2. Others in industrywould have acted to prevent drainage__________________________________3. Drill offset well
Protection against DrainageThird PartyDrains* Harmful to bothlessor and lessee* Shared interest: drill offset wellLesseeDrains * Harmful to onlylessor* Conflict of interest: avoid drilling offset well
Protection against DrainageLessor’s acceptanceof delay rentals = ratificationof lessee’s activities = waiverof implied rights? Notsuccessful defense for lessee* Payment of delay rentals eliminates need to drill, notneed to protect against drainage
Diligent MarketingMarket within reasonable timeof production* When would reasonably prudentoperatorsell?Market at appropriate price* Price acceptable to reasonablyprudent operator?
Lease Negotiation Exercise60-acre tract of land in Midland, TexasArea of average productivitySeveral energy companies interested in leasing this land
In your role as landowner or landman:* Identify five key lease provisionsthat you want to negotiatebefore signing lease* Rankthose provisions in order of priority(from most important to less important)* Make changes and/or additionsto the language in those provisions which you will present during negotiations