Definition breakdown of a Lease

There are different types of surface-use contracts. There’s the Right-of-Way (ROW), that the Lessor (landowner) grants to allow the Lessee (company wanting to get the ROW) to go into and out of the property, but the Lessee isn’t allowed to leave any equipment or other permanent fixtures on the land. A ROW can be either a contract for a specified length of time, or it can be long term. Either kind will specify in the contract if a monthly, annual, or periodic payment (like every 5 years, for example) to keep the ROW Agreement alive. The ROW Agreement will state all of that directly in the document.

Then there is the Easement Agreement, which the Grantor (landowner) can give to a Grantee (company) that will allow the Grantee to go into and out of the property, but also will allow the Grantee to install fixtures (like a pipeline, for example). An Easement Agreement typically is long term, any many of them have language in them allowing for automatic renewal at the end of the first term (and subsequent terms). An Easement Agreement typically calls for one payment, up front, to cover the entire term of the agreement (5, 10, 20 years typically).

The third common type of surface contracts I’ve worked with routinely in my work as a division order analyst in the oil industry is the Surface Lease. A Surface Lease usually is taken for the drillsite tract, but also to place storage tanks, or to allow an equipment storage yard. Again, the term can be short (like 1-5 years), or longer, such as 10 or even 20 years. And like the other two types of surface agreements, I’ve seen them call for monthly, annual, or periodic payments less often than every year.

So, take a look at the agreement the Grantee/Lessee is offering. What does it say about payments? Or, if you are in the negotiation process, the “payment plan” is something that needs to be negotiated between the Grantor/Lessor and Grantee/Lessee.

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