How Does A Gas Lease Work?

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When someone contacts you regarding the leasing of your mineral rights to the gas under your land you need to ask some questions to determine what is proposed.

It is important to ascertain if other neighboring property owners have been contacted and if they are agreeable to the lease.

Who is making the proposal.  Are you being contacted by someone who wants to obtain the gas lease in their own name with a plan to resell the lease to someone else – perhaps a gas company.  Are you dealing with someone who is an employee of the company looking to purchase gas leases in your area for their use.  Or, are you being contacted by an independent contractor working on behalf of the company who plans to use the lease.

Do some research on the person contacting you as well as the company which will be leasing the rights to your gas.  Check out whether there are any other wells in your area.

If you have more than one parcel of land negotiate a separate lease for each property.

Gas leases normally last for a long time.  Usually gas leases have two provisions affecting their duration.  First there is a period of time during which the lessee attempts to develop a particular result.  If this particular result is realized then the second provision of the lease takes effect and this can last for an indefinite prior of time.

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At the beginning of the lease you may receive a cash bonus for signing the lease.  Often with a gas lease you can negotiate to receive a certain amount of free gas each year.  Usually the amount of free gas  you receive will be enough to supply the gas needed for a house.  If you need more than the allocated amount of gas then usually you can purchase the additional gas by paying the current retail price.  In addition to the free gas you may receive royalty checks for a share of the gas drilled.

The well drilling process will be messy and noisy.  However, after the wells are in place there will be little mess.  Someone from the lessee will probably check the wells periodically to be sure they are operating properly.

If you purchase property where there is a gas lease in place you may or may not be purchasing the rights to the lease.  Be sure to ascertain this information at the time you consider purchasing the property.  If you are the new owner of the gas lease you will need to contact the lessee to have any royalty checks sent to  you and not the previous owner.

It is important to consult with an attorney who can help you with the legal issues and the documents required if you contemplate leasing the rights to the gas on your property.