Many landowners sign quickly, only to discover later that deductions, unrestricted surface use, or weak reclamation language affect the long-term value of the land. Therefore, knowing what to ask before signing is critical. Asking the right questions ensures your property is protected, your compensation is fair, and the lease reflects industry-standard protections rather than assumptions that work against you.
Pay attention to the questions we cover here and make the right decision when signing oil and gas leases!
Why Asking Questions Matters?
Asking informed questions empowers landowners to approach leasing from a position of knowledge rather than uncertainty. Oil and gas leases contain detailed provisions that impact how mineral development proceeds, how delays are handled, how compliance is monitored, and what happens if production stops. Without clarity, landowners may miss opportunities to strengthen their negotiating position or secure additional protections that are common in modern industry practice.
Engaging with the operator through well-structured questions also signals that the landowner understands the leasing process and expects professional standards. This often results in more transparent communication, more explicit commitments in writing, and fewer disputes once drilling or production begins.
Top Questions to Ask Before Signing an Oil and Gas Lease
1. What Royalty Rate Is Being Offered and How Will It Be Calculated?
The royalty clause decides your long-term income, so it must be clear and transparent. Ask how royalties will be calculated, what deductions are allowed, and whether the oil and gas lease uses “market value at the well” or “proceeds” pricing. Simple wording that limits post-production deductions helps prevent reduced payments over time. Clarify how often royalty statements are issued and what information they must include.
2. What Is the Length of the Primary Term?
Most leases include a primary term that gives the operator time to begin drilling. If drilling does not start by the end of that term, the lease should expire. Ask whether the operator is seeking an extension option and, if so, how much they will pay for it. A shorter primary term can maintain your negotiating power if drilling does not occur.
3. How Will the Surface of the Property Be Used?
Surface-use questions are critical for landowners who live on or actively use their land. Ask where roads, well pads, tanks, or pipelines may be placed and whether you can set no-drill zones. Many landowners request a separate surface use agreement to define access, compensation, reclamation, and restoration responsibilities in clear language.
4. What Rights Does the Operator Have to Pool or Unitize the Minerals?
Pooling and unitization allow operators to combine their acreage with surrounding tracts. This affects how royalties are shared and how wells are located. Ask whether the lease contains a pooling clause and what limits apply. Provisions that restrict unnecessary pooling or cap unit size help protect your share of production.
5. Are There Any Cost Deductions or Fees You May Be Responsible For?
Some oil and gas leases allow deductions for gathering, compression, dehydration, or transportation. These charges can reduce your royalty payments. Clarify which deductions are permitted and request language that removes or restricts post-production costs whenever possible.
6. What Happens If a Well Is Shut In or Production Pauses?
A shut-in clause defines what happens when a well is capable of producing but not currently operating. Ask how long the operator can keep the well shut in and what payment must be made to keep the lease active. Reasonable limits prevent a lease from continuing indefinitely without proper development.
The Role of an Attorney in Oil and Gas Leases
Hiring an attorney who has years of experience in oil and gas law is one of the most effective safeguards a landowner can use during the leasing process. The right attorney helps you understand Oil & Gas Law in Texas and enables you to pass the legal maze effortlessly:
Interpreting Lease Language and Identifying Hidden Risks
Oil and gas leases include terms like “habendum clause,” “continuous development,” “royalty valuation,” and “pooling authority,” all of which influence your long-term rights. An attorney breaks down these provisions in simple language and alerts you to clauses that may reduce compensation, extend the lease unfairly, or grant broad operational control to the operator.
Strengthening Royalty Protections and Cost Limitations
Royalty terms are often the most negotiated part of a lease, and an attorney makes sure the language favors you rather than the operator. They review how royalties will be calculated, whether post-production deductions are allowed, and how pricing will be determined. They work to limit or remove deductions and lock in a fair, predictable payment structure.
Securing Surface Rights and Operational Boundaries
Surface protections are vital for landowners who farm, ranch, or live on their property. An attorney for oil and gas leases helps you restrict where roads, pads, pipelines, and equipment can be placed. They also ensure reclamation, restoration, and compensation requirements are clearly defined.
Secure fair terms and long-term income by reviewing your oil and gas lease with a knowledgeable attorney you can trust.
Evaluating Pooling, Unit Size, and Development Obligations
Your attorney reviews pooling clauses to prevent royalty dilution, checks unit size limits, and ensures advance notice requirements. They also confirm drilling timelines, continuous development obligations, and shut-in rules so the operator cannot hold your acreage for years without meaningful production or activity.
Ensuring Clear Title and Legal Compliance
An attorney verifies mineral ownership, resolves heirship or boundary issues, and cures defects that may affect leasing rights. They also ensure the lease complies with state laws, recording rules, payment standards, and operational requirements, reducing future disputes and protecting your long-term legal and financial interests.
Conclusion
Understanding the right questions to ask ensures your oil and gas lease supports both the value of your minerals and the long-term use of your land. Careful review prevents costly surprises, strengthens your negotiating position, and helps you secure fair, transparent terms. When you are ready to move from questions to confident decision-making, we at MBB are here to help. Our experienced attorney for oil and gas leases provides the guidance needed to evaluate your options, clarify complex clauses, and protect your interests at every stage of the leasing process.
FAQs
What is an oil and gas leasehold?
An oil and gas leasehold is a legal interest granted by a landowner to an operator that allows the exploration and production of minerals. The lease defines compensation, operational rights, development timelines, and the conditions under which the operator may access the property.
What questions to ask before signing a lease?
Landowners should ask about royalty rates, cost deductions, surface-use rights, pooling authority, drilling timelines, shut-in provisions, and reclamation responsibilities. These questions clarify financial expectations, operational boundaries, and long-term obligations, ensuring the lease accurately reflects industry standards and protects the landowner’s interests.
What are the most common pitfalls landowners face when signing an oil and gas lease?
Common pitfalls include accepting low royalties, allowing broad post-production deductions, granting unrestricted surface access, agreeing to oversized pooling units, and overlooking shut-in or extension clauses. These issues can reduce revenue, limit negotiation power, and tie up land without meaningful development.
How to negotiate an oil and gas lease?
Effective negotiation requires reviewing every clause, comparing offers, and seeking legal guidance. Landowners should request higher royalties, limit deductions, restrict surface use, set pooling caps, and ensure clear drilling commitments. Well-informed negotiation aligns compensation, protection, and operational terms with long-term landowner goals.