Warranty Clause


#1

Greenwing Energy landman, leasing for Canyon Creek, has been offering to lease Section 32-2N-9E Coal County. Landman says Canyon Creek is no longer leasing unless the lease has a warranty clause. When I said I was not willing to sign a lease warranting title, he said: then you will be forced pooled.

Has anyone else come across this demand and what sounded to me like a threat.

Has anyone had an offer from another company.


#2

I went round and round with Greenwing in Coal County over a number of clauses including the Warranty Clause. We finally settled on: ** Lessor limits her warranty of title to actions in, by and through herself only. No other warranty expressed or implied is made. **


#3

I don’t like warranty clauses in a typical lease. Most people have not completed an mineral title opinion and are in a poor position to warranty what they don’t know. In this situation I would rather be force pooled.


#4

We never grant general warranties on anything we lease, sell, or assign. Even if you have a title opinion (which most mineral owners do not have) it could be inaccurate or the operator’s attorney may have a different opinion. If you have to grant a warranty, the best thing to do is to limit to a special/limited warranty (“by through and under grantor/lessor”) so that you’re only on the hook for anything in title that may have occurred during the time in which you owned. It looks like that’s what you’ve done here.

In Oklahoma, operators don’t have to do very much at all in order to reach an agreement to lease you prior to applying at the OCC for pooling. Some of the smaller owners will never even get a phone call, they may just receive an offer letter and that’s it, which will satisfy the requirement.


#5

Did they ever pay you