Hello. I’m in the process of negotiating w/CHK on a .289 acre lot in Cleburne, TX that my Father-in-Law bought as a HUD repo. A well has been permitted but not drilled. We’ve agreed so far on a depth clause, idemnity of the lessor, no warrenty of title by the lessor, 2500/25% royalty, 3/2 year. Were we are having a hang up is this: They have a perpetual sub-terrainian easement that would not terminate with the lease. They came back & re-worded it to state only for O&G & only while under lease. It doesn’t state under lease with whom so I’m going to assum with any company. To me, that would give them a great deal of control in the future if any other prospects for exploration develope in the coming years once the Barnett plays out. The reason the RedSky landman gave me for wanting the easement was " because they need to protect themselves legally in the future", and “in case they drill a dry hole”, etc. Well, I don’t see any legal issues for “needing” the easement. I told him that the lease provides for an easement for the duration of production, so why must it be perpetual? If they drilled a dry hole, which is very unlikly, the lease provides a 90 day period to re-work or commence anew. Any thoughts from anyone on this? Thanks
Joel
Are they wanting to run a pipeline under your property? Other than that, the rest of the terms are poor but comparable to what is being offered today.
Your basic assumptions also seem to be correct but you may want to invest in an O&G attorney given the fact that you’ll be stuck with whatever lease you sign. Remember, as the leassor, you have the right to demand your terms, too.
Thanks for your reponce. The bore is about 131’ outside of the property line. But they don’t need a perpetual easement for this or to bore under this property. The lease provides for that as long as production is in paying quantities. I just see in the years to come after the Barnett has played out them having some control over the minerals by vertue of haveing the never ending easement. We’re only dealing with .289 acres. After giving this more thought, I don’t think we are in a strong negotiating position. I just wanted to get some input regarding other’s expierince with this type of easement. thanks again.
Jim Colley said:
Joel
Are they wanting to run a pipeline under your property? Other than that, the rest of the terms are poor but comparable to what is being offered today.
Your basic assumptions also seem to be correct but you may want to invest in an O&G attorney given the fact that you’ll be stuck with whatever lease you sign. Remember, as the leassor, you have the right to demand your terms, too.
NOT LEGAL ADVICE
Dear Mr. King,
I have encountered this language before, and you are very astute to have noticed it in your lease language. The only reason I can think of that they want to make it “perpetual” is so that if your unit has a dry hole or the production plays out, then they can still transport product beneath your property to market from a neighboring drilling unit or even one much further away. It seems like they should pay for an easement. In fact, easements are usually separate legal instruments, with a separate payment. I think I know the going rate for a pipeline easement but won’t speculate because I am not up to date on that aspect.
Sincerely,
Philip Wynne