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August 20th, 2015
As the oil and gas industry continues to develop throughout the tri-state area, I have continued to receive more and more calls from people asking for help with their leases and potential lawsuits. While many oil and gas leases are complex, I thought it would be informative to do a small series regarding some of the basic legal aspects of oil and gas law.
One of the most common misunderstandings I hear while talking with clients is “my lease is only for five years.” In mineral rights leases, the type of lease that is used to by oil and gas companies, there is almost always a “primary” and “secondary” term. The primary terms is the length of time established in the lease and agreed upon by the parties. The primary term is usually five to ten years and many people believe this is the entire length of their lease. However, when leasing mineral rights, a person must be aware that the oil and gas company will more than likely not be done with your property within this primary term.
The secondary term is the amount of time the lease carries on after the primary term. While all leases are different, in many leases, the oil and gas company is required to produce oil and/or gas, or the property must be operated by the company in the search for oil and/or gas, during the primary term. If the oil and gas company does not work on a property during the primary term, the lease expires.
However, if the oil and gas company does start operations during the primary term, the lease continues past the primary term of five years (for example) and enters the secondary term. You might be wondering, “how long does the secondary term last?” While the terms of a lease govern its length, secondary terms usually last for as long as oil or gas is being produced in paying quantities. Generally, this means that a lease will last for as long as oil or gas is still being taken out of the ground. We have cases where the old leases have lasted up to 100 years because oil and gas was still being removed, despite the fact that it was a small amount.
At Bordas & Bordas, we have mineral rights attorneys that specifically focus on landowners’ oil and gas rights. We have many oil and gas cases where individuals were not being paid correctly, their land was being used when the oil and gas company did not have the right to do so, and many other diverse issues. Many times, a person’s mineral rights may be their most important asset and selling that asset without understanding every aspect of the lease has lost many people their property rights and significant sums of money. If you have any questions regarding your oil and gas rights, always feel free to reach out to one of our attorneys for a free consultation.
