Before a landowner will be paid a signing bonus for executing an oil and gas lease, the Lessee needs to make sure that the person who signed the lease is the person who owns the oil and gas underneath the subject property. To know for sure, the energy company has to spend a good amount of time doing research at the local courthouse. There, they search through old deed books and try to determine if any prior owner to the land had reserved the oil and gas rights. If another person reserved the oil and gas rights, then that party is, by law, the only person entitled to enter into the oil and gas lease. In this case, the landowner who just signed the lease and was expecting a nice bonus payment would not be entitled to it. This unhappy landowner has a title defect.
This situation is not uncommon. Given that the energy company pays sizable signing bonuses, it makes sense that they take their time to make sure they are paying the right person. The basic idea – from the energy company’s perspective – is this: am I 100% certain that the people who have legal rights to these minerals have given me permission to extract them? The last thing they want is to drill a well and later find that they haven’t obtained the proper person’s permission to do so. Aside from mineral reservations, there are other defects in title that might make an energy company nervous about issuing a signing bonus. These can range from gaps in title, prior oil and gas leases, active wells, as well as probate issues. Most title defects are easily cured, and our oil and gas attorneys are thoroughly experienced in curing them. Other title defects can be more complicated, and can require some clever lawyering. Has an energy company notified you that a title defect is preventing you from obtaining an oil and gas lease? Call us to set up an appointment, and our attorneys will help determine what’s stopping you from entering into an oil and gas lease.