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Keep Your Minerals Safe: Considerations for Leases

June 2008

By Judge Jeff Cox

First, the landowner should try to protect standing timber, ditches, drainage, crops, roads, gates, and fences. When an oil company comes on the land to explore for oil, they are not worried about what is on the surface. The oil company needs to be responsible to restore the land to as near a condition they found it in when they started their operations. In the lease, the landowner might consider placing in language that provides a licensed forester or appraiser will determine any damages to the property. In addition, the oil company should be responsible for maintaining any roads and making repairs to any roads on the leased property.

Second, a landowner should consider having language in the lease that states that the oil company will be responsible for any oil or chemical spills on the property due to their operations. Landowners do not want to be left holding the bill for a cleanup if a spill occurs. Further, the landowner should consider putting in the lease that the oil company is responsible for the cleanup of any slush or salt water pits used during their operations.

Third, the landowner should consider that if the leasee drills to a certain depth, that other sands below that depth are excluded. The landowner also ought to consider that if lands outside a unit are not being used, that those lands can be excluded from the unit. This will keep the lessee from tying up other lands that can be re-leased or that can be explored for oil and gas deposits.

In addition, the landowner needs to remember that water is becoming a valuable resource. The landowner should consider including in the lease that any water that is needed for drilling operations can be used. However, any water that is found cannot be marketed and sold by the lessee on the open market as drinking water.

Finally, the landowner needs to consider making a reservation of other types of minerals such as sand, clay, gravel, coal, and lignite. If these are found on the land, they can be sold separately from the oil and gas lease. Some of these minerals can bring as much money as oil and gas. As such, a separate lease would be needed to cover mining of these materials.

As always, it is a good idea to consult an attorney before entering any contract. The items mentioned above are just considerations. An attorney can guide you and hopefully keep your land and minerals safe for generations to come.

Jeff Cox is the 26th Judicial District Court Judge for Bossier/Webster Parishes, Division C.