Wasco Lease Renewal

I am representing my mother-in-law in negotiating a lease for mineral, oil and gas rights on the east side of Wasco and adjacent to Rose Field. As a new member to this forum, I would like to thank people for all their previous postings which have proved to be most interesting and informative.

The extension of the current lease which has been offered by Maverick Petroleum for Vintage Production (as would be expected) is very lessee friendly. The renewal offer was for 5 years at $35.00/acre for 80 acres with a 1/6 royalty. This seems on the low side as several new drill permits in the area of my mother-in-law’s land have been issued. Recent activity in the area indicates that horizontal drilling and fracking will be employed. Some of the proposed drilling will come within a few feet of the property lines.

I am seeking information about where I might find copies of leases that contain more lessor friendly wording and clauses to use as a starting point. I feel it will be good to compare two types of leases to come up with one that is more equitable for the lessor and will also help to decipher some of the lessee’s legalese.

The current lease includes wording which makes any lessor royalties subject to any production costs, and fees that the lessee may incur for clean-up, water, and waste removal, etc.

I would like more information about:

  1. Horizontal and vertical Pugh clauses
  2. Pass-through rights
  3. Clauses that would offer environmental, water, and surface restorations protections for the lessor
  4. Is it possible to find out if one’s land is being pooled and what other acres are within a pool?
  5. Does anyone know about the current interpretation of the Rule of Capture under California law?

Any help or suggestions would be appreciated.

Welcome to the Forum.

You do not mention the percentage of interest that your mother-in-law holds in the 80 acres. This is necessary because Vintage, and almost all other oil companies, will be unlikely to agree to significant changes to their lease from a minority interest holder.

If they will agree we typically start with the lessee's form and revise it accordingly. If your mother-in-law owns the surface then surface provisions may be appropriate. The pooling clause typically allows pooling without further lessor approval. It is unlikely that Vintage will agree to a consent provision in this regard, but you can try. A declaration of pooling is required when they do pool, however, so you will know when this occurs.

Lessor royalties cannot typically be subject of production costs but can include such costs as dehydration, transportation, and other marketing costs. Typically, Paragraph 10 of the Vintage form discusses what costs can be charged to the lessor's royalty.

Regarding horizontal and vertical well development, typically paragraph 6 sets forth the development requirements regarding spacing for either type of well. This is fairly standard here in Kern County.

Even if your mother-in-law owns 100% of the mineral interests in the 80 acres, that is not a lot of land in terms of oil development these days but would give her some ability to negotiate with Vintage on the terms of the lease. If she owns less than 100% then such negotiations are less likely to be available to her as Vintage may not agree to such changes.

Hope this helps!

Jean-

Thank you for your informative response. My mother-in-law does hold 100% of the MOG rights on nominal 80 acres (78.81) in Sec 6 T27S R25E. I will look over paragraphs 10 and 6 and see how to proceed.

You have been most helpful.