I’m going to assume this is in Oklahoma since I remember you posting in some Oklahoma groups, because so many things are state specific.
My opinion on these answers is based on generic overviews and is not meant to help you negotiate your lease. I’m sure not an attorney and how these things might impact you might be best discussed with an attorney.
- In layman’s terms, what exactly do you expect to gain or prevent from the assignment clause? How will you be “damaged” without these notifications?
- Why do the documents have the be certified?
- What penalty do you expect if they are not in compliance?
- Are you willing to litigate if the lessee fails in the performance of that clause?
- Why would you care if the Lessee places a mortgage on their ownership of their lease.
- What are you gaining from the clause that the Oklahoma Production Payment Standards Act does not already cover? OK §52-570.10.
- What penalty do you expect if they are not in compliance? And how do you expect to enforce it.
- Are you willing to litigate it?
Some people seem to think some of these clauses will make their lease invalid automatically if the lessee is not in compliance with some of these clauses. I also see them place clauses that might be less restrictive that implied covenants or statutory governance that already define this. Does this mean their clause has less “teeth” than it would otherwise have if the clause was not there?
So lets say they drill a well with a 640 spacing. with 2.878788 NMA and 3/16 lease, you would have a Decimal Interest in the well bore of .00084339 If they sell $10 million in product over 24 months, your payments would average $351.41. At a 12% rate, 1 month interest would be $3.51. How much is your time worth to argue on a late payment and to try to collect $3.51? Sure that first 6 months of production might be closer to 1/2 of all of the total 12 months of production. So you would be getting $4216.97 on that first check. One months interest on that total would be $42.17.
And the bottom line is, are you willing to stand by these provisions so strongly that you fail to reach an agreement with the lessee? I feel the assignment clause places an unnecessary and costly burden on the lessee in most cases. A lessee that agrees to this clause, might not have any intention of ever fullfilling the requirement of the obligation and rely on the lessor to enforce or attempt to enforce it. I don’t think you would ever find an attorney that would advise trying to use failure to perform these clauses to break the lease.