The oil and gas industries play an unquestionable role in the financial success of the state of Texas and many people who live here. The ability to extract crude oil and gas resources and then refine them and sell them to companies and individuals generates a lot of capital in the state, including passive income in the form of unused oil and gas leases on private property.
These leases assign drilling rights to a company that can choose to install a well or other equipment on private property to extract mineral resources. The owner receives compensation regardless of what amount of oil and gas the company ever finds or extracts.
Whether you have recently purchased your property or only just discovered potential signs of valuable oil or gas deposits on family land, you might find yourself considering an oil and gas lease as a means of increasing your household wealth. Before you sign the first contract a company offers you, there are certain considerations you should negotiate for your own best interest and the protection of your property.
Look at how much control you give away to the company
Some businesses offer lucrative terms for oil and gas leases with the expectation that you will allow them to do just about anything they want if they utilize those natural resources. For example, in rural locations, a business could decide to perform construction at all hours of the night or leave pumps running at times that will disturb you and your family members.
You also want to look at their use of your other natural resources, including water. Allowing them unlimited access to your water could diminish the water table you depend on for your home and leave you vulnerable to droughts in the future. Additionally, providing water to the company may substantially decrease how profitable your contract is. It is usually better to require companies to provide their own water or to compensate you at a fair market rate for any water used.
Make sure there are reasonable terms that protect your rights as an owner
You don’t want to indefinitely sign off mineral rights on your land to a company. Setting terms for the lease — including a limit on how long the company can hold the lease and conditions that will allow you to terminate the lease — gives you more control as the property owner.
Ensuring that the company won’t be able to block your use of the land or leave you with responsibility for environmental damage that they caused are issues best addressed during the contract negotiation stage. Getting lease offers and quotes from multiple companies puts you in a more viable position for negotiating terms that best benefit you.