To Have and To Hold option on proposed draft contract

I have a proposed "draft contract" from Terra Services (EQT) in which I have mineral rights for 1.2958 acres in Wetzel County, just north of Pine Grove. On one hand they tell you that their first contract on the 140 acre parcel just to the north of the 124 acre parcel now in question was for 10 years, but this contract is "only" for 5 years. But then they have this "To Have and To Hold" provision that says that at any time during the life of the 5-year contract, they can decide to extend it another 5 years by simply paying you the same "signing bonus" they just gave you for the first five years. So they're essentially saying that if they strike it rich on your property during the first five years, they'll hang around another five years but only give you what they initially gave you to do exploratory drilling in the first place! Is this standard contract language or is this something I can demand to be deleted?

Alan, you can require that the option to renew be deleted from the lease. However, I remember reading that just lining through something in a lease does not remove it from the lease automatically.

I answered your other question with a suggestion that you get an attorney involved, and that would help with this part as well.

If you read some threads on this site, and on some of the other county groups (Doddridge and Tyler for example) there might be some helpful information.

If you have relatives who are also owners of interest in this and the other tract, you could try to get them to work with you in getting an attorney. You could split the fee, and the more net acreage the more clout you have..

Like Nancy said, you can demand that the automatic extension be deleted. However, that doesn't mean the lease will expire in five years. An oil and gas lease (in fact, all oil and gas leases that have ever been signed) will continue in force as long as there is production from the property or royalties are being paid. So if they drill and produce before any time before that five years is up, the lease will continue for as long as production continues.

As a side note, you can cross out language in the lease and that will be effective as long as both you and the company sign the lease that way. I'd initial next to anything you cross out and have the company do so, too.

The usual method for making changes to leases these days, however, is to put new clauses into an Addendum. The company will usually only cross stuff out if it's a simple change that's easy to see, like an entire paragraph. It makes it easier for lease analysts to review a lease ten years from now and determine what it says more quickly than having to read every word of the lease.

Thank you very much for your response. This also brings up another potential problem in the contract called "Shut-in Payments." In that paragraph (just below it) the term "Secondary Term" comes up, which is defined in the "To Have and To Hold" provision just above it -- the one that I will cross out in the lease. The Shut-in Payment would essentially apply after the 5-year "Primary" term of the lease contract. It says that if their "lands pooled or unitized. . . are shut-in. . . for at least 90 consecutive days, Lessee shall pay a shut-in royalty equal to $5.00 per net mineral acre of the Leased Premises annually, but prorated on a monthly basis; said payments shall keep this agreement in full effect." My reaction to that was -- are you kidding me? That means they can dawdle around on-site as long as they want after the first five years, and what they would pay me thereafter wouldn't buy me lunch at SUBWAY. It just seems like the Shut-in Payment provision, with its dependency on being strictly defined within the "Secondary Term," (To Have and To Hold) already slated to be struck out in my mind in a future contract, and particularly since it says that if they make "Shut-in Payments," it automatically extends the lease -- I just don't see how or why it would be in my best interests to incorporate a "Shut-in Payments" provision into a forthcoming contract. Now if the Shut-in Payment was something substantial, something that would actually provide them incentive to renegotiate, sell their lease, or do something other than take advantage of the lessor, then I could understand its importance.