Whether you are the owner of land in California or the representative of a company interested in accessing the resources that may lay below the surface of a particular piece of property, it is important for you to understand how agreements between these parties may work. When entering into any contract involving the rights to a mineral, whether rock, oil or something else, great care should be taken to identify the fine details in order to prevent future disputes.
As explained by Geology.com, a mineral rights contract may be structured in a number of ways. One option is to establish a lease that grants access to the land for a limited period of time. The intention here is that a company can use this time to explore and test the viability of any resource presence and production opportunity during this time. At the end of the lease period, they may pursue a purchase or walk away and all rights then return to the land owner.
Another option is an outright purchase. This, however, does not mean that production would commence immediately. It may take decades before this happens. It is therefore essential that the contract stipulate how a mineral rights owner may access the land and the resources beneath the surface.
If you would like to learn more about details that are important in contracts between land owners and those interested in accesssing potential resources from the land, please feel free to visit the mineral and surface rights page of our California oil and gas law website.
If you are a California landowner, signing a oil and gas lease can be a profitable proposition. However, the negotiation process can be complex and time-consuming. Typically, the proposal to you favors the producer. At Ehrlich, Pledger Law, LLP, we have the expertise and experience needed in negotiating and preparing the lease documents.
According to MineralWise, one of the most important things not to do is show your enthusiasm to the leasing agent. An emotional response often signals you are ready to sign whatever documents they supply. In doing so, you may not get the best terms and miss out on a great deal of potential upside.
Although economic considerations are often atop the priority list, they are not the only aspects that require your attention. The terms related to surface usage can be critical. Make sure you read and understand the implications in the agreement. Everything is negotiable, so do not be afraid to address your concerns.
Depending on the situation, a single lease sent by the leasing agent may encompass the rights for several non-contiguous tracts of land. As the lease is typically signed for many years and development is a dynamic process, it is in your best interest to separate the tracts into separate agreements. This can reduce or eliminate issues that crop up later regarding whether the tract is held by production from another tract.
Additional tips include the following:
Do not respond that you are not interested. This could result in being force pooled.
Delete the warranty clause, especially if there are concerns regarding the property’s chain of title.
Do not spend the money before the lease check clears the bank.
Do not make absolute statements, such as naming an acceptable minimum dollar amount per acre. It may minimize your negotiating position.
The proposal package from the leasing agent often contains bank drafts, leases and ratification. These documents are legally binding. Do not sign them until the discussions and negotiations have concluded. Visit our webpage for more information on this topic.
The oil and gas industry in California are booming and is highly competitive. Interested natural gas investors are constantly scouring the industry for opportunities to capitalize on potential discovery opportunities. Investors who intend to be successful and remain in the industry as respected leaders must be strategic about delegating responsibilities and making the types of business decisions that will allow them to make competitive movements.
One resource that they can utilize in bringing their vision to life is a contract service provider. According to HACCP Mentor, contract service providers are responsible for giving some type of service to investors that further facilitate their achieving of organizational objectives. Often, the tasks they choose to delegate are ones that could be time-consuming or require competencies that they do not have enough of.
Contracts are a critical part of hiring service providers and allow investors to designate responsibilities and requirements. In these documents, both parties will find clearly written guidelines of what is expected of each other, as well as information about what process will be followed if the contract is breached at all.
Service contracts can be valuable to industry leaders and can provide the following services according to Inc. including shorter lapses of time between different tasks, specialty services that are provided by experienced professionals and the ability to take a standard idea and scale it faster because of focused assistance. Because of undivided attention to certain components, service providers may be able to help natural gas investors to avoid problems with their deals by recognizing them before they become a nuisance.
When you are dealing with oil and gas transactions in California, a great deal of time and communication will go into creating agreements and implementing protocols designed to protect both parties from being taken advantage of. One of the measures you may use to protect your assets is an operating agreement. The purpose of this negotiation is imperative to your ability to confidently and legally continue doing business with another party.
Can you imagine how frustrating it would be to do business with another entity without a contract of some kind? Contracts allow you to clarify important terms, designate responsibilities and verify the conditions under which the contract is valid and usable.
According to the U.S. Small Business Administration, an operating agreement serves a few important purposes including your ability to have, in writing, the agreements and conditions that you and the other party decided on verbally. While a verbal agreement creates the foundation for an ongoing relationship, it is important to get that same information in writing to use as a reference if there is ever a disagreement between anyone.
A properly formed, written and maintained operating agreement can protect your assets, your company and your own personal liability. It is also legally binding which is important if your contract is ever breached. Because of the binding nature of a secure agreement, you can be confident in your ability to get compensated for damages if your contract is breached by another party. The information in this article is intended for educational purposes only and should not be taken as legal advice.
For many people in California, a decline in the amount they have to pay for gas prices is a welcomed site. People often still discuss how foreign it seems to pay less than $1 for a gallon of gas, but everyone agrees that those days have long since passed. However, what many people may not realize is that a drop in the price of gas has both positive and negative effects.
Throughout the history of America, there have been times when lower gas prices were primarily favorable, but with the drastic changes to the nation's economy throughout time, lower gas prices can have far-reaching effects in more than one way. As the largest producer and consumer of oil in the world, the natural resources industry in the United States can have startling effects on several other notable industries when it fluctuates.
When gas prices drop lower, Americans may be celebrating the surface positive of paying less for gas. However, behind the scenes, it is an indication that oil prices are declining which ultimately leads to job loss in that sector. With a steady decline in the oil industry, other industries may soon begin to feel the nagging effects. In modern America, lowered gas prices can significantly negatively influence the economy. According to a study completed by the American Petroleum Institute, 10.3 million jobs in the nation are rooted in the oil industry. As such, a continuous decline in gas prices can potentially translate into an exponential loss of jobs and an adverse effect on the economy.
If people are looking into investing in the oil and gas industries, they may benefit from working with an attorney. Legal professionals have experience that enables them to understand the challenges of investing in such a volatile industry.
When you are first starting in the oil and gas industry, chances are you will encounter many learning curves as you gain experience in buying and selling your assets. At Ehrlich Pledger Law, LLP, we have helped many people in California to protect their assets and work through complications with contracts that may have been misinterpreted.
As with any type of business, your involvement in the oil and gas industry allows you access to many assets. Often, it requires hard work, strategic movement and time for you to gain assets and transform them into fully functioning components of your business. The way you choose to go about investing in the industry and the way you utilize your strengths will affect the type of assets you ultimately choose to purchase.
According to azcentral.com, there are three primary types of assets you could choose to invest in including downstream, upstream and midstream. Downstream assets will be components that are as close to the end user as possible. For example, natural gas liquefaction plants, oil refineries and other types of storage facilities for oil and gas. Upstream assets are trading rights for oil, gas and mineral discovery. Reserves that are already found and are in the ground are also considered upstream assets. Midstream assets are methods that facilitate the processes designed to get natural resources to a usable state. These assets include transportation efforts and storage facilities.
When you understand the different types of assets that you can invest in within the natural resources industry, you can decide where you would like to put your efforts into building your successful enterprise. For more information about oil and gas law, visit our web page.
While states like North Dakota may have received a lot of attention in recent years when it comes to domestic oil production, the fact remains that the state of California continues to be a major player in this market. If you are involved in this industry, you will know just how regulated this business can be and how important it is that your company follow appropriate laws and guidelines. For this reason, it is important to have a good understanding of what the Division of Oil, Gas and Geothermal Resources is and what its scope is relative to your activities.
As explained by the California Department of Conservation, the DOGGR was first established more than 100 years ago to promote safe operation and extraction of natural resources from California's land and ocean bounty. The agency has responsibility for all onshore wells statewide as well as all wells in the Pacific Ocean located within three miles of the California coastline.
Any request for approval to drill in the DOGGR's area must be initiated by filing a Notice of Intent to Drill. This may be done confidentially but requires a company to provide the rationale for keeping this information confidential. Once a notice has been filed, the business has two calendar years to initiate the actions before the notice expires.
If you would like to learn more about how to work effectively with the Division of Oil, Gas and Geothermal Resources when managing your oil and gas business, please feel free to visit the DOGGR compliance page of our California oil and gas law website.
If you plan to lease your land for the purpose of oil extraction in California, there are several heavy considerations you must make before signing on the dotted line. Your contract with the oil and gas company should address those considerations. Though every case is unique, and though you should always consult with an attorney before signing over the rights to your property, PennState details several components that all oil and gas lease contracts should include.
According to the paper, you and your attorney should first determine the actual length of the lease. This may not be as cut-and-dry as you might think. Depending on the language of the contract, the length of the lease may be the primary term of the lease, which is typically five years, or it may extend into a secondary term so long as production is still active. If a secondary term is necessary, it is usually as long as the primary term.
You should also take a look at the incentives for leasing your land. Most gas and oil companies offer a bonus for signing the contract, but what payments you should expect beyond that depends on the language of the lease. Some companies may try to get away without having to pay rental fees, royalties or delay fees. You can maximize your profits by ensuring that the language of the lease includes ongoing payments.
Other conditions to which you should pay close attention are those regarding subsurface and surface rights. If you are not careful, you may unwittingly give the gas and oil company permission to use heavy equipment, underground explosives, oil rigs and other equipment to search for more minerals. If you do not want your land torn up, you may want to negotiate for more limited access.
Finally, you may want to reconsider the standard automatic renewal option and replace it with a right of first refusal. This gives you the option to deny a second term or, if you agree to a second term, renegotiate for better benefits.
The information in this post should not be construed as legal advice. It is for purely educational purposes.
Ideally, the agreement between a mineral rights owner in California and an oil and gas company to drill a well should be a mutually beneficial arrangement. The oil company has the equipment and expertise necessary to reap the bounty of your estate, and you get a percentage of the profits. According to MineralWise, however, the value of your mineral rights can vary widely on the basis of several different factors, some of which you have little to no control over.
The commodity prices of gas and oil are not only among the most obvious factors contributing to the value of mineral rights, but they may also be the most variable as prices fluctuate on a nearly daily basis. You can continually monitor changes in oil and gas commodity prices on the New York Mercantile Exchange.
As with residential real estate, the location of your mineral rights holdings matters greatly. Your mineral rights value will be higher the closer you are to known hydrocarbon accumulations according to the study of geology.
The more land you have available to lease, the higher your mineral rights value will be because it is easier, cheaper and therefore far more desirable for oil companies to lease a large tract of land than a small one.
Finally, mineral rights have a higher value when they are currently in production. The value of nonproducing minerals comes from their potential, while the value of minerals under production stems from the current cash flow that they generate.
The information in this article is not intended as legal advice but provided for educational purposes only.
We have focused on many aspects of oil and gas disputes on this blog, such as some of the reasons why business owners find themselves in the middle of a disagreement. As the owner of an oil and gas company, you should also think of the potential consequences associated with a dispute. Aside from financial headaches, you may face serious and potentially long-term complications depending on how the dispute plays out in court. Across the state of California, it is pivotal for oil and gas company owners to be prepared for these setbacks.
Regardless of the factors that have led to a dispute, the way in which your company handles this difficult situation could have an impact on the future of your firm. Sometimes, disputes can be resolved relatively effortlessly and simply communicating with those involved in the dispute can help reduce tensions and settle the disagreement. This is certainly not possible in every dispute and some can be extremely contentious, with very strong emotions and even negative media coverage.
If an oil and gas company is unable to resolve a dispute successfully, they could face massive financial consequences. Moreover, they may miss out on opportunities that would have led to incredible growth. In some instances, oil and gas companies have ultimately been forced to shut down because of a difficult dispute. Our oil and gas producers page covers some other legal considerations that oil and gas companies may want to review in order to avoid or address these tough situations.