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Avoid the Top 10 Mineral Lease Mistakes

Knowledgeable Houston Oil & Gas Lawyer

When an oil or gas company wants to drill materials from a piece of land, they will often lease the mineral rights from the landowner. Because a mineral lease can have a huge impact on companies and mineral rights owners, negotiating the terms of an oil and gas lease will require time, effort, and extensive knowledge of oil and gas law. Although mineral leases can often be a lucrative source of income, jumping into a mineral lease without fully understanding the terms can have terrible consequences.

If you are facing a mineral lease dispute, are entering into a mineral lease, or are relatively unaware of your mineral rights, the Houston Oil and Gas Attorney at Herring Law Firm can help. Below, the firm has provided the top 10 mineral lease mistakes they see clients make and how to avoid them. If you have any questions or concerns about your oil and gas lease in Texas, it can be beneficial to seek out professional help from Herring Law Firm. After you've read the firm's advice for how to avoid common mineral lease mistakes, consult the attorney from the firm regarding your specific situation.

Know What to Avoid & What to Consider in Your Oil & Gas Lease

  1. Take Time to Consider Other Options - Many mineral owners are under the misconception that they must agree to the terms of a lease right away. When you are not informed of your rights - especially your right to not accept a lease - the result could have ruinous effects on your property. This is certainly one of the top mistakes that Herring Law Firm sees, and the firm always encourages clients to consider other options and other terms. Doing so can ensure that you are not taken advantage of and that every part of your lease is negotiated to uphold the integrity of your property, protect your mineral rights, and establish profitable price points.
  2. Always Read the Fine Print Before You Sign - As with any contract, Herring Law Firm always encourages clients to read the fine print of a lease agreement before signing anything. Once signed, your mineral lease will be a legally binding document that must be honored. Failing to completely review and understand your lease agreement could have the potential to lead to unnecessary litigation, such as breach of contract disputes. Negotiating a leasing agreement should involve careful planning, strategic preparation, and thorough organization.
  3. Price Check & Shop for Other Offers - Even if you think that you are hitting the jackpot with your lease agreement, you must practice the art of patience. A mineral lease extends far beyond royalties and bonus payments. If you agree to a lease simply because you think you are getting the best deal, you could end up hurting yourself in the long run. Other terms related to mineral leases can be just as important as royalties and bonuses. It never hurts to check and double-check other offers to make certain that you are receiving the best possible deal for your specific circumstances.
  4. Know Who You Are Dealing With - If someone has tried to contact you regarding a mineral lease, it is generally wise to know who you are dealing with before proceeding. Just because someone has contacted you does not mean that they are specifically from the oil and gas company. Once you determine whether you are dealing with the oil and gas company itself or a leasing agent, broker, contractor, middleman, or entrepreneur, then you can begin to make steps toward negotiating the best possible deal.
  5. Do Your Research - In addition to knowing who you are speaking with, you should consider researching other wells, mines, or other resources in your area. Once you are familiar with the interest of other wells within the vicinity, you can have a better chance of negotiating a more lucrative lease agreement. Typically, Texas Oil and Gas Production Regulatory Agencies can oversee oil and gas activity in your area. Searching for things like wells, mines, production data, or names of operators in your area can inform you of values so that you stay protected and do not agree to anything that robs you of the true value of your assets.
  6. Consider Tax and Estate Planning - Although a mineral lease can protect your rights and your property, there may be some element of risk involved. One disadvantage that a mineral owner may experience when leasing his or her oil and gas rights is damage to the property during drilling. Tax and estate planning tools can be used to protect your general assets. Consider different tax and estate planning options that can safeguard your interests in the unfortunate event that your rights are compromised, your property is damaged, or your lease agreement fails to be as beneficial as you had originally hoped.
  7. Understand the Importance of Timing - If you would like a well drilled on your property or if you have been contacted regarding drilling for the minerals on your property, you must understand when to agree to a lease. Signing a lease too quickly could result in you agreeing to minimal royalties or unfavorable terms. Timing and research are essential, so enlist a professional to help review a lease, evaluate all offers, and strategically time your "yes" or "no" answer to your advantage.
  8. Pay Careful Attention to Whom You Are Leasing - Once the timing is right, you must consider competition rates, bonuses offered, and the company's reputation. Entering into a lease with a company that has minimal to no merit could potentially be disastrous. Making certain that an oil and gas company has professional relevance can help ensure that you also reap financial gains from a lease agreement. Remember, you do not have to accept a lease agreement with the first company that offers you a deal, so shop around and always do your research.
  9. Demand Separate Oil and Gas Leases for Separate Tracts of Land - When you enter into a mineral lease, you want to negotiate terms that can help minimize future risks instead of increasing the likelihood of future problems. One of the greatest mistakes that a mineral owner can make is agreeing to a single lease for multiple tracts of land. By establishing specific leases for each piece of land, work on one site can remain unaffected by problems that arise regarding a different site. If all tracts are covered in one lease, then one problem with one tract could hold up production, drilling, and progress related to all lands included in the lease, even if the problem would not affect the work at other sites.
  10. Retain a Skilled Attorney - Putting everything in writing will be essential when you agree to a mineral lease, and an oil and gas lawyer can help. A legal professional can help negotiate the terms of your lease agreement so that you can walk away with more money in your pocket whenever possible and help protect your property and rights. Ultimately, an attorney can help all parties reach the ultimate goal of creating a mineral lease that establishes mutually beneficial terms. Not all elements of a mineral lease have to be handled by a lawyer, but enlisting an attorney early on can help you expedite aspects of the process and avoid making costly mistakes.

Learn more valuable tips by calling Herring Law Firm today!

In addition to avoiding the common mistakes described above, there are countless valuable tips to keep in mind when negotiating an oil and gas lease. Of course, there will be terms that vary in each situation, so not all pieces of advice will apply to every case. When you call Herring Law Firm, your lawyer can go over specific tips that can work to your advantage in your unique situation.

Protect your interests. Contact Herring Law Firm today!

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