Reviewing an Oil and Gas Lease in Pennsylvania
Reviewing an Oil and Gas Lease in Pennsylvania
DuBois, Pennsylvania. Oil and gas leases, pipeline agreements and rights-of-way can affect a landowner’s property for years. The financial terms are important, but so are provisions governing development rights, surface use, deductions, assignment, extensions, pooling or unitization, environmental responsibilities and the circumstances under which the agreement ends.
Why Should a Landowner Review the Entire Lease?
A lease is more than a royalty percentage and signing bonus. Standard forms are generally drafted for the producer’s business needs. A landowner should understand what rights are being granted, how long they may continue and what obligations apply to both sides before signing.
Important Oil and Gas Lease Terms
- Primary and secondary terms: how long the lease remains in effect and what events can extend it.
- Royalty provisions: how royalties are calculated and what costs or deductions may affect payment.
- Pooling and unitization: when the leased acreage may be combined with other property for development.
- Surface-use provisions: roads, pads, pipelines, water use, restoration and other surface impacts.
- Assignment: whether and how the producer can transfer its rights to another company.
- Shut-in and delay provisions: circumstances that may maintain the lease without active production.
- Indemnity and insurance: allocation of certain risks and insurance obligations.
Pipeline and Right-of-Way Agreements
A pipeline or right-of-way agreement is distinct from an oil and gas lease and should be reviewed on its own terms. Important issues can include the width and location of the easement, number and type of lines, access, construction methods, restoration, future expansion, assignment and compensation.
Can Pennsylvania Oil and Gas Lease Terms Be Negotiated?
Potentially. The ability to negotiate depends on the property, market conditions, existing title and leases, the proposed development and the producer. A landowner should not assume that every provision in a proposed form is non-negotiable.
Prior Recognition of C.J. Zwick’s Lease Work
After a prior lease negotiation, a senior landman for a Texas-based gas producer complimented C.J. Zwick’s understanding of Pennsylvania oil and gas leases. That historical comment reflects one professional’s experience in a particular negotiation; it is not a guarantee of results in any future matter.
Questions to Ask Before Signing
- Exactly what property and rights are covered?
- How can the lease or agreement be extended?
- How are royalties or other payments calculated?
- What deductions may be taken?
- What surface activities are permitted?
- Can the agreement be assigned?
- What restoration obligations apply?
- What happens if there is a dispute or alleged breach?
Talk with a Pennsylvania Oil and Gas Attorney
Learn more about ZwickLaw’s Oil & Gas Law practice and C.J. Zwick. To discuss a lease, pipeline agreement, right-of-way or related dispute, call (814) 371-6400, email cjz@zwick-law.com, or use the ZwickLaw contact page.
This article provides general information and is not legal advice. Oil and gas rights depend on the specific agreement, title, property and current Pennsylvania law. Prior results or comments do not guarantee a similar outcome.
