Drafting and Negotiating Oil, Gas and Mineral Leases: What Every Landowner Should Know
By The Jones Law Firm PC– Serving Landowners in Austin, San Antonio and Across Texas
Owning land in Texas comes with more than just surface rights, it may also include valuable mineral rights. When energy companies come knocking with offers to lease your oil and gas rights, it can feel exciting—but also overwhelming.
Before you sign anything, it’s essential to understand how mineral leases work and how to negotiate terms that protect your land, rights, and long-term interests.
What Is a Mineral Lease?
An oil, gas and mineral lease is a contract between a landowner (the lessor) and an oil, gas, or mining company (the lessee) that grants the company the right to explore for and produce minerals from your land in exchange for payment.
While these leases can generate significant income, they also come with legal and financial risks if not drafted carefully.
Key Terms Every Landowner Should Understand
When reviewing a an oil, gas and mineral lease, pay close attention to these critical provisions:
1. Bonus Payment
This is the up-front money paid when the lease is signed. It can vary widely depending on market demand, location, and past production in your area.
2. Royalty Rate
This is your share of the revenue if minerals are produced, commonly 12.5% to 25%. Be sure the lease clearly defines how and where royalties are calculated and if deductions are allowed; e.g., at the wellhead or further downstream.
3. Lease Term & Extension
Most leases have a primary term (often 3 to 5 years). If production begins during this period, the lease may extend indefinitely. Understand what happens if production doesn’t start and how to limit how long the lease extends.
4. Surface Use & Damage
Clarify whether the company has the right to use your land surface for drilling, roads, or equipment—and what compensation or restoration you’ll receive for any damage.
5. Groundwater Rights
Groundwater has become very important and valuable. Make sure that you get fairly compensated for your groundwater if you let the operator use it.
6. Shut in and Delay Rentals
These clauses allow companies to maintain the lease without active drilling, sometimes with minimal payment. Make sure the terms are fair.
7. Pugh and Depth Clauses
These clauses protect you from tying up too much of your land or mineral interest if only part of it is developed.
Common Pitfalls to Avoid
- Signing a standard lease without review – Most leases favor the company, not the landowner.
- Accepting the first offer – Bonus and royalty rates are often negotiable.
- Overlooking environmental protections – Make sure your lease protects your water, soil, and surface use.
- Failing to consider taxes and long-term rights – Mineral income may trigger tax obligations, and leases can affect your heirs.
Negotiation Tips for Landowners
- Do your homework. Research your land’s mineral history and surrounding activity.
- Consult professionals. Work with an attorney experienced in Texas mineral law to review and negotiate the lease.
- Get it in writing. Verbal promises from landmen or company reps mean nothing without written terms.
- Don’t rush. You have the right to fully review the lease and get a second opinion.
How The Jones Law Firm PC Can Help
At The Jones Law Firm PC, we represent landowners throughout Austin, San Antonio and across Texas who are approached by oil, gas, and mineral companies. We can:
- Review and negotiate lease terms
- Protect your surface rights and land value
- Ensure fair royalty and bonus payments
- Guide you on taxation and succession planning
We’re committed to helping landowners make informed, confident decisions about their mineral rights.
Have you been approached about a mineral lease?
Before you sign, consult with the legal team at The Jones Law Firm PC to protect what’s yours.