Houston Oil & Gas Attorneys
Oil and gas disputes arise when landowners who possess land being drilled are not receiving the payment and treatment they deserve. Oil and gas disputes often also involve workers who are injured while performing their job duties. We can help if you are facing these kinds of disputes. Arnold & Itkin represents clients who own mineral rights to protect their rights to fair royalties, environmental protection of their land, and other concerns of landowners. Landowner concerns vary widely and range from maximizing income from royalties to protecting land from unnecessary damage to ensure that it remains viable for other purposes such as farming and grazing. Our oil and gas attorneys can help ensure that your concerns are addressed; when they are not being addressed, our Houston attorneys can fight for your rights, in court if necessary.
About Oil & Gas Law in Texas
Oil and gas law in the United States is the body of law that relates to the acquisition and ownership of mineral rights in oil and gas both under the soil before discovery and after its capture, and adjudication regarding those rights. During the 1930s, the Texas Legislature empowered the Texas Railroad Commission (TRC) to "prevent physical waste" in the oil production fields in East Texas. Through the years, Texas legislators have authorized additional authority, and today the Texas Railroad Commission is the regulating authority for oil and gas production in Texas.
Recent booms in exploration and production in the Barnett Shale in Texas and the Haynesville Shale are forcing landowners to face the unfamiliar complexities of oil and gas law as they negotiate oil and gas leases for the oil and gas operators that are swarming their communities. If you hold mineral rights for land in these are other areas where there is active exploration or production you may need an oil and gas attorney.
Helping with Oil & Gas Leases in Texas
Oil and gas leases have nuances that differ from standard contracts making the services of an experienced attorney particularly valuable when negotiating leases or resolving related conflicts. An oil and gas lease is a contract that conveys rights to extract and market the oil and gas resources below a tract of land for a period and specifies the terms under which exploration and production will be conducted. Oil and gas agreements include terms that specify a royalty that will be paid to the landowner for gas or oil produced and the schedule for payment. Oil and gas leases are usually negotiated with landowners by "landmen" who represent oil and gas companies.
Landmen provide services to oil and gas companies such as:
- Determining mineral rights ownership
- Negotiating leases for exploration and production
- Researching title status and resolving title issues
- Unitizing or pooling of interests in oil and gas reservoirs
Landmen represent the interests of the oil and gas companies they work for and a usually far more knowledgeable about the nuances than the landowners. Consequently, uninformed landowners can be at a significant disadvantage when negotiating an oil and gas lease.
Many negotiable considerations should be evaluated and explicitly addressed in the lease agreement:
- Environmental Issues - Lease terms should address conservation and land protection to protect water, agricultural, grazing, and development potential. They should address the operator's responsibility for environmental cleanup, and address issues such as the potential abandonment of equipment on the property after drilling and production have ceased.
- Lease Term & Deadlines - Oil and gas leases are usually limited to a finite period. However, they may have clauses that provide for automatic extension based on certain circumstances. Missed deadlines may constitute a breach of contract on the part of the oil and gas operator, and production after a missed deadline may not be subject to the terms of the lease.
- Water Rights - Water rights issues should be addressed to avoid potential conflicts over water resources. Scientists at the Jackson School of Geosciences at the University of Texas at Austin see the potential for conflict in some parts of the Barnett Shale where water use for hydraulic fracturing could begin competing with other uses such as drinking and agriculture.
- Indemnification & Insurance - Oil and gas companies may seek overbroad indemnification for damaging events that could occur during the term of the lease. Leases may include terms that limit the scope of indemnification, require operators to carry ample insurance to cover most eventualities, and require that the landowner be named on the policy as 'additional insured.'
- Royalties - Most leases will include terms specifying the royalty rate, method of calculation, and payment schedule. A lease may also specify limits or prohibitions of royalty-reducing deductions for post-production expenses.
- Scope of Lease - Lease terms should clearly define the scope of the land and resources included in the lease and may include limits and exclusions on the depth of drilling, specific mineral resources, and other factors.
- Lessee's Qualifications - The lease terms may specify certain qualifications the lessee must have and maintain, providing assurances that they are qualified to develop and produce under the lease terms.
- Surface Issues - Leases may include terms that deal with equipment placement and surface use, limiting where and to what extent operators may place structures and equipment. The terms may limit surface damage and require surface repairs.
- Pooling of Interests - Pooling of interests occurs when land tracts from multiple leases are combined in a pooled unit to drill a single well. With pooled interests, the production of the well is considered to have occurred on all the leases in the pool. Royalties are generally paid in proportion to the amount of land a landholder has in the pooled unit.
- Delay Rentals - In an "unless-delay rental" lease, a lessee agrees to pay delay rentals so long as the lessee is not drilling on the property. An "unless" lease terminates automatically if the lessee fails to drill within the specified time or pay the delay rentals.
- Assignment of Rights - A lease may include terms that limit the company as lessee from assigning their rights to another party.
- Bonuses - Lease terms may stipulate sign-on, production, or other bonuses.
Duties of an Oil & Gas Company Under a Lease
- Duty to Develop - A company may have an implied duty to develop the lease to the extent that a reasonable operator would have.
- Duty to Protect Against Drainage - A company may have an implied obligation to drill an offset well to protect a common reservoir from drainage if a well is drilled to extract its resources from an adjacent tract of land.
- Duty to Market - The duty to market hydrocarbons produced and obtain the best price/terms possible for the sale of production.
Oil & Gas Royalties in Texas
There is no standard oil and gas royalty rate. Oil and gas royalties paid to mineral rights owners depend on several factors and are negotiable. Because market factors that drive oil and gas royalty rates vary over time, newer leases in high-demand areas like Texas' Barnett Shale or the Haynesville Shale can earn higher royalties than older leases in the same regions. If you are a landowner trapped in a lease paying lower than market royalties, you may do well to evaluate the terms of your lease carefully. There may be circumstances that provide an opportunity to break an existing oil or gas lease, freeing you to negotiate a new, more favorable lease at current market royalty rates.
Although Texas statutes address the rights of landowners in oil and gas leases, no authority is charged with oversight to ensure private landowners are getting paid due to royalties. Landowners have few options but to take matters into their own hands, carefully monitor their interests, and go to court to when necessary. It is not uncommon for oil and gas companies to try to find ways to shave money out of oil and gas royalty payments by under-reporting production, overstating post-production expenses and other means. When they do, an experienced Houston litigation attorney can bring the resources and expertise to make a strong case against them and claim the royalties you are owed.
How We Can Help with Oil & Gas Litigation
There are many more kinds of issues you can run into as a property owner, such as being underpaid for royalties, pipeline easements, quiet title, and more. If one of these situations describes what you are going through, then we may be able to help. Oil and gas litigation might include claims by royalty or mineral owners who need help with issues such as title research, finding out their rights, or division orders. Division orders can sometimes be cause for concern to a landowner because oil and gas companies will often combine multiple properties into a unit and then pay landowners based on a percentage. Sometimes that percentage will lead to an incorrect payment amount.
When premises are leased, landowners may develop some of the following concerns:
- The company may be refusing to develop the land as promised, therefore leaving the lessor without payment.
- Oil and gas drilling operations also have the potential to damage property.
- Lessors may even wish to terminate a lease with an oil or gas company.
Want to Break an Existing Oil & Gas Lease?
Maybe you are caught in an existing oil and gas lease with an operator who is not developing the field. Meanwhile, operators are drilling producing wells on neighboring property and draining a shared reservoir of resources in which you have a stake. In fact, you may be experiencing money damages without even realizing it. Oil and gas companies must protect the leasehold against drainage. If you are caught in such a situation, we can help you claim damages for royalties on production that would have been produced from the well that was never drilled.
Circumstances may enable you to break an oil or gas lease without undesirable consequences.
Oil and gas companies have certain implied duties including a duty to develop, a duty to protect against drainage, and a duty to market. They may also have specific duties and deadlines spelled out in the oil and gas lease. If any of those duties are not fulfilled within the deadlines, they may be in breach of contract affording you an opportunity to exit the agreement. Nuances in oil and gas lease agreements may also limit the scope of an oil and gas company's rights based on the depth of exploration. New technologies that make deeper reserves accessible may create opportunities to renegotiate existing leases or enter new leases for deeper exploration. We can help you understand your options.
Oil & Gas Common Questions
Can I Break an Existing Oil & Gas Lease?
In some cases, circumstances may allow a landowner to break an existing lease. Oil and gas lease agreements are complex and nuanced contracts whose language may afford a reasonable exit from an existing lease. An oil and gas attorney can review your lease and advise you of your options.
The Lease on My Property Is Old. The Company Wants to Negotiate a New Lease. Is That Standard?
Many oil and gas leases were established years before advanced drilling and production techniques were developed. As a result, the terms of your current lease may not allow the company to utilize new technology without your permission. This situation may provide you with an opportunity to consider renegotiation of the lease or breaking it, depending. We can discuss your lease for a better assessment of your options.
I Own Property in the Barnett Shale & I've Been Approached About a Lease. Do I Need to Speak with an Attorney?
Although you may have already spoken with others who have signed leases, it is a good idea to speak with an attorney experienced in oil and gas law. You will be better equipped to protect your rights, and you can avoid signing a lease without fully understanding the long-term ramifications.
What Is the Standard Oil & Gas Royalty Paid to Landowners?
There is no standard oil and gas royalty. A number of market forces drive oil and gas royalty rates and vary over time. Royalty rates as high as 28% have been offered in high demand areas like the Barnett Shale and Haynesville Shale, but these rates are not necessarily the norm. If you are negotiating an oil and gas lease, an experienced oil and gas attorney may be able to help you maximize oil and gas royalty rates.
What Are Oil & Mineral Rights?
Oil and gas mineral rights are the rights to explore, remove, and produce oil or gas located in or under a specific land property.
I Inherited a Farm But I Recently Learned Someone Else Owns the Oil & Gas Mineral Rights. What Does This Mean?
This means that while you own the land, another person or company owns the right to any oil or gas contained beneath the surface. Often, the owner of the mineral rights will approach you with an agreement to allow them to drill without actually buying your land.
I Entered into an Agreement, But Now My Property Is Polluted. Can I Sue?
Companies are obligated to protect your property from environmental harm. Typically, this is spelled out in the land protection terms of the lease between you and the oil company. If the oil company caused environmental damage, you may have grounds for a lawsuit.
Contact a Business Lawyer in Texas Today: (888) 493-1629
Our attorneys are skilled in commercial litigation and have handled many cases of oil and gas disputes. This is a winning combination that you need on your side after you encounter an oil and gas dispute. Our firm can thoroughly evaluate your case to determine if you are entitled to a commercial litigation claim. Should you become our client, we promise to offer you the highest quality of legal assistance possible.