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Arkansas Message Board

Gas Lease Contract Information

  • 01/04/2012 10:55 AM
    Message # 786956
    Anonymous
    I need information regarding a potential lease with a petroleum on my property in Arkansas. This property had been leased to Chesapeake before they sold their interest in the area to BHP. The contract recently expired and now another petroleum company wants to lease the property. I was able to add several conditions to the contract with Chesapeake regarding insurance/ indemnity, liability for environmental damage, restoration of the surface after drilling, damages, fencing of a well site, and drill site location. The new company refuses to add any such conditions to their contract and said sign the contract as is, or forget it. I have had an attorney read the contract and he said it is vague as to the conditions mentioned above and that they can do just about anything they want as long as it conforms to the Arkansas state laws regarding the drilling of a gas well, restoration after drilling, and their responsibility/liability for damages.

    What I need to know specifically is what are the Arkansas laws regarding any protection for property owners, even if the conditions as mentioned above are not spelled out in the lease. I have also contacted the Arkansas Oil and Gas Commission about this matter and they were no help at all. They referred me to the State of Arkansas legislature web site to find such information. Needless to say, trying to find such information on their site was a waste of time. Does anyone know the specific laws, or where I can go to find them? 

    Thanks for any help!  
    Last modified: 01/05/2012 11:13 AM | Anonymous
  • 01/05/2012 12:07 PM
    Reply # 787978 on 786956
    Anonymous

    I am not a lawyer and what I have listed below is what I might talk to a lawyer about. You will need to get with a lawyer about the situations you have mentioned and the ones I have mentioned. I have listed the Arkansas General Assembly Web link below so you can look at the code for yourself. Also look on the Arkansas Oil and Gas Commission web site for more rules and regulations that might help you.

    http://www.lexisnexis.com/hottopics/arcode/Default.asp

    http://www.arkleg.state.ar.us/assembly/2011/2011R/Pages/Home.aspx

    The first statue listed below might be used at or after a commission hearing.

    15-72-106. Court review by aggrieved person -- Injunction.

    15-72-107.  Notice prerequisite to temporary restraining order or injunction.

    15-72-108.  Injunctions for enforcement.

    15-72-110.  Appeals.

    15-72-305.  Allocation of production and cost following integration order -- Procedure. (1/8 royalty)

    If the company doesn’t let you have a clause in your lease that states you don’t have to pay for any transportation costs, enhancing of product, production costs, etc. you could go to the hearing and try to have the commission put it into your lease.

    The law mentions that you have to exhaust all your administrative remedies.

    If that fails you might have your lawyer set it for a court date since that same statue mentions that the suit shall have precedence over all other causes, proceedings, or suits on the docket of a different nature and it would be in the circuit court of the county in which the property is involved.

    Also under 15-72-110 if an appeal is made to the Supreme Court the appeal shall take precedence over other cases on the docket.

    Also under 15-72-305 the mineral owner that is forced integrated is suppose to get 1/8 royalty and Marketability of title is mentioned.

    There is an ongoing lawsuit about the “forced integrated” 1/8 royalty and production costs.

    Maybe your lawyer and the lawyer of that suit could possibly get together and see if it is possible to join suits and put them on the front burner of the courts to help your case in some way.

    This might give you an option for a different lawyer too.

    The Arkansas NARO President would probably have more information about the ongoing lawsuit. He could possibly give you more information.

    The link below is about the suit on the NARO site.

    http://www.naro-us.org/Default.aspx?pageId=697379&mode=MessageList&eid=743402

     

     

    As far as the clause in the lease for warranty and define title, I don’t see how even the Oil and Gas Commission can force that clause on a citizen, since you can use various titles to sell your property, like a quit claim title in which you don’t defend or warranty title. This would go into title laws and might be another objection I would raise to my lawyer before the hearing.

    I would also look at leases in the area and see if they have active leases with the conditions you mentioned, in and out of your section. If they do, you might want to bring that to your lawyer’s attention and the commissions.

    I have listed some other codes you might want to read below.

    15-73-201.  Lease extended by production -- Scope.

    The Fayetteville shale area is I believe in a controlled field, 15-73-201 shows you your rights as far as wording in a lease, which would protect your rights to be held by production in other sections or tracts.

    15-73-203.  Forfeiture of oil, gas, or mineral leases

    15-72-203.  Prerequisite to exploring or drilling -- Notice to surface owner.

    15-72-210.  Gas leaks in pipelines, machinery, etc.

    15-72-213.  Surface owner's lien for damages caused by operator neglect.

    15-72-214.  Surface owner's claim for damages caused by operator neglect.

    15-72-219.  Compensation of surface owners and surface tenants for damages -- Restoration of land.

     

 
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