Is this typical lease language?

Oil and Gas Leasing Help
1

Recently received an agreement for review for brine leasing in southern Arkansas.

The lease I received states that the term is for 10 years, but will automatically renew as long as the lessor continues to make royalty payments (and if it should renew, it renews for 25 years).

Is this type of language normal? I have never had a lease agreement span for 25 years. Thanks everyone.

2

For what it’s worth, I bought some Columbia County, Arkansas minerals last year and received a copy of the seller’s brine lease from 1995 (with Albemarle). It was a 25-year lease. I hope someone here can share relevant (and recent) experience, especially with the lithium-from-brine developments over there. Hopefully you’re in one of the lithium territories and the Arkansas Oil and Gas Commission will reach a lithium royalty decision in the coming months.

Cheers, Nick

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3

In my experience this is not normal. The 10 year initial term is longer than typical. Three to five years would be more typical. After that, the lease should remain in effect for so long as the well(s) are producing “in paying quantities”. Once production ceases, the lease should expire in 12 months. This gives them a reasonable time frame to return the well to production in the even of some kind of mechanical problem.

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4

Thanks Steve. I’ve talked with others who also believe the 25 years was abnormal. We’re making a counter on the lease now, we’ll see how that goes.

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5

A brine lease is not the same as an oil and gas lease. You should have it reviewed by an attorney who is familiar with brine leases.

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6

Depending upon the state, mineral owners cannot lease the brine, only the surface owner or the operator owns the brine. I have seen some very poorly worded leases that confuse the different types of ownership on the same lease, so definitely a good idea to get an experienced attorney look at the lease.

7

Thanks Martha! It’s in the hands of an attorney now for review.

8

Please update us sometime if you can. I’m very interested in South Arkansas brine activity (personally, not professionally). Hopefully you get a favorable outcome here!

9

Upon the recommendation of our attorney, we declined to sign the lease after the lessee would not make material changes in the terms.

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