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What is a Gas Lease?

When you own land that might be oil-rich, you can use a Gas Lease to grant someone else the right to explore and extract oil and gas, and other minerals, from the property. Signed by the land owner and the gas company (respectively called the "lessor" and the "lessee"), this essential contract can help to clarify the terms of the gas exploration, as well as any potential royalties the property owner could receive if anything valuable is discovered. Royalty payments are a percentage of the total proceeds made from the sale of any oil, gas or other minerals produced from the property. When ready, you can click "Make document" to take a closer look at the sample Gas Lease.

When to use a Gas Lease:

  • You're looking to lease your land for oil exploration.
  • You'd like to lease private property to search for oil.

Sample Gas Lease

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Gas Lease

 

, , , ("Lessor"), and , at , , ("Lessee"), agree as follows:

 

GRANT OF LEASED PREMISES

Lessor, in consideration of the total payment of which reflects an annual rental fee of , receipt of which is acknowledged by Lessor, and the covenants and conditions contained in this lease, does lease and demise to Lessee exclusively that certain tract of land in the County of State of , with an address of , , and legally described as follows: and containing acres, more or less ("the Premises"), for the purpose of exploring, mining, drilling, and operating for, and extracting, storing, and removing of oil, gas, hydrocarbons, and all associated substances.

 

Lessor leases to Lessee the Premises for a term of years from and after the date of this lease and so long thereafter as (a) any oil, gas, or other hydrocarbon substances are produced from the Premises; (b) drilling operations are being continuously prosecuted on the Premises; or (c) the term is extended by agreement of the parties.

 

LESSEE'S RIGHTS

During the term of this lease, Lessee shall have the exclusive right to explore, drill, and mine for, and extract, store, and remove oil, gas, hydrocarbons, and other associated substances on and from the Premises and for the following purposes:

 

(a) To enter and occupy the Premises;

 

(b) To erect, construct, maintain, operate, use, repair, and replace on the Premises structures, buildings, plants, machinery, casing, instruments, equipment, tanks, houses for employees, pipe lines, pole lines, power lines, telephone lines, telegraph lines, roads, and other structures and facilities as may be necessary or convenient;

 

(c) To inject in the Premises gas, water, and other fluids;

 

(d) To drill on the Premises for water and use, without charge, any water obtained by its operations on the Premises; and

 

(e) To construct, erect, maintain, use, operate, repair, and replace on the Premises a plant, with all necessary appurtenances, for the extraction of oil and gas produced from the Premises or other land in the vicinity of the Premises.

 

OIL ROYALTY

Lessee shall pay to Lessor as royalty for all oil produced and removed from the Premises an amount equal to of the value of all oil produced and removed from the Premises after the customary adjustments are made for temperature, water, and basic sediment. The value of the oil shall be the posted available market price in the district in which the Premises is located for oil of like gravity on the day the oil is removed from the Premises. Lessor, by giving 90 days' notice in writing to Lessee, may elect to receive the royalty provided for in this paragraph in kind, in which event Lessee shall, at no cost to Lessor, deliver to Lessor's tanks on the Premises or to a pipe line designated by Lessor at the mouth of each well on the Premises the percentage or fraction of all oil produced and removed from the Premises as specified in this paragraph; provided, however, that a change from payment in kind to payment in value, or vice versa, may be made no more often than once each calendar year. No royalty shall be due Lessor for or on account of oil lost through evaporation, leakage, fire, or other casualty before marketing, or, when royalty oil is being taken in kind by Lessor, before delivery.

 

GAS ROYALTY

Lessee shall pay to Lessor as a royalty for all gas, including residual dry gas, produced, removed, saved, and sold from the Premises an amount equal to of the net proceeds received by Lessee from the sale of the gas; provided, however, that nothing contained in this paragraph shall obligate Lessee to produce, save, or sell gas from the Premises. Should Lessee, for purposes of having gasoline extracted from the gas, transport the gas, or cause it to be transported, to a gasoline extraction plant located on the Premises or on other land, the cost of so transporting the gas shall be deducted from the amount received for it by Lessee before determining the net proceeds received by Lessee from the sale of the gas. Further, no royalty shall be payable to Lessor for any gas that is (a) Lost, used, or consumed in the operation of the gasoline extraction plan; or (b) Used by Lessee to repressure any oil bearing formation from which oil is being produced by a well or wells on the Premises though the repressuring is accomplished by injecting the gas into wells not situated on the Premises.

 

CASINGHEAD GAS ROYALTY

Any casinghead gasoline extracted from gas produced from the Premises may, at the option of Lessee, either be returned to the oil or gas formation from which it was produced or sold by Lessee at the best price and on the best terms reasonably obtainable. When the gasoline is returned to the oil or gas formation from which it was produced, no royalty shall be payable to Lessor for this gasoline. When the gasoline is sold, a royalty shall be paid by Lessee to Lessor equal to of the net proceeds received by Lessee for the sold casinghead gasoline. The term "casinghead gasoline" shall include natural gasoline produced by a gas well. When sold, casinghead gasoline shall be sold for not less than the public or open market price for this gasoline, when it exists, at its place of extraction.

 

NO ROYALTY FOR OWN USE

Lessee is not required to account for or pay royalties to Lessor for any oil, gas, or water produced from the Premises and used by Lessee in its operations under this lease.

 

PAYMENT OF ROYALTIES

On or before the day of each month, Lessee shall pay to Lessor in the manner specified in this lease all royalties due to Lessor under this lease for any oil, gas, or other substances produced and removed or sold from the Premises during the preceding month. All royalties, regardless of amount, shall be fully paid, if not otherwise already paid, at the end of the calendar year in which they accrue.

 

DEVELOPMENT CLAUSE

Lessee has paid to Lessor the rental in full for the primary term of this lease. Unless Lessee terminates this lease sooner, as provided in this lease, Lessee, on or before the last day of that period, shall either commence drilling operations on the Premises or pay to Lessor as rental the sum of per year and make a like payment of rental to Lessor on the first day after the end of the primary term and on the same day every year thereafter, until drilling operations are actually commenced on the Premises or this lease is terminated.

 

MANNER OF PAYMENT OF RENT

All rent and royalties payable under this lease shall be deemed duly paid when a check for the same, payable to the order of Lessor jointly, is deposited in the United States mail, first-class postage prepaid, addressed to Lessor at , , . Lessor may at any time, and from time to time, change its address for the purpose of this paragraph by giving written notice to Lessee.

 

PAYMENT FOR LESSOR INTEREST

The rentals and royalties specified in this lease are based on the assumption that all the oil and gas rights in the Premises are owned by Lessor and leased to Lessee under this lease. Should it hereafter appear that Lessor, at the time of making this lease, owns less than a fee simple in the Premises and therefore less than all oil and gas rights in the Premises, the rentals and royalties accruing under this lease to Lessor shall be reduced proportionately.

 

OIL DEVELOPMENT

Should oil or gas be produced in paying quantities by any well drilled by Lessee on the Premises, Lessee shall continue to drill additional wells on the Premises as rapidly as can be done with one drilling rig working with reasonable diligence until as many wells have been drilled on the Premises.. Thereafter, all drilling obligations of Lessee on the Premises shall be deemed fully performed.

 

GAS DEVELOPMENTS

Should Lessee complete a well or wells on the Premises that fail or fails to produce oil in paying quantities but produces gas in paying quantities, Lessee shall either sell so much of the gas as it may be able to find a market for and pay Lessor the gas royalties specified in this lease or suspend operations of the gas well or wells and pay Lessor a yearly rental in advance of per acre for each acre held under this lease at the commencement of the suspension until producing operations on the Premises are again resumed by Lessee. Should Lessee complete a well on the Premises that fails to produce oil in paying quantities but produces gas in paying quantities, Lessee shall not be obligated to conduct any further drilling operations on the Premises, except to drill offset wells as described in the following paragraph, Offset Wells, of this lease, until in its judgment the drilling of additional wells under the provisions of this lease is warranted by existing or anticipated market conditions.

 

OFFSET WELLS

Should oil or gas be discovered in paying quantities by means of any well drilled on property adjoining the Premises and within feet of the exterior boundary of the Premises, Lessee shall offset this well by commencing the drilling of an offset well on the Premises provided both of the following conditions are met:

 

(a) Oil or gas in paying quantities is produced by the adjoining well for longer than a 30-day production test period; and

 

(b) The drilling obligations of Lessee expressed in the previous section, Gas Developments of this lease have not been fully performed.

 

CONDUCT OF OPERATIONS

All operations to be performed by Lessee on the Premises in accordance with this lease shall be performed by Lessee at Lessee's own cost and expense and not at the expense of Lessor or any of them. Further, Lessee shall conduct all operations in a careful workmanlike manner, in accordance with all laws, statutes, and regulations relating to the operations of oil and gas production, and shall allow no liens to attach to the Premises as a result the oil and gas operations.

 

TAXES

Lessee shall pay all taxes on any improvements placed or oil stored by it on the Premises and of the taxes levied and assessed on the petroleum mineral rights in the Premises. Lessor shall pay all taxes levied or assessed against the Premises and of the taxes levied and assessed against the petroleum mineral rights in the Premises.

 

SURFACE USE

Lessor shall have the right to use the surface of the Premises, and all of it, for agriculture and any purposes that do not interfere with Lessee's rights under this lease.

 

DEFAULT CLAUSE

Should Lessee default in the payment of any rent or royalty due under this lease or in the performance of any other obligation imposed on it by this lease, and this default is not corrected within 15 days after written notice of the default has been served on Lessee by Lessor, then Lessor may terminate this lease and all rights of Lessee in and to the Premises or under this lease shall cease. However, if any oil well has been drilled or is being drilled on the Premises by Lessee and Lessee is not in default in connection with this well, Lessee's right to this well and to one acre surrounding the well, together with Lessee's right to any rights-of-way necessary for egress and ingress to the well, shall not be affected by the default or terminated by Lessor.

 

TERMINATION OF LEASE

On termination of this lease, Lessee shall peaceably surrender possession of the Premises, or the portion surrendered to Lessor or its successors in interest in as good condition, reasonable wear and tear excepted, as it was on the date of this lease. Lessee shall have the right, on termination of this lease or surrender of any part of the Premises, to all improvements placed on the Premises or the surrendered part of the Premises by Lessee under this lease including all structures, buildings, plants, machinery, casing, instruments, equipment, or tanks erected or installed by Lessee.

 

ASSIGNMENT

Lessor and Lessee shall each have the right to assign its interests in this lease, in the Premises, and in the oil and gas rights to the Premises; provided, however, that no assignment by Lessor shall increase Lessee's obligations under this lease and no assignment by Lessor shall be binding on Lessee until Lessee has been given written notice, signed by Lessor, of the assignment.Neither party may assign or transfer this Contract without prior written consent of the other party, which consent shall not be unreasonably withheld.

 

NOTICES

Any notice or communication required or permitted under this Lease shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the addresses listed above or to such other address as one party may have furnished to the other in writing. The notice shall be deemed received when delivered or signed for, or on the third day after mailing if not signed for.

 

BINDING ON HEIRS

This lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the parties to this lease.

 

ATTORNEY'S FEES

If any litigation is commenced between the parties to this lease concerning the Premises, this lease, or the rights and duties of either in relation to the Premises or to this lease, the party prevailing in that litigation shall be entitled to, in addition to any other relief that may be granted in the litigation, a reasonable sum as and for its attorneys' fees in that litigation that are determined by the court in that litigation or in a separate action brought for that purpose.

 

ENTIRE AGREEMENT

This instrument constitutes the entire agreement between Lessor and Lessee respecting the Premises, the leasing of the Premises to Lessee, or the lease term created under this lease, and correctly sets forth the obligations of Lessor and Lessee to each other as of its date. Any agreements or representations respecting the Premises or their leasing by Lessor to Lessee not expressly set forth in this instrument are null and void. This lease may not be extended, amended, modified, altered, or changed, except in a writing signed by Lessor and Lessee.

 

 

 

 

_________________________________________ ________________________

Date

By ,

 

STATE OF ss:, ss:

 

 

 

 

__________________________________________ ________________________

Date

By ,

 

STATE OF ss:, ss:

 

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Gas Lease FAQs

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  • Will this Gas Lease Contract be legally binding under state law?

    As with any other contract, Gas Leases will not be legally binding until everyone has signed. This isn't your average Gas Lease template. Any Gas Lease Contract under a Rocket Lawyer membership can be reinforced by optional Document Defense® support from an attorney.

  • Should a land owner make a Gas Lease Contract each time that they rent out their property?

    No matter whom you are renting your property to, it is valuable to keep track of every rental with a lease. The following list of benefits may be helpful for you:

    • Payment requirements are well-defined
    • The length of the rental period is established
    • Roles and responsibilities are understood by all

    A few consequences of not having one in place could include property damage, unplanned changes to the rental arrangement, late or unpaid fees, and unauthorized usage.

  • How is a Gas Lease template organized?

    To complete your Gas Lease with Rocket Lawyer, you'll need to prepare the following information in advance:

    • A description of the property
    • The lessee's contact information
    • What the duration of the rental will be
    • How payments should be made

    Your Gas Lease will also contain guidelines about past due payments, liability, and governing law. Using the document tool, you have the power to add further modifications, as needed.

  • On average, what would it typically cost me to create a Gas Lease?

    The fees associated with hiring and working with a lawyer could be between hundreds of dollars and thousands. With Rocket Lawyer, every Gas Lease that you make will be tailored to you. Simply tap or click the button that says "Make document" to start the process. As with any document that you plan to sign, you might also find it helpful to have a lawyer in our nationwide attorney network read it over for you.

  • Are there any additional steps that I should be sure to take after creating a Gas Lease?

    Attached alongside each Gas Lease, there's a checklist of recommended actions to take after your document is completed. With a Premium membership, you can edit, print, make a copy, sign electronically using RocketSign®, and/or save it in PDF format or as a Word file as needed. Finally, the gas company should always receive copies of your fully executed agreement. You may also wish to check out our full repository of additional legal documents .

  • How do I have my Gas Leases checked by an attorney?

    Depending on whom you approach, some lawyers will not even accept requests to review a rental contract that they didn't draft. A more favorable approach would be via attorney services at Rocket Lawyer . If you sign up for a Premium membership, you will be able to ask for guidance from an attorney with relevant experience or ask other questions related to your Gas Lease Contract. As always, Rocket Lawyer is here to support you.

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