Every year, eager oil and gas companies drill
thousands of wells in Oklahoma. Of Oklahoma’s 77 counties, 72 have oil- or gas-producing
wells, and 2008 saw 3,439 new wells drilled. As more and more wells are drilled, average
production from each well goes down. In this context—of increasing effort, decreasing
return, and heightened competition—Oklahoma land and mineral right owners would do well to
have a basic understanding of Oklahoma mineral rights law.
and gas ownership
In Oklahoma, landowners do not
own subsurface gas or oil until they extract it from the ground. Oklahoma courts long ago
decided that the rule of capture governs fugacious—fleeting—substances below the
earth’s surface. In other words, if your neighbor drills a well at the border of your
property and begins to extract oil from underneath your land, you cannot successfully sue him or her
and hope to be compensated for your lost oil. Instead, you must drill your own well to capture
as much of the oil as you can.
Oil and gas leases
Oklahoma oil and gas leases have two primary
functions: they convey oil and mineral rights from the mineral owner to the lessee—usually an
oil company—and create a contract in which the lessee takes possession of the mineral rights
subject to certain conditions and obligations. Like all property deeds, the oil and gas lease
must clearly identify the lessor, the lessee, and the interest conveyed, and must adequately
describe the leased premises.
Like Texas, Oklahoma
courts subscribe to a rule of capture for oil and gas instead of the old common-law rule granting
absolute ownership of everything beneath the surface to the soil owner, Oklahoma oil and gas leases
cannot convey absolute title to oil and gas. Instead, they convey a right to drill and to
reasonably necessary use of the surface to exercise that right.
Primary and secondary terms of oil and gas leases
Oil and gas leases typically cover two terms, or periods of time specified by
the lease. A delay-rental or unlessclause governs the first term of the
lease and this can last a period of several years. These clauses require that the lessee begin
drilling within a set time period—usually a year—or pay a delay rental penalty to the
lessor, otherwise, the lease expires. The secondary term usually lasts as long as the lessee
produces oil and gas in paying quantities from the leased premises.
Protect your interests
own or lease land in any oil producing state—if you want to produce oil and gas in Texas,
Oklahoma, or Louisiana—consult with attorneys who know oil and gas law. Contact
Sloan, Bagley, Hatcher & Perry today to set up a consultation.
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