Lease signed in Texas on 9/14/2011. Primary Term 3 years. Has an Option Period for 2 additional years with additional bonus payment due "on or before" Primary Term expires.
We have had no correspondence, written or oral from Lessee and no additional payment. Are we correct in assuming lease is over and we are free to lease to another company? Is there anything we have to do at this point?
Thank you,
Dell
Dell: It has been my experience that the Operator pays the bonus, on the option to extend, about a month prior to the expiration of the leases primary term to drill. If there is no bonus paid prior to lease expiration of the primary term then the lease has expired and you are free to lease with another Operator.
Thank you very much for taking the time to respond! I appreciate you sharing the information on your experience with this type of issue.
Sincerely,
Dell
Mike Igau said:
Dell: It has been my experience that the Operator pays the bonus, on the option to extend, about a month prior to the expiration of the leases primary term to drill. If there is no bonus paid prior to lease expiration of the primary term then the lease has expired and you are free to lease with another Operator.
Dear Ms. Thomason,
There is most certainly something for you to do at this point. Send to the Land Manager of that company a Demand Letter by certified mail, demanding that the lease be released in proper form. There is confusion among some people on that term. Release does not mean lease the lands again. It means to release or relinquish or to confirm termination of their ownership in the lands and the lease.
The "Release of Oil and Gas Lease" should be filed at the courthouse where the property is located. This gives you no cloud on your title.
As a service to you and others on this board, attached is a form letter for release. If you are not entirely confident in its use, consult an attorney. This should not be construed as the practice of law, but an example of forms available at oilandgasleaseforms.com. Moderators, I only put the website in to prove that this is from an existing publishing house and not as any type of advertising. Please delete as needed to conform to the terms of service.
Best
Buddy Cotten
Thank you very much for the suggestion! I will take a look at the form today. Our family will all be together tomorrow, so this is perfect timing to discuss. Thank you for your participation in this website!
Dell
Buddy Cotten said:
Dear Ms. Thomason,
There is most certainly something for you to do at this point. Send to the Land Manager of that company a Demand Letter by certified mail, demanding that the lease be released in proper form. There is confusion among some people on that term. Release does not mean lease the lands again. It means to release or relinquish or to confirm termination of their ownership in the lands and the lease.
The "Release of Oil and Gas Lease" should be filed at the courthouse where the property is located. This gives you no cloud on your title.
As a service to you and others on this board, attached is a form letter for release. If you are not entirely confident in its use, consult an attorney. This should not be construed as the practice of law, but an example of forms available at oilandgasleaseforms.com. Moderators, I only put the website in to prove that this is from an existing publishing house and not as any type of advertising. Please delete as needed to conform to the terms of service.
Best
Buddy: In the situation I described to Dell in my case we did receive a release from the Operator when the option period had expired. The question is does the mineral owner need to file this with the County Courthouse or did the Operator do this? We received a written notification of the release. Also would any landman be able to determine if the lease had expired without the release notification? Thanks.
Dell,
There is another reason to follow Buddy Cotten's advice. The lessee or assigns, in their opinion, may have triggered one or more of the provisions in the lease that allow them to hold the lease past the primary term. Obtaining a RELEASE, as Mr. Cotten defines it, then recording it will confirm that lessee or assigns no longer has any claim on your minerals. Both you and and the public will then know that the lease is officially terminated.
The wording of the "DEMAND" is important. It should not be a request and should provide for the event that it is ignored.
Dell,
Thanks for bringing up this question. These are all good answers and suggestions by Gary, Buddy and Mike.
And thanks Buddy for the 'Demand for Release Document'.
Thanks,
Clint Liles
Thank you all for participating in this discussion. I don't know if this makes any dfference, but there has been no activity on the land. No seismic, no surveying, no testing, no drilling....the company has done nothing on or around the area. I see no way they could think some provision was keeping the lease active.
Dell
Dell:
IMHO, the advice that Buddy gave you is sound and excellent advice. It has been awhile; but, I have had similar situations come up, once on an oil lease and twice on pipelines ROW's. As Dave said, this is usually covered in the lease if the lease went through an attorney that was worth his salt. You might look in your lease just to see if there is a release time frame already there. Even if there is a set time for them to give you a release, often times they just forget or push it to the back burner until you send the demand letter.
I believe this is or should be a very good learning experience for all of us. Make sure there is a release clause in the lease and that there is an escalating penalty associated with not getting a release within a certain time period following receipt of the demand letter. Usually 15 days before the penalty starts.
Good Luck!
Dell Thomason said:
Thank you all for participating in this discussion. I don't know if this makes any dfference, but there has been no activity on the land. No seismic, no surveying, no testing, no drilling....the company has done nothing on or around the area. I see no way they could think some provision was keeping the lease active.
Dell
I will read through the lease again to see if there is a release provision. I don't remember seeing one, but will check again! Thank you!
Bigfoot said:
Dell:
IMHO, the advice that Buddy gave you is sound and excellent advice. It has been awhile; but, I have had similar situations come up, once on an oil lease and twice on pipelines ROW's. As Dave said, this is usually covered in the lease if the lease went through an attorney that was worth his salt. You might look in your lease just to see if there is a release time frame already there. Even if there is a set time for them to give you a release, often times they just forget or push it to the back burner until you send the demand letter.
I believe this is or should be a very good learning experience for all of us. Make sure there is a release clause in the lease and that there is an escalating penalty associated with not getting a release within a certain time period following receipt of the demand letter. Usually 15 days before the penalty starts.
Good Luck!
Dell Thomason said:Thank you all for participating in this discussion. I don't know if this makes any dfference, but there has been no activity on the land. No seismic, no surveying, no testing, no drilling....the company has done nothing on or around the area. I see no way they could think some provision was keeping the lease active.
Dell
Dear Mike,
A three year lease with an option to extend for two years is no different than a 5 year lease with one rental payment due at the end of year 3.
I would not buy a lease with what appears to be a lease that can be valid. I would need a release first. That may be just me, but clients will never forgive a landman for buying a bad lease.
There are more reasons to do so as well.
I have always felt as if it were the oil companies responsibility to file the release, but in the demand letter you could certainly put in words to the effect "demand that you file a release of this lease is Jack County, Texas and provide us with a copy to evidence same.
Best
Buddy Cotten
Mike Igau said:Buddy: In the situation I described to Dell in my case we did receive a release from the Operator when the option period had expired. The question is does the mineral owner need to file this with the County Courthouse or did the Operator do this? We received a written notification of the release. Also would any landman be able to determine if the lease had expired without the release notification? Thanks.