In a word, no. At one time, the “Producers 88” form was considered a standard lease, but today, there are numerous types of lease forms used by the various oil and gas companies. If you are in a situation where you are negotiating with a land agent and he or she says, “It's a standard form,” ask them to clarify. The company they represent may have a “standard template” they use to generate the lease that is presented to you, but each mineral lease has variable characteristics and clauses, thus each one usually differs from the next.
Types of Oil & Gas Lease Forms
At a broad level, there are generally two types of oil & gas lease forms, the difference based upon the timing of the lease bonus payment(s). The type used most often by oil and gas companies today is known as the “Paid-Up” lease. In this type of lease form, no bonus payments are due from the company after the lease is signed... you get 100% of your lease bonus money combined with the annual rental payments up front.
The “Rental Lease” is the other type, and is not as commonly used today. In this type, the lease, can lapse if the rentals are not paid in a timely manner by the company (usually on the anniversary of the lease), therefore terminating the lease.
Before the boom in shale gas began around 2005, rental leases were more common. With oil and gas companies less certain of the likelihood of finding hydrocarbons, land could be leased relatively inexpensively. Bonus amounts were often $5 - $10 per acre per year, with a lease term of five to ten years and royalty percentage set at 12.5%. Today, with improvements in technology spreading across the country allowing for more determinable results, oil and gas companies are more convinced as to what a property is likely of producing (and so are mineral owners).
Now lease bonuses tend to range anywhere from $100 - $5000 per acre and sometimes more, based primarily upon competition between companies. The value can rise quickly if a shale formation in the area has been proven to produce at substantial rates. The length of the primary term in leases has gotten shorter as well, averaging 3-5 years.
Primary Elements of an Oil & Gas Lease Form
As mentioned earlier, there is no standard form for a mineral lease, but most leases have similar elements:
There are usually several additional secondary clauses in most oil and gas lease forms, and a mineral owner that has done his or her research will sometimes have those clauses, (not listed here), added to their lease. We will go into what some of the secondary clauses are in an upcoming article.
What Happens After a Lease Form is Signed?
After the lease is signed and before a well is drilled on the tract of land, a full title examination must be performed. Running title is necessary to confirm the specific owners who actually own the minerals under a particular tract of land. This is usually done by landmen who work on behalf of the oil and gas company. In earlier times, one individual often handled the leasing process from cradle to grave, but more recently land companies assign a group of landmen to do the leasing, another group that performs title checks, a different group that negotiates surface agreements, and so on.
It sounds simple, but running a title chain can be complicated - sometimes very complicated. The landman looks to see if the property was deeded correctly from the time the land was conveyed to the first owner, all the way forward in time to present day. He will make sure there are no liens, no inheritance or family issues, no lawsuits, no other disputes, no past due taxes, etc. Once this process is complete, the oil and gas company can move forward with drilling. Before you begin receiving royalty checks, you'll get a document detailing your ownership in the proposed unit. You can learn more in the article: Understanding Oil & Gas Division Orders.
As you can see there is no “standard” form for an oil and gas lease form. Each lease differs in clauses contained, duration, acreage, royalty percentage and so on. With due diligence on your part as a lessor and communication with the land agent, you can sign a lease that will please you. Hopefully, a well is drilled ,and provides extra income for you and yours for years to come.
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