Out with the Old, In with the New. Clearing the way for your next oil and gas lease.

Written by Eric Holey

Many Ohio and Pennsylvania landowners signed oil and gas leases a decade or more ago, collected a bonus check, and never saw a drill rig. Years later, that old lease may still be sitting in your County’s Recorder’s office. Even if the lease has long since expired, an unreleased lease can cloud your title and cause real problems when a new opportunity comes along.

Most leases have a primary term, often five years, after which they expire unless the property, or land pooled with it, is producing or the lease has been extended. But expiration doesn’t clear the record on its own. If the prior oil and gas company or its successors never recorded a release of their oil and gas lease, the public record still reflects that someone else holds rights to your minerals.

That matters when a new operator comes calling. A company’s title examiner will flag the old lease, and many operators won’t pay a bonus or sign a new lease until the prior lease is cleared of record. At best, this delays payment. At worst, it opens the door to disputes over who holds the rights, or leaves you negotiating from a weaker position.

The solution is to act before an offer arrives. Review your deed and the county land records for recorded leases, memoranda of lease, assignments, and extensions. If a lease has expired, request a recorded release from the current lessee. If the company won’t cooperate or can’t be located, an attorney can pursue other remedies.

Once your title is clean, don’t simply sign the first lease put in front of you. Standard company forms favor the company. Key terms worth negotiating include the royalty rate and whether post-production costs may be deducted, the length of the primary term, pooling and Pugh clauses, shut-in provisions, surface use and restoration, pipeline and water rights, and indemnification. A lease can bind your land for generations, so understanding and negotiating its terms is one of the most valuable steps a landowner can take.

Contact Eric Holey, Esq. at MPL Law Firm to find out more: [email protected]. Eric is licensed to practice law in Pennsylvania, Ohio, New York and Oklahoma.