Judon Fambrough's 10 Things to know when leasing
Judon Fambrough, a professor at the Texas A&M Real Estate Center, has taught oil and gas law since 1977.
Fambrough is an expert in the field and he ranges across the state speaking to landowners about what they need to know when signing a mineral rights lease or dealing with a pipeline.
He recently spoke in Gonzales and here are some of the things he highlighted in his talk:
1. Unless specified in your contract, a mineral rights lease in Texas goes to the center of the earth. If a company is leasing your minerals, be sure to say what part of your mineral rights you are leasing.
2. Unless your lease says otherwise, the oil company has an automatic use of surface rights for the land the mineral rights are leased under.
3. When leasing your mineral rights, minerals in Texas include five substances: oil, gas, uranium, salt and sulfur. Always limit the lease to associated hydrocarbons that can be retrieved through a borehole. Don't allow mining, and specifically deny any rights to coal, lignite, iron ore and uranium.
4. There is a difference between conditions in a lease and covenants. If you have conditions, these are requirements that have to be met or the contract is voided. If a company breaks a covenant, you have to take it to court to prove it and try to make it uphold its agreement. It's hard to get conditions, but try for them. They're legally stronger.
5. Always go over a lease with a lawyer you trust. Put anything you want the company to do, or not do, into the lease. The provisions written into a lease are the most likely way of getting what you want.
6. Unless you negotiate otherwise, one well on your land, or on land with which you have been pooled, holds all the leased premises to the center of the earth as long as production continues at any depth on any portion of the land.
7. If you own both surface and mineral rights to your land and you don't protect the surface rights with the contract, you are in the same position as someone who doesn't own the minerals. What the company can or cannot do to your land should be in the lease.
8. All clauses in a lease are subject to negotiation.
9. The biggest problem with an oil and gas lease is not what it says, but what it does not say.
10. Generally, the first offer isn't the best offer, so don't be in a hurry. Have the company define any terms you don't understand.