assignment of oil gas leases

Assignment Of Oil And Gas Lease

Jump to section, what is an assignment of oil and gas lease.

An assignment of oil and gas lease is a contractual agreement between a landowner and an oil or gas company in which the company gains the right to explore for, develop, and produce oil and gas from the property. The leaseholder typically compensates the owner with periodic payments (called royalties) based on the amount of oil or gas produced. Leases can be assigned to another party, such as a drilling contractor, if the original leaseholder decides not to pursue development. Assignment of an oil and gas lease should be done in writing and filed with the appropriate government authority.

Assignment Of Oil And Gas Lease Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.1 6 exh101.htm ASSIGNMENT OF OIL AND GAS LEASES. , Viewed October 27, 2022, View Source on SEC .

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Oil and Gas Lease for Dummies: 2024 Guide

For over a century, property owners and oil and gas companies have come together to sign mutually beneficial oil and gas leases . In the U.S, we are fortunate to have the capability of entering into an oil and gas lease. This is in order to extract and sell the resources found below the personal property.

Unfortunately, like many property transactions, no two oil and gas leases are the same. Many questions arise before, during, and after gas leases that can only be answered on a case-by-case basis. That’s why we’ve put together this ultimate guide. It is to help answer some of the most common questions about oil and gas leases.

What is Oil and Gas Lease?

Oil and gas lease is an agreement between a mineral owner (lessor) and a company (lessee) in which the owner grants the company the right to explore, drill and produce oil, gas, and other minerals below the surface of the earth.

We aren’t calling anyone names when we say oil and gas leases for dummies , but rather, we wanted to explain what an oil and gas lease is in the simplest terms so that anyone with any amount of experience can understand.

Oil and gas leases are created so that property owner can maintain their mineral rights. At the same time while leasing their land to an extraction company.

How Does an Oil and Gas Lease Work?

As a legal agreement between property owners and oil and gas companies, oil and gas leases are fairly straightforward. It is also pretty simple to understand. However, what is incredibly important to understand is that there is no truly standard oil and gas lease.

Instead, oil and gas leases are made up of many common clauses. It outline the different defined sections of the document. Although some of these sections may be omitted in simpler agreements. With that, here are the most common parts of an oil and gas lease:

• Dates Clause
• Parties Section
• Consideration Section
• Granting Clause
• Royalty Clause
• Drilling and Delay Rental Clause
• Dry Hole, Cessation, and Continuous Drilling Clause
• Pooling Clause
• Surrender Clause
• Damage Clause
• Assignment Clause
• Force Majeure Clause
• Warrant Clause

For definitions of each of these sections, you can read more about how an oil and gas lease works.

Oil and Gas Royalties: What You Earn with a Mineral Lease

More than anything, oil and gas royalties are the largest point of interest when it comes to signing a mineral lease. After all, oil and gas royalties are a monthly payment to operation stakeholders as a percentage share from the sale of the extracted resource .

In layman’s terms an oil and gas royalty is a paycheck that mineral rights owners receive whenever resources are extracted and sold from their property. In an oil and gas lease agreement, generally, a fixed percentage of the share of profits is defined for the property owner. This percentage is applied to each month’s operational profits, and the landowner is able to earn a monthly income from their oil and gas lease.

Of course, this is a very brief overview about oil and gas royalties. For more information, feel free to read more about oil and gas royalties.

Understanding Oil and Gas Lease Bonus Payments

Beyond oil and gas royalties, the most common way for property owners to financially benefit from an oil and gas lease is with a bonus payment. Oil and gas lease bonus payments are an amount of money that you are to be paid immediately upon signing and oil and gas lease.

Essentially, a bonus payment is designed to entice a landowner into signing an oil and gas lease. It is generally paid 60-90 days after the contract is signed.

Oil and gas lease bonus payments are great, in that they guarantee a landowner is compensated for their time. If no oil or gas is ever extracted from the land, landowners will not be able to receive oil and gas royalties, because nothing was extracted and sold. However, the bonus payment had already been paid, and cannot be revoked. Therefore, a landowner is compensated simply for entering into an agreement, even the operation never begins.

Learn more about oil and gas lease bonus payments.

Paid Up Leases – What Are They & Why are They Used

In order to receive an oil and gas lease bonus payment, landowners may be required to sign a paid up lease agreement. A paid up lease is simply an agreement between a mineral rights owner and an oil and gas company, in which one payment is made at the beginning of the contract.

Although oil and gas royalties may be earned later in the lease’s life, a “paid up lease” is created so that landowners can receive an oil and gas lease bonus payment. Read more about paid up leases in oil and gas.

Pooling, Joint & Unitization in Oil and Gas Leases

What goes on below the surface of the Earth is not always reflective of what is above the ground. In oil reserves, the large pools of crude oil are only rarely located under one parcel of defined land.

For oil reserves that technically belong to multiple mineral rights owners, a few different methods are used to consolidate and fairly compensate the landowners in an oil and gas lease. They are as follows:

• Pooling – Pooling combines several tracts of land together in order to cover the area of a single oil well. In a pooling agreement, all of the parties own their portion of any oil that is produced from within the pooled land.
• Joint – Joint Leases combine two active oil and gas leases into what is known as a “joint operating agreement (JOA). In a JOA, operators agree upon a community lease in which assets are shared and new royalty percentages are defined.
• Unitization – Unitization is a process that merges different pieces of land together across an entire oil field. Unlike pooling, unitization can combine the production of many different oil wells into one shared contact

For expanded definitions and examples of each, learn more about pooling, unitization, and joint oil and gas leases.

An Oil Company Wants to Lease My Land, What Should I Do?

It happens all of the time. A landman has approached you and wants to lease your land in order to extract oil, gas, or other resources that can be sold in the market. Are you getting a good deal or does the man at your door simply want to turn a profit?

Essentially, if an oil company wants to lease your land you have two options: do or don’t. As the mineral rights ( subsurface rights ) owner of your property, you have the power to control what happens to your land.

On one hand, oil and gas operations can be extremely beneficial as a chance to earn oil and gas royalties as well as any associated bonus payments. On the other hand, you may not want a drilling company in your backyard, or want to reserve your resources for future generations.

Either way, leasing you land to an oil company is an individual choice. On a case-by-case basis, oil leases should be analyzed, negotiated, and even counter-offered. Always consult an expert before signing an oil and gas lease. For now, you can read more about what to do if an oil company wants to lease your land.

How to Get Oil Companies to Drill On Your Land

Sometimes in this life, you have to go out and get what you want, rather than waiting around for opportunities to knock at your door. If you live in a resource-rich state like Texas, Colorado, Oklahoma, Pennsylvania, or North Dakota (or any other state where valuable resources are found), then you may want to seek out an oil and gas company to drill on your land.

Getting an oil company to drill on your land is actually quite easy. There are many companies and individuals at all levels of the oil industry that would be excited to help in any operation that may be successful.

For first-time mineral rights owners, it is a good idea to speak to experts, lawyers, surveyors, and more before approaching any individual oil company to drill on your land. The more you know about your property (as well as its potential) can be used to leverage your case in an oil and gas lease agreement.

Learn more about how to get oil companies to drill on your land.

Leasing Mineral Rights: Pros and Cons

So you have valuable property, great! Essentially, you have two choices: leasing or selling you mineral rights . Selling your mineral rights results in an outright sale of your land for a large lump sum. Leasing mineral rights is a bit more complicated. For the most part, here are the main pros and cons of leasing mineral rights.

• Retained ownership of mineral rights
• Signing bonuses
• Future oil and gas royalties
• Contracts can be complicated or unfair
• Earnings are highly dependent on found resources and operational efficiency
• Could miss out on opportunity to sell mineral rights

Essentially, leasing mineral rights is a great way to retain the ownership of your property in hopes that a successful drilling operation will lead to a steady stream of oil and gas royalties. Read more about the pros and cons of leasing mineral rights.

Things to Consider Before Signing an Oil and Gas Lease

Once you know that you’ll be making money as soon as the dotted line is signed, then it is tempting to quickly move forward with an oil and gas lease. No matter how good of a deal you think you have on the table, there is always room for a better agreement.

Before you sign an oil and gas lease, patience and attention to detail will maximize the benefits of your oil and gas lease. Here are the top five things we recommend doing before signing an oil and gas lease:

• Ask as many questions as you can, clarify everything
• Be a good person, remain civil and realize that the agreement is designed to benefit both parties
• Know the approximate worth of your land
• Get as much as you can financially

Essentially, you must consider everything before signing an oil and gas lease. Taking the time to fully understand your land and the agreement will maximize the benefits you can receive. Read more about what to do before signing an oil and gas lease.

Oil and Gas Lease Negotiations: Tips from Mineral Rights Experts

Of course, knowing how to negotiate is the best way to sign a mineral lease in your favor. Because there is no standard mineral lease agreement, everything is on the table. Every single aspect of an oil and gas lease can be negotiated, so you will want to come as prepared as possible to fight for what you believe you deserve.

Above all, here are our top three tips for oil and gas lease negotiations:

• Start off by saying “no,” never take the first offer
• Take your time and get multiple quotes
• Talk to an industry expert and have them carefully comb the contract

Once it is signed, an oil and gas lease is legally binding. Therefore, it is critical to only sign when you are absolutely ready. Although some companies may pressure you into agreeing before a set date, you have all of the power to wait until you are ready to sign an oil and gas lease. Read more about oil and gas lease negotiations tips.

Oil and Gas Lease Form 88 – What is it & Where Can I Get It

Whereas there is no standard oil and gas lease, Form 88 is about as standard as it gets in the industry. In fact, for a long time, form 88 was the standard for oil and gas leases. Also known as the printed form, or Producer’s 88, Form 88 refers to the most common page for signing an oil and gas lease.

Form 88 is available online as a template for oil and gas contract agreements. After printing, all that needs to be added is the designated drilling location, involved parties, and specific lease terms.

Even if it seems cut and dry, never sign an agreement of which an oil and gas company refers to as simply a “standard form.” Whereas Form 88 was standard for years, modern oil and gas lease agreements are much more sophisticated than they were 50 years ago. It is likely that your oil and gas lease will have some version of Form 88, so it is important to understand what it is and how it works. Read more about oil and gas lease form 88.

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Oklahoma Bar Journal

Interpreting assignments of the oil and gas lease.

By Jereme M. Cowan

Under Oklahoma law, an oil and gas lease grants a cluster of rights in land,1 forming an estate in real property with the nature of fee.2 Like many of the sticks in the metaphorical bundle, the estate created under the oil and gas lease is freely assignable and divisible.3 As a result, oil and gas leaseholds can be transferred, in whole or in part, by the holder of the oil and gas lease, such practice being a central element to oil and gas development.4 Furthermore, the transfers of leasehold are usually executed and delivered by legal instruments ubiquitously titled “assignments,” which are filed of record in the same manner as any instrument affecting title to real property.5 Given the history of Oklahoma’s oil booms,6 not to mention Oklahoma’s current role in the U.S. shale boom, assignments inundate many of the county clerk records where oil and gas exploration is prevalent. Therefore, it is likely that an examination of oil and gas land titles in one of these counties will require the interpretation of assignments. BASIC RULES OF CONSTRUCTION Assignments are a contract and a conveyance.7 As such, they are to be read in accordance with the basic rules of contractual interpretation,8 which comprise not only those findings in Oklahoma’s case law but also the statutory provisions of 15 O.S. §§151-178. In a nutshell, Oklahoma’s rules on interpreting assignments begin with prioritizing the true intent of the parties, as gathered from the four corners of the instrument.9 If the assignment is unambiguous, then the written instrument will govern,10 along with all technical terms in the assignment being interpreted as commonly understood among persons in the oil and gas industry.11 However, if there is an ambiguity, then the contractual interpretation can be aided by extrinsic evidence in order to resolve the intrinsic uncertainties of the assignment.12

These rules make it imperative for an attorney conducting a title examination to understand the business and terminology of the oil and gas industry as it pertains to the transfer of leasehold, not to mention understanding general rules of land titles and the law of oil and gas. The purpose of this article is not to give a complete account of the oil and gas industry nor an account of all rules governing the transfer of oil and gas rights in the record title. Rather, the purpose is to give an introductory and cursory overview, presented on a step-by-step basis, for an attorney who may find themselves, either willingly or unwillingly, examining assignments of oil and gas leases filed in Oklahoma. STEP 1: WHAT TYPE OF INTEREST? First and foremost, the title examiner needs to determine the type of interest being assigned (or reserved) in the leasehold. More often than not, if the assignment is transferring an interest in a lease without overriding royalty language or net profits language, then a working interest is being assigned. When there is ambiguity, the title examiner should remember that a working interest is the right to  work  on the leased property — searching, developing and producing oil and gas. On the other hand, an overriding royalty interest is share in production attributable to a particular lease. STEP 2: WHAT AMOUNT OF INTEREST? Working interests tend to be relatively straightforward. Either the assignor is purporting to assign all of its right, title and interest under a lease, all of a lease (read 100 percent) or a fractional interest in a lease. Digressing a bit, now would be a good moment to discuss the difference between all right, title and interest  of the assignor  and 100 percent of a lease. All of the assignor’s right, title and interest could be 100 percent or could be some fractional interest. It depends on what the assignor owns of record. If an assignor assigns a lease without any fractional limitations or without the foregoing language limiting it to the assignor’s right, title and interest, then the assignor is purporting to assign 100 percent of the lease. The prudent examiner notes the distinction.

Overriding royalty interest can sometimes not be as straightforward. Often, the assignor decides to use a formula for the computation of the assigned or reserved overriding royalty interest. For example, a recitation in the assignment reads as follows: an overriding royalty interest equal to the difference between 20 percent and lease burdens. Here, the overriding royalty interest would be calculated by first adding up all the lease burdens, such as a one-eighth landowner’s royalty and a previously conveyed one-thirty-second overriding royalty interest, and then subtracting that number from 20 percent, which is represented mathematically as: 20% - (1/8 + 1/32) = 4.375%.

There are various business reasons for computing an assigned or reserved overriding royalty interest with the subtraction of lease burdens from a certain percentage, the most prominent being that assignments of leases typically cover a block of leases, which contain various lease net revenue interests. Showing the overriding royalty interest as a formula rather than a specific number allows the assignor to either retain or convey the leases at certain net revenue interest. In the prior example, assuming the assignor was assigning the overriding royalty interest, it was retaining an 80 percent net revenue interest in all the leases covered by the assignment except, of course, those leases which were already burdened greater than 20 percent. STEP 3: WHAT LEASE IS COVERED? All leasehold interests derive from a lease. Therefore, it is imperative that the examining attorney determine what lease is covered by an assignment. If the assignment covers one or just a few leases, then the lease(s) will probably be described somewhere in the body of the instrument. If the assignment covers multiple leases, then typically they will be described in an exhibit “A” attached thereto. However, it should be noted that in some cases an assignment may not describe a particular lease or leases but instead will include language that it is the intent to assign all leasehold rights in a particular tract of land, usually the unitized area. For example, an assignment may read that all of the assignor’s rights in the leasehold covering the SW/4 are transferred to the assignee without giving further explanation as to the underlying leases.  In this particular example, the assignor is conveying whatever leasehold rights it may own from whatever source such rights might derive as to the SW/4.

STEP 4: WHAT ARE THE LIMITATIONS TO THE ASSIGNED INTEREST? By far the most challenging (and often most ambiguous) aspect of an assignment is the limitations to the assigned interest. Like land itself, a lease is a bundle of sticks. A lease can be cut and carved any which way, limited only by the imagination of the oil and gas industry. If an assignor wants to assign a lease insofar as that lease covers a particular formation in the strata, then the assignor can do so. The following are standard limitations that the examining attorney should recognize.

An assignment can be limited to the wellbore of a well. A wellbore limitation means that the assignor is assigning only those rights to production from the wellbore of a certain well, arguably at the total depth it existed at the time of the assignment. All interest outside the wellbore are excluded from the assignment, entailing that a wellbore assignee can produce from shallower formations in the wellbore but cannot produce from deeper formations or lands outside the wellbore.

The central problem with wellbore only assignments is determining when in fact there is a wellbore only assignment. The title examiner should be aware that a wellbore assignment is the narrowest of assignments. Very limited rights to the lease are being assigned. It can be argued that the lease or unit and the lands covered by the lease or unit need only be described for informational purposes, as it is rights to the wellbore being assigned. Furthermore, the fact that a well or unit is mentioned in the description of the lease does not entail that the assignor intended to convey wellbore rights only. More often than not, a reference to a well or unit in Oklahoma is for informational purposes.

Some assignments are limited to certain depths or to a particular formation. For instances, an assignment may limit the assigned leases “insofar as said leases cover the Woodford Formation” or “insofar as from the surface to a depth of 8,100 feet.” Depth limitations are usually more prominent than wellbore limitations and are considerably less ambiguous. Furthermore, title examiners should always read an assignment thoroughly to determine whether a depth limitation is pertinent. Many times, such a limitation is buried in one of the numerous special provisions of the assignment or placed in one of the exhibits attached thereto.

In order to accommodate the formation of units, leases will often be assigned only as to a portion of the lands covered thereby. For example, a participant enters into a joint operating agreement with the operator that has proposed the drilling of a 40-acre unit well located in the NW/4 NW/4. If the participant owns all of a certain lease covering the N/2 NW/4, the participant may decide to assign only that portion of the lease covering the NW/4 NW/4, thereby retaining all rights in the NE/4 NW/4. Therefore, assignments may contain limitations as to the area acreage being conveyed.

CONCLUSION The foregoing steps serve as an introduction to interpreting assignments of oil and gas leases. Most certainly, each step of analysis could be accompanied by a more detailed explanation. That said, the key point to be made here is that the interpretation of assignments in oil and gas land titles requires a familiarization of the business practices of the oil and gas industry, not just an understanding of the governing law.

ABOUT THE AUTHOR Jereme M. Cowan is a managing partner at Cowan & Fleischer PLLC. Mr. Cowan’s practice fo-cuses on oil and gas land titles. He has planned, moderated and spoken at a number of oil and gas seminars sponsored by the Oklahoma Bar Association.

1.  See Hinds v. Phillips Petroleum Company , 1979 OK 22, 591 P.2d 697, 698 (1979) (stating that “[t]he cluster of rights comprised within an instrument we refer to ‘in deference to custom’ as an ‘oil and gas lease’ includes a great variety of common-law interests in land”). 2.  See Shields v. Moffitt , 1984 OK 42, 683 P.2d 530, 532-33 (1984) (finding that “the holder of an oil and gas lease during the primary term or as extended by production has a base or qualified fee,  i.e. , an estate in real property have the nature of a fee, but not a fee simple absolute”). 3.  See Hinds  at 699 (concluding that leasehold interests are freely alienable “in whole or in part”); Eugene Kuntz,  Kuntz, a Treatise on the Law of Oil and Gas , Volume Five, §64.1, 259 (1987) (asserting that the oil and gas lease is freely assignable “in the absence of a provision to the contrary”);  see also Shields  at 533 (holding that a lease clause restricting alienation was void). 4. John S. Lowe,  Oil and Gas Law in a Nutshell , Sixth Edition (2014). 5. Joyce Palomar,  Patton and Palomar on Land Titles , 3rd Edition, Volume One, 3 (2003). 6. Kenny A. Franks,  The Oklahoma Petroleum Industry  (Norman: University of Oklahoma Press, 1980). 7.  See Plano Petroleum, LLC v. GHK Exploration, L.P. , 2011 OK 18 (2011). 8.  K & K Food Servs. v. S & H, Inc. , 2000 OK 31, 3 P.3d 705, 708. 9.  See Messner v. Moorehead , 1990 OK 17, ¶8, 787 P.2d 1270, 1272. 10.  Messner  at 1273. 11. 15 O.S. §161. 12.  Crockett v. McKenzie , 1994 OK 3, ¶5, 867 P.2d 463, 465.

Originally published in the  Oklahoma Bar Journal --  OBJ 88 pg. 285 (Feb. 11, 2017)

• The Oil and Gas Addendum

Federal Court Rules that Assignment of Oil/Gas Lease May Not Extinguish Liability of Original Lessee

Landowners are often alarmed and angered when they receive word that the oil/gas lease they executed several years ago, after months of intense and personal negotiations, has been assigned to an unknown, unfamiliar gas operator. This anxiety is amplified when the landowner’s phone calls or letters go unanswered, the royalty checks are late or are not made at all and the once well-maintained well pad site is now overgrown and in a state of disrepair. Can the landowner seek redress against the original gas operator? A federal court in Pittsburgh recently addressed this issue and suggested that the assignment of an oil/gas lease may not relieve the original gas operator from liability. This decision could impact thousands of leases throughout the Commonwealth of Pennsylvania. Given the potential impact of this decision, landowners and gas operators alike should carefully review the assignment clauses in their leases and re-evaluate liability risks in light of the federal court’s opinion in Rice v. Chesapeake Energy Corp., et al., 2012 WL 3144318 (W.D. Pa., August 1, 2012).

The Rice case was originally filed on March 5, 2012 in the Court of Common Pleas of Greene County by the landowners, James and Veronica Rice (“State Court Action”). The State Court Action arose out of the oil/gas lease the Rices signed with Dale Property Services Penn, LP (“DPS Penn”) on November 24, 2009 (the “Lease”). Since DPS Penn had subsequently assigned the Lease to Chesapeake Energy Corp. (“Chesapeake”), the Rices also named Chesapeake as a defendant in the State Court Action. The Rices’ Complaint alleged various claims against both DPS Penn and Chesapeake, including trespass, unauthorized access roads, crop damage and failure to pay the well pad drilling fees.

On March 25, 2012, Chesapeake sought to “remove” the State Court Action to the federal court sitting in Pittsburgh, Pennsylvania. Generally, a defendant such as Chesapeake may “remove” an action to federal court only if there is complete “diversity of citizenship” between the parties – i.e., each plaintiff and defendant must be from different states. Although both the Rices and DPS Penn were Pennsylvania citizens, Chesapeake and DPS Penn argued that because DPS Penn had assigned the Lease to Chesapeake, there could be no liability against DPS Penn and, as such, DPS Penn’s citizenship could be ignored and the case should proceed in federal court. The Rices opposed removal on the grounds that, under Pennsylvania law, the mere assignment of the Lease did not automatically extinguish DPS Penn’s liability and, therefore, the claims against DPS Penn remained viable. The federal court agreed with the Rices and sent the State Court Action back to Greene County.

The Rice decision illustrates the complex and unique nature of oil/gas leases. DPS Penn argued that the Lease should be treated solely as a property conveyance. If viewed solely as a conveyance, the promises and covenants set forth in the Lease “run with the land” and can only be enforced against the party in possession of the property at the time of the alleged breach. Pennsylvania law has long observed that “privity of estate” must exist in order to enforce lease or deed covenants. See, Conti v. Duve, 15 A.2d 494, 495 (Pa.Super. 1940) (liability of lessee “grows out of privity of estate [and] ceases when the privity ceases. If he has assigned before the time of performance, his liability would have ceased with his title, and liability would have attached to his assignee…”); See also, Goldberg v. Nicola, 178 A. 809, 813 (Pa. 1935) (“the covenantor of … an easement or a benefit attached to land is not liable after parting with his title …”). Under this analytical framework, DPS Penn maintained that since the Lease was assigned to Chesapeake, “privity of estate” was lacking and, therefore, the covenants could only be enforced against Chesapeake.

The Rices contended, however, that under Pennsylvania law, when it comes to the effect of an assignment, oil and gas leases are treated the same as any other contract. According to the Rices, oil/gas leases contain both “land use and contractual attributes” and that absent consent and release by the lessor, a lessee retains liability even after an assignment. Since the Rices never formally released DPS Penn from the original lease covenants, the Rices contended that the Lease covenants could still be enforced against DPS Penn despite the purported assignment. As support for their position, the Rices relied on a Pennsylvania Supreme Court decision from 1889. In Washington Natural Gas Co. v. Johnson, 16 A. 799, 801 (Pa. 1889), the Supreme Court observed “[t]hat [lessee] continued liable notwithstanding their assignment to [assignee] is very clear. The covenant was their own, and their privity of contract with their lessors continued notwithstanding their assignment of the lease.” Importantly, the Washington Natural Gas court did not require “privity of estate” and enforced the covenants against the original lessee:

“…although their assignment had divested them of the lease, it could not relieve them from their contract.”

See, Washington Natural Gas, 16 A. at 801. The Rices maintained that, despite being over 120 years old, the Washington Natural Gas decision had never been overturned or reversed and remained the law of Pennsylvania. As such, the Rices argued that, contrary to DPS Penn’s assertion, “privity of estate” is not required and the claims against DPS Penn could move forward.

In remanding the State Court Action back to Greene County, the federal court was compelled to follow the rule set forth in Washington Natural Gas. The court observed that the “advanced age of the [Pennsylvania Supreme Court’s] doctrinal rules does not, in and of itself, make them inapplicable.” Rice, 2012 WL 314318 at 5. Since the Washington Natural Gas rule does not require “privity of estate”, the lease covenants could still be enforced against DPS Penn despite the assignment to Chesapeake. The Rice court observed that remand to Greene County was appropriate even through “it is entirely possible, that in state court, [DPS Penn’s] theories to defeat the claims asserted against it will ultimately prevail.” Id. In light of this ruling, the litigation against DPS Penn and Chesapeake will now proceed in Greene County as opposed to federal court.

Although the Rice court did not rule on the actual merits of the Rices’ claims against DPS Penn, the decision is nonetheless significant because it recognizes those claims as being viable against the original lessee. What can we take away from the Rice decision? Unless the lessor specifically “releases” the original lessee, the mere assignment of the lease to another gas operator may not automatically extinguish the liability of the original lessee. Landowners who may have claims for unpaid rentals, incorrect royalties or surface damage should carefully review the assignment clauses in their respective leases. In the event of an assignment, such claims may be advanced against the original lessee.

• Lease Expiration and Lease Development

Oil and gas development can present unique and complex issues that can be intimidating and challenging. At Houston Harbaugh, P.C., our oil and gas practice is dedicated to protecting the interests of landowners and royalty owners. From new lease negotiations to title disputes to royalty litigation, we can help. Whether you have two acres in Washington County or 5,000 acres in Lycoming County, our dedication and commitment remains the same.

We Represent Landowners in All Aspects of Oil and Gas Law

The oil and gas attorneys at Houston Harbaugh have broad experience in a wide array of oil and gas matters, and they have made it their mission to protect and preserve the landowner’s interests in matters that include:

• New lease negotiations
• Pipeline right-of-way negotiations
• Surface access agreements
• Royalty audits
• Tax and estate planning
• Lease expiration claims
• Curative title litigation
• Water contamination claims

Robert Burnett - Practice Chair

Robert’s practice is exclusively devoted to the representation of landowners and royalty owners in oil and gas matters. Robert is the Chair of the Houston Harbaugh’s Oil & Gas Practice Group and represents landowners and royalty owners in a wide array of oil and gas matters throughout the Commonwealth of Pennsylvania. Robert assists landowners and royalty owners in the negotiation of new oil and gas leases as well as modifications to existing leases. Robert also negotiates surface use agreements and pipeline right-of-way agreements on behalf of landowners. Robert also advises and counsels clients on complex lease development and expiration issues, including the impact and effect of delay rental and shut-in clauses, as well as the implied covenants to develop and market oil and gas. Robert also represents landowners and royalty owners in disputes arising out of the calculation of production royalties and the deduction of post-production costs. Robert also assists landowners with oil and gas title issues and develops strategies to resolve and cure such title deficiencies. Robert also advises clients on the interplay between oil and gas leases and solar leases and assists clients throughout Pennsylvania in negotiating solar leases.

Brendan A. O'Donnell

Brendan O’Donnell is a highly qualified and experienced attorney in the Oil and Gas Law practice. He also practices in our Environmental and Energy Practice. Brendan represents landowners and royalty owners in a wide variety of matters, including litigation and trial work, and in the preparation and negotiation of:

• Pipeline right of way agreements
• Surface use agreements
• Oil, gas and mineral conveyances

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