The size of the words on a page don’t always convey their true meaning.
Oil and gas lease clauses are no different.
There are a lot of moving pieces in oil drilling programs. The amount of equipment, people, and surprises that come with drilling wells is staggering.
This makes oilfield logistics extremely complicated. Managers across the oil patch put in long hours to ensure everything is in the right place. Time is money, so every operator wants to be as efficient as possible.
Sometimes it works, sometimes “the devil is in the details”.
Oil and Gas Lease Clauses: Mise en Place
Mise en place is an old french chef’s idiom. It means “putting in place”.
The saying refers to the way chefs arrange their ingredients in the kitchen for efficient and accurate execution of every dish. It’s also somewhat of a philosophy of life for many chefs. They like to invoke the saying as a fundamental life philosophy:
Mise-en-place is the religion of all good line cooks … As a cook, your station, and its condition, its state of readiness, is an extension of your nervous system … The universe is in order when your station is set up the way you like it: you know where to find everything with your eyes closed, everything you need during the course of the shift is at the ready at arm’s reach, your defenses are employed. If you let your mise-en-place run down, get dirty and disorganized, you’ll quickly find yourself spinning in place and calling for back-up.
— Anthony Bourdain, Kitchen Confidential
Oil and Gas Lease Clauses: Become Detail Oriented
As hard as oilfield managers and workers push to keep projects on schedule, the inevitable road blocks always seem to show-up. They want to get everything put in place, but the weak link doesn’t hold up.
One day you’re making great progress drilling a few hundred feet per shift, the next you’re spending the whole day “fishing” for a piece of equipment that unexpectedly broke off the drill string.
Enter the fine print known as oil and gas lease clauses. This is where the details make all the difference. Knowing the details will help you in a couple of ways.
Accurate expectations of the drilling process sets you free from anxiety. You don’t have to worry if things don’t go exactly to plan. That can – and does – happen when you’re drilling 5,000 feet into the earth.
It’s also important because oil and gas lease clauses contain the “primary lease terms”. This is the time an operator has to drill on your property. If they don’t drill within that time, they will lose your lease.
Oil and Gas Lease Clauses: Winning the Primary
Just like anything else in an oil and gas lease, the clauses are negotiable. Operators bet on Murphy’s Law, “Anything that can go wrong, will go wrong.”
In other words, they want to build in as much time as possible to drill on your property.
If an operator completes or abandons a well on your property, or if production from a previous well stops for any reason for up to 90 days before your primary lease term ends, most producers want to extend the lease for 90 days.
Often times, operators will add language to oil and gas lease clauses that cover them outside of the primary lease terms. This covers them for even more contingencies and builds in more time for drilling, completing, or reworking wells.
Oil and Gas Lease Clauses: The Buck Stops Here
As much as you can understand why an operator might want as much time as possible to drill on your land, it’s not always in your best interest. Just like any other industry, the oil business has its A Players and its B League.
Operators in the B League sometimes try to use the fine print to drag out the drilling process. Do your research and work with a professional who knows how to negotiate.
Then you will put everything in place. Most importantly, money in the bank.
Your Turn
What’s the best advice you have for new mineral owners about oil and gas lease clauses? Please leave a comment below!
