Oil and Gas Law Lease Operations

November 15, 2021
Many families in Oklahoma who have lived here for a while or have family property here own mineral interests. Many have adhered to the adage "never sell your minerals," but what happens if you don't want to sell or lease your minerals? It happens all of the time. For example, a landman has approached you and wants to lease your land to extract oil, gas, or other resources sold in the market. Should you take the offer?

Let's start with the basics. 

What is an oil and gas lease?  An oil and gas lease is an agreement between a mineral owner and a company in which the owner grants the company the right to explore, drill and produce oil and gas. These leases are created so that property owners can maintain their mineral rights. At the same time, while leasing their land to a company to drill.

What if I decide not to sign the lease? 

If the company is still interested in drilling on your property, they will want to compel you to make a decision.  If a company cannot reach an agreement (an oil and gas lease) with a mineral owner after a good-faith attempt the company may file an application for a pooling order with the Oklahoma Corporation Commission. This application pools the owner's interest with other mineral owners who have not leased to move forward with drilling the well. If you have received a Pooling Application, it will inform you of the hearing's date, time, and location.  As oil and gas drilling continues in our state, pooling proceedings are becoming more common. As a mineral owner, you have options; however, the time frame to exercise those options is usually limited.

Next steps

If you have received notification that you are subject to a pooling proceeding, the responsibility is then on you and your attorney to take action. Leasing your land to an oil company is an individual choice. On a case-by-case basis, oil leases should be analyzed, negotiated, and even counter-offered. Always consult an expert who understands oil and gas law before signing a lease.