OIL AND GAS LEASES 101 - TexasBarCLE

OIL AND GAS LEASES 101

by MATTHEW CARSON COTTINGHAM ("COTTIE") MILES

bank of america plaza,25th floor 300 convent street san antonio, texas 78205 tel: (210) 227-7591 fax: (210) 227-7924

State Bar of Texas NUTS AND BOLTS OF OIL, GAS AND ENERGY RESOURCES LAW

September 24, 2008 Houston

CHAPTER 1

MATTHEW CARSON COTTINGHAM ("Cottie") MILES

BIOGRAPHICAL INFORMATION

EDUCATION B.A. in Politics, 1994, Washington and Lee University, Lexington, Virginia J.D., 1997, Texas Tech University of School of Law, Lubbock, Texas

PROFESSIONAL ACTIVITIES Partner, Martin & Drought, P.C., San Antonio, Texas Board Certified in Oil, Gas & Mineral Law, Texas Board of Legal Specialization Board Certified in Commercial Real Estate Law, Texas Board of Legal Specialization Editor, State Bar of Texas Oil, Gas and Energy Resources Law Section Report, 2008 - Present Council Member, State Bar of Texas Oil, Gas and Energy Resources Law Section, 2006- Present Chairman, Natural Resources Section, San Antonio Bar Association, 2003-2006 Fellow, San Antonio Bar Foundation, 2002 - Present Member, Rotary Club of San Antonio, 2004 ? Present

LAW RELATED SPEECHES AND PUBLICATIONS Author, Water Wars: A History of the Edwards Aquifer Water Crisis, 6 S.C.ENVT'L.

L.J. 213 (1997). Author, A Statutory Lien with an Attitude, Real Estate, Trust and Probate

Newsletter (October 2004). Speaker/Author, State Bar of Texas 2004 Advanced Oil, Gas & Energy Resources

Law Course, The Vacancy Hunter And The Landowner ? Do Opposites Really Attract? Co-Author, So Your Client Thinks He Wants to Buy Only the Surface, State Bar of

Texas Oil, Gas and Energy Resources Law Section Report (December 2006).

Oil and Gas Leases 101

TABLE OF CONTENTS

Chapter 1

I. INTRODUCTION....................................................................................................................................................1

II. MINERAL ESTATE VERSUS SURFACE ESTATE............................................................................................ 1

III. ESSENTIAL LEASE CLAUSES ........................................................................................................................... 2 A. The Granting Clause ....................................................................................................................................... 2 B. The Habendum Clause.................................................................................................................................... 2 C. The Delay Rental Clause ................................................................................................................................ 2

IV. OTHER LEASE CLAUSES ................................................................................................................................... 3 A. The Royalty Clause ........................................................................................................................................ 3 B. The Mother Hubbard Clause .......................................................................................................................... 3 C. Principal Savings Clauses............................................................................................................................... 3 1. The Shut-In Royalty Clause ................................................................................................................... 3 2. The Operations Clause............................................................................................................................ 4 3. The Dry Hole Clause .............................................................................................................................. 4 4. The Cessation of Production Clause....................................................................................................... 4 5. The Force Majeure Clause...................................................................................................................... 4 6. The Breach Clause.................................................................................................................................. 4 D. The Pooling Clause......................................................................................................................................... 4 E. Administrative Clauses................................................................................................................................... 5 1. The Warranty Clause .............................................................................................................................. 5 2. The Proportionate Reduction Clause ...................................................................................................... 5 3. The Equipment Removal Clause ............................................................................................................ 5 4. The Surrender Clause ............................................................................................................................. 5 5. Lease Memorandum Clause ................................................................................................................... 5 6. Assignment Clause ................................................................................................................................. 5 7. Free Use of Oil and Gas Clause.............................................................................................................. 5

V. DATE OF LEASE AND PARTIES........................................................................................................................ 5

VI. A BRIEF SUMMARY OF IMPLIED LEASE COVENANTS .............................................................................. 6

VII. TOP LEASES.......................................................................................................................................................... 7

VIII. CONCLUSION ..................................................................................................................................................... 7

APPENDIX A - Producers 88 Form - Paid Up............................................................................................................... 9

APPENDIX B - Producers 88 Form - Delay Rental ..................................................................................................... 11

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