Whether you’re a seasoned mineral investor or just dipping your toes into this arena, understanding the ins and outs of active oil and gas leases and how to enforce key terms with a lessee is crucial.

For instance, some leases specify that lessor royalties may not be burdened by post-production costs, typically transportation, processing, and marketing expenses. A lessee may owe the mineral owner additional payments if the costs have been improperly deducted. The law on many of these costs and what magic language allows or prevents such costs from being deducted is ever-evolving. Have you looked at your lease lately?

A lease may also contain a Pugh clause, requiring a lessee to release undeveloped portions of the land after the primary term. Armed with a comprehensive understanding of their Pugh clause, a lessor can monitor development and take advantage of opportunities to renegotiate their lease or entertain offers on new leases.

Any investor acquiring mineral interests subject to a lease should carefully study the terms and ensure compliance. At RR&A, we can help you analyze your lease to determine if your lessee is in compliance. Contact us today!