I’m coming up on the end of the three year primary period in an oil & gas lease. The lease gives the Lessee an option to extend the primary period for another two years, and there have been no oil and gas activities related to this lease whatsoever over the term of the lease so far.
My question: Does the Lessee publicly record their decision to execute (or not execute) the extension option? If the Lessee doesn’t execute their option, is there any value with me recording a document stating such so that other companies understand my property is no longer burdened by the O&G lease?
You don’t say which state your lease is located in. In Texas the lessee generally doesn’t record anything showing an option was exercised, and lease memorandums recorded at the beginning of leases often don’t say whether an option is part of the lease term stated in the memo.
Regardless whether or not a lease includes an option to extend, once a lease expires the mineral owner should request that the lessee record a release in the same county deed records where the original lease was recorded, or to provide a signed original of a release that the mineral owner can record.
Releases are simple documents that describe the original lease and confirm it is no longer in effect. Companies may drag their feet on providing them, and I know one company that’s refused to provide one unless it is specifically required in the lease. It’s good to insist on that requirement being a part of the special provisions addendum when you are negotiating the lease. I think it’s also logical to require notice be provided of any lease assignment so you’ll know who to request a release from if the lease expires.
Thanks for the information, Dusty1. I’m in Texas (Lavaca County) and the recorded Memorandum of Oil & Gas Lease does specifically mention the term extension option. I know the lease has been transferred/reassigned once (the original lessee failed to notify us of this transfer per the terms of the lease) so I’ll need to track down a point of contact with the current lessee if we get to the point of requesting they file a release.
You may already know this, but often the only thing you receive showing the option has been exercised is a check for the additional bonus, assuming that is required in the lease.