RECenter Quiz: Oil and Gas Leasing

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Quiz
Oil and Gas Leasing
By Judon Fambrough
January 1998

Oil and gas leasing is on the rise in Texas. The price of oil has not increased, but oil companies can find and produce oil and gas more efficiently using new technology. When approached by an oil company for a lease, mineral owners may have questions. The Real Estate Center reports Hints on Negotiating An Oil and Gas Lease, Rights and Responsibilities of Mineral Cotenants and Minerals, Surface Rights and Royalty Payments; answer many of them.

The leasing mineral owner has a legal duty to protect the surface whenever the ownership of the mineral and surface estates have been divided.
T F
If the mineral interests are owned by more than one person in a cotenacy, the law requires that all the cotenants lease to the same oil company.
T F
In Texas, an oil and gas lease is actually a deed, not a rental agreement, as implied by the title.
T F
When a lease is silent, an oil company is liable to the surface owner if the acquifer, serving as the sole source of freshwater for the surface owner's household and agricultural purpose, is depleted by the oil company's operations.
T F
In Texas, an oil and gas lease allows an oil company to explore for and produce oil, gas and uranium.
T F
When the lease is silent, an oil company is liable to the surface owner for the loss of livestock when the drill site is not fenced.
T F
If the minerals are owned by more than one person in a cotenacy, the law requires that all the contenants sign the lease before the lease is valid as to any of them.
T F
When the lease is silent, an oil company is liable to the surface owner for failing to pursue the production method that serves the public policy of mineral development while, at the same time, permits the use of the surface for productive agriculture.
T F
In Texas, a lease terminates if the oil company goes six consecutive months without paying royalties from the time production began.
T F
According to the oil and gas lease, if one acre is place in a pooled unit, then all the leased acres are held as long as production continues from the pool.
T F

For an explanation to all answers, click here.

Fambrough is an attorney, member of the State Bar of Texas and senior lecturer with the Real Estate Center at Texas A&M University.

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