucas explains. “Surface issues should be dealt with in a separate
agreement. A surface agreement can be an addendum to the oil and gas lease, but it should never be writ- ten into the lease. It is best for a landowner to supply the lease form. If an oil company form is used, strike out the unacceptable terms and write the changes in an addendum. Rewriting an existing form is never a good idea,” he says. Unless a property owner is experienced in oil and
gas leases, get professional help to negotiate an agree- ment.
LEXINGTON Livestock Commission
Sale Every Saturday 12:00 Noon
David Shelton
SALE EVERY SATURDAY 10:00 a.m.
P.O. Box 565
Gonzales, Texas 78629 Mobile: 830-857-5394 Offi ce: 830-672-2845 Fax: 830-672-6087
Lexington, Texas 78947 Russell Heller: 979-773-4738 Steven Heller: 512-446-6895
979-773-2244 or 979-773-2922 Fax: 979-773-4798
P.O. Box 186 66 The Cattleman July 2015
thecattlemanmagazine.com
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