Oil and gas leases allow companies the legal right to extract mineral resources without imposing the financial obligation to purchase real property. Such arrangements help companies keep their operating costs reasonable.
Smaller businesses tend to prioritize securing leases that are likely to result in actual extraction efforts. Organizations seeking to acquire mineral rights through leases often need support during the complicated due diligence process. Companies may decide to outsource some of that work, possibly to the lawyers who help draft the leases and negotiate their terms.
What matters do companies frequently need to investigate before committing to oil and gas leases?
Ownership and leasing rights
In the real estate world, ownership fraud is one of the most costly and devastating issues. People who technically have no legal right to a property may sign leases or even deeds despite having no right to the property. Artificial intelligence (AI) has made it easier than ever before for unscrupulous people to pose as others, possibly using virtual document signing as a way to hide their true identity.
Co-owners signing leases without the consent of all interested parties could be another significant concern. A married property owner may need the consent of their spouse to make major moves regarding shared real property, as the real estate and therefore possibly also the mineral rights may be community property. If multiple people inherited joint ownership of a property, that situation may also require the consent of multiple distinct owners.
Existing or prior leases
Determining whether an outside party currently has an interest in the mineral rights to the property can be important as well. Particularly in scenarios where real property has recently changed hands or where the party signing the lease is a surviving spouse who may have previously allowed the deceased spouse to manage major decisions, there could be an existing lease in place.
Restrictive covenants or easements
Occasionally, property owners may be subject to limitations on how they utilize their real estate. Restrictive covenants included in deeds can sometimes prevent property owners from leasing mineral rights to businesses. Occasionally, there could also be easements in place that could impact the viability of an oil and gas lease.
Doing a thorough search on the history of the property and all local or community rules that might apply to oil and gas projects can help ensure that companies don’t waste time and energy pursuing leases that are useless. The background research necessary to enter into an oil and gas lease with confidence is relatively extensive.
Getting adequate information about a property and any legal issues that might prevent extraction can be helpful for those who own or help operate oil and gas businesses. With the right support, leases can be one of the safest and most cost-effective means of securing mineral rights.
