assignment of oil and gas lease

Assignment Of Oil And Gas Lease

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What is an assignment of oil and gas lease.

An assignment of oil and gas lease is a contractual agreement between a landowner and an oil or gas company in which the company gains the right to explore for, develop, and produce oil and gas from the property. The leaseholder typically compensates the owner with periodic payments (called royalties) based on the amount of oil or gas produced. Leases can be assigned to another party, such as a drilling contractor, if the original leaseholder decides not to pursue development. Assignment of an oil and gas lease should be done in writing and filed with the appropriate government authority.

Assignment Of Oil And Gas Lease Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.1 6 exh101.htm ASSIGNMENT OF OIL AND GAS LEASES. , Viewed October 27, 2022, View Source on SEC .

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Meet some of our Assignment Of Oil And Gas Lease Lawyers

Joshua is an experienced attorney with deep expertise in finance, corporate, and business law. He offers practical legal solutions and personal service. As Managing Partner of Soloway Group PC, he advises startups, growing companies and investment funds on key issues, from formation to fundraising, stock issuances, trademarks and general business. He started out structuring funds and transactions at PwC before launching his own firm in 2009. He has been a partner in several New York law firms and has founded several companies including a banking firm, a real estate business, and a Cleantech company. Joshua has also served as Chief Legal Officer and Chief Strategy Officer of several companies in the tech, real estate, consulting, and sustainability industries. Prior to law school he was an early employee at a SoftBank-backed startup until it’s acquisition. Over the years, Joshua has helped many clients to launch, finance and grow successfully.

Josh Bernstein has been serving real estate and corporate transactional clients since 2002. His experience is varied, and he enjoys working on and puzzling out novel and complex corporate and real estate matters. Josh’s experience includes, among other things, the following: representation of public companies in connection with SEC reporting and compliance work (proxies, 10-K’s; 10-Q’s; 8-K’s, etc.); representation of public and private company securities issuances (including private placements, and other similar offerings); assistance in structuring and drafting joint ventures, both for investors and operating partners, and including both real estate and corporate ventures; handling public and private company mergers and acquisitions; and asset sales and dispositions; assisting clients, big and small, with real estate acquisitions, sales and financings; managing large-scale and multi-state real estate portfolio acquisitions, dispositions and financings; complex condominium creation, structuring and governance work, including: commercial condominiums, use of condominiums as a land planning tool, wholesale condominium property acquisitions and dispositions, and rehabilitating failed or faulty condominium legal structures to make ready for sale; development of restrictive covenants and owners’ association documents for master-planned communities; compliance with federal statutes governing real estate sale and development (including, without limitation, the Interstate Land Sales Full Disclosure Act, the Housing for Older Persons Act, and the Americans with Disabilities Act); representation of real estate lenders, for both improved and unimproved property, and including numerous construction financings secured by real estate; assistance with commercial leasing; from both the landlord and tenant side, and including condominium leasing; training residential home and condominium sales staff for compliance with applicable local and federal law; and workouts of all kinds. When he’s not busy lawyering, Josh may be found watching 80’s commercials, flying a single-engine plane, playing poker, or trying to be a good dad.

Benjamin T.

I’m an Attorney working out of Marion, Ohio. Born and raised in Toledo, Ohio. I completed undergrad at the University of Toledo. I completed law school at Barry University in Orlando, Florida.

I am a new attorney who is licensed to practice in Connecticut and Massachusetts. I am waiting for bar admission to North Carolina. I have over 20 year of experience working in both the public and private sectors. I am a fierce advocate for my clients and am committed to delivering solutions for clients with excellence.

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Recent law school graduate with an undergraduate degree in biomedical engineering degree passionate about the intersectionality of law and life sciences. Admitted to New York and New Jersey Bar. Ability to add value in a pharmaceutical or biotechnology entity and provide a unique perspective to multiple disciplines.

Presently, I am a civil rights and insurance litigation attorney with a focus on representation government entities. Prior to this, I’ve represented some of the largest financial institutions in the world in litigation.

Attorney James is an experienced Attorney, Federal Law & Tax Specialist, Corporate Counsel, Tax Lawyer and Mediator. Experienced in Contract Drafting, Corporate Formation, Corporate Governance, Federal Administrative Law, Regulatory Compliance, Tax Settlement, Tax Planning, Merger/Acquisition, Business Law, Collection, Insurance Claims, Employment Law, Immigration, Non-Profit Governance Licensed Corporate Counsel in State of Delaware Supreme Court Bar #900646 Attorney: US District Court of the District of Columbia, Washington DC Federal Bar #DE0003 US Bankruptcy Court of The District of Columbia, Washington DC Federal Bar #DE0003 Tax Advisor: IRS Registered Tax lawyer/PTIN, PTIN (over 10 years experience) US Federal Agencies, Boards and Commissions, Federal Administrative Law and Regulatory Compliance Business law services: Administrative Law, Business Law, Collections, Bankruptcy, Corporate, Employment, Regulatory Compliance, Corporate Counsel, Immigration

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Oil and Gas Lease for Dummies: 2024 Guide

For over a century, property owners and oil and gas companies have come together to sign mutually beneficial oil and gas leases . In the U.S, we are fortunate to have the capability of entering into an oil and gas lease. This is in order to extract and sell the resources found below the personal property.

Unfortunately, like many property transactions, no two oil and gas leases are the same. Many questions arise before, during, and after gas leases that can only be answered on a case-by-case basis. That’s why we’ve put together this ultimate guide. It is to help answer some of the most common questions about oil and gas leases.

What is Oil and Gas Lease?

Oil and gas lease is an agreement between a mineral owner (lessor) and a company (lessee) in which the owner grants the company the right to explore, drill and produce oil, gas, and other minerals below the surface of the earth.

We aren’t calling anyone names when we say oil and gas leases for dummies , but rather, we wanted to explain what an oil and gas lease is in the simplest terms so that anyone with any amount of experience can understand.

Oil and gas leases are created so that property owner can maintain their mineral rights. At the same time while leasing their land to an extraction company.

How Does an Oil and Gas Lease Work?

As a legal agreement between property owners and oil and gas companies, oil and gas leases are fairly straightforward. It is also pretty simple to understand. However, what is incredibly important to understand is that there is no truly standard oil and gas lease.

Instead, oil and gas leases are made up of many common clauses. It outline the different defined sections of the document. Although some of these sections may be omitted in simpler agreements. With that, here are the most common parts of an oil and gas lease:

• Dates Clause
• Parties Section
• Consideration Section
• Granting Clause
• Royalty Clause
• Drilling and Delay Rental Clause
• Dry Hole, Cessation, and Continuous Drilling Clause
• Pooling Clause
• Surrender Clause
• Damage Clause
• Assignment Clause
• Force Majeure Clause
• Warrant Clause

For definitions of each of these sections, you can read more about how an oil and gas lease works.

Oil and Gas Royalties: What You Earn with a Mineral Lease

More than anything, oil and gas royalties are the largest point of interest when it comes to signing a mineral lease. After all, oil and gas royalties are a monthly payment to operation stakeholders as a percentage share from the sale of the extracted resource .

In layman’s terms an oil and gas royalty is a paycheck that mineral rights owners receive whenever resources are extracted and sold from their property. In an oil and gas lease agreement, generally, a fixed percentage of the share of profits is defined for the property owner. This percentage is applied to each month’s operational profits, and the landowner is able to earn a monthly income from their oil and gas lease.

Of course, this is a very brief overview about oil and gas royalties. For more information, feel free to read more about oil and gas royalties.

Understanding Oil and Gas Lease Bonus Payments

Beyond oil and gas royalties, the most common way for property owners to financially benefit from an oil and gas lease is with a bonus payment. Oil and gas lease bonus payments are an amount of money that you are to be paid immediately upon signing and oil and gas lease.

Essentially, a bonus payment is designed to entice a landowner into signing an oil and gas lease. It is generally paid 60-90 days after the contract is signed.

Oil and gas lease bonus payments are great, in that they guarantee a landowner is compensated for their time. If no oil or gas is ever extracted from the land, landowners will not be able to receive oil and gas royalties, because nothing was extracted and sold. However, the bonus payment had already been paid, and cannot be revoked. Therefore, a landowner is compensated simply for entering into an agreement, even the operation never begins.

Learn more about oil and gas lease bonus payments.

Paid Up Leases – What Are They & Why are They Used

In order to receive an oil and gas lease bonus payment, landowners may be required to sign a paid up lease agreement. A paid up lease is simply an agreement between a mineral rights owner and an oil and gas company, in which one payment is made at the beginning of the contract.

Although oil and gas royalties may be earned later in the lease’s life, a “paid up lease” is created so that landowners can receive an oil and gas lease bonus payment. Read more about paid up leases in oil and gas.

Pooling, Joint & Unitization in Oil and Gas Leases

What goes on below the surface of the Earth is not always reflective of what is above the ground. In oil reserves, the large pools of crude oil are only rarely located under one parcel of defined land.

For oil reserves that technically belong to multiple mineral rights owners, a few different methods are used to consolidate and fairly compensate the landowners in an oil and gas lease. They are as follows:

• Pooling – Pooling combines several tracts of land together in order to cover the area of a single oil well. In a pooling agreement, all of the parties own their portion of any oil that is produced from within the pooled land.
• Joint – Joint Leases combine two active oil and gas leases into what is known as a “joint operating agreement (JOA). In a JOA, operators agree upon a community lease in which assets are shared and new royalty percentages are defined.
• Unitization – Unitization is a process that merges different pieces of land together across an entire oil field. Unlike pooling, unitization can combine the production of many different oil wells into one shared contact

For expanded definitions and examples of each, learn more about pooling, unitization, and joint oil and gas leases.

An Oil Company Wants to Lease My Land, What Should I Do?

It happens all of the time. A landman has approached you and wants to lease your land in order to extract oil, gas, or other resources that can be sold in the market. Are you getting a good deal or does the man at your door simply want to turn a profit?

Essentially, if an oil company wants to lease your land you have two options: do or don’t. As the mineral rights ( subsurface rights ) owner of your property, you have the power to control what happens to your land.

On one hand, oil and gas operations can be extremely beneficial as a chance to earn oil and gas royalties as well as any associated bonus payments. On the other hand, you may not want a drilling company in your backyard, or want to reserve your resources for future generations.

Either way, leasing you land to an oil company is an individual choice. On a case-by-case basis, oil leases should be analyzed, negotiated, and even counter-offered. Always consult an expert before signing an oil and gas lease. For now, you can read more about what to do if an oil company wants to lease your land.

How to Get Oil Companies to Drill On Your Land

Sometimes in this life, you have to go out and get what you want, rather than waiting around for opportunities to knock at your door. If you live in a resource-rich state like Texas, Colorado, Oklahoma, Pennsylvania, or North Dakota (or any other state where valuable resources are found), then you may want to seek out an oil and gas company to drill on your land.

Getting an oil company to drill on your land is actually quite easy. There are many companies and individuals at all levels of the oil industry that would be excited to help in any operation that may be successful.

For first-time mineral rights owners, it is a good idea to speak to experts, lawyers, surveyors, and more before approaching any individual oil company to drill on your land. The more you know about your property (as well as its potential) can be used to leverage your case in an oil and gas lease agreement.

Learn more about how to get oil companies to drill on your land.

Leasing Mineral Rights: Pros and Cons

So you have valuable property, great! Essentially, you have two choices: leasing or selling you mineral rights . Selling your mineral rights results in an outright sale of your land for a large lump sum. Leasing mineral rights is a bit more complicated. For the most part, here are the main pros and cons of leasing mineral rights.

• Retained ownership of mineral rights
• Signing bonuses
• Future oil and gas royalties
• Contracts can be complicated or unfair
• Earnings are highly dependent on found resources and operational efficiency
• Could miss out on opportunity to sell mineral rights

Essentially, leasing mineral rights is a great way to retain the ownership of your property in hopes that a successful drilling operation will lead to a steady stream of oil and gas royalties. Read more about the pros and cons of leasing mineral rights.

Things to Consider Before Signing an Oil and Gas Lease

Once you know that you’ll be making money as soon as the dotted line is signed, then it is tempting to quickly move forward with an oil and gas lease. No matter how good of a deal you think you have on the table, there is always room for a better agreement.

Before you sign an oil and gas lease, patience and attention to detail will maximize the benefits of your oil and gas lease. Here are the top five things we recommend doing before signing an oil and gas lease:

• Ask as many questions as you can, clarify everything
• Be a good person, remain civil and realize that the agreement is designed to benefit both parties
• Know the approximate worth of your land
• Get as much as you can financially

Essentially, you must consider everything before signing an oil and gas lease. Taking the time to fully understand your land and the agreement will maximize the benefits you can receive. Read more about what to do before signing an oil and gas lease.

Oil and Gas Lease Negotiations: Tips from Mineral Rights Experts

Of course, knowing how to negotiate is the best way to sign a mineral lease in your favor. Because there is no standard mineral lease agreement, everything is on the table. Every single aspect of an oil and gas lease can be negotiated, so you will want to come as prepared as possible to fight for what you believe you deserve.

Above all, here are our top three tips for oil and gas lease negotiations:

• Start off by saying “no,” never take the first offer
• Take your time and get multiple quotes
• Talk to an industry expert and have them carefully comb the contract

Once it is signed, an oil and gas lease is legally binding. Therefore, it is critical to only sign when you are absolutely ready. Although some companies may pressure you into agreeing before a set date, you have all of the power to wait until you are ready to sign an oil and gas lease. Read more about oil and gas lease negotiations tips.

Oil and Gas Lease Form 88 – What is it & Where Can I Get It

Whereas there is no standard oil and gas lease, Form 88 is about as standard as it gets in the industry. In fact, for a long time, form 88 was the standard for oil and gas leases. Also known as the printed form, or Producer’s 88, Form 88 refers to the most common page for signing an oil and gas lease.

Form 88 is available online as a template for oil and gas contract agreements. After printing, all that needs to be added is the designated drilling location, involved parties, and specific lease terms.

Even if it seems cut and dry, never sign an agreement of which an oil and gas company refers to as simply a “standard form.” Whereas Form 88 was standard for years, modern oil and gas lease agreements are much more sophisticated than they were 50 years ago. It is likely that your oil and gas lease will have some version of Form 88, so it is important to understand what it is and how it works. Read more about oil and gas lease form 88.

Contact us to learn more

To learn more about oil and gas leases and how they can benefit your portfolio, contact us today .

100 Crescent Court, Suite 700 Dallas, Texas 75201

(469) 310-4970

Our team specializes in the acquisition of mineral rights, royalties, overriding royalty and non-operated working interests. Contact us to learn more about how we can assist you.

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Understanding an oil and gas lease: What does it really mean?

Know what a landman is offering in an oil and gas lease before you sign.

We have all heard the old adage ‘the devil is in the details.’  This holds particularly true in oil and gas leasing. The story line has repeated itself time and time again since the Marcellus Shale land rush came to Pennsylvania.  A landman contracted by the gas exploration company knocks on a landowner’s door, puts a lease in front of them, and asks them to sign on the dotted line.  Stories have percolated up that some unscrupulous landmen use ‘scare tactics’ to entice landowners to sign quickly – suggesting that the company will drill under their land even if the landowner doesn’t sign a lease, or that if they don’t sign now the landman won’t be back…neither of which are true.

Many times a landowner signs a lease presented by a landman without a firm understanding of the implications either with respect to their rights or the rights of generation after generation of their family members who inherit the land.

Below are some of the provisions that may be included in oil and gas leases.  It is by no means a complete list, but it provides examples of what may be discussed and negotiated with the landman and the gas exploration company.

A lease provision might state that:

The Lease is granted for any or all of the following purposes: the right to stimulate all coal seams or other strata or formations using any and all methods and technology available at the time of stimulation;

This means that the lease is not limited to exploration of the Marcellus Shale formation which sits 5,000 or more feet below the surface.  Coal seams are located much closer to the surface and the operations to extract natural gas from such coals seams is a markedly different process than extraction from the Marcellus Shale strata deep below the surface.  There are other natural gas bearing formations that lie below the Marcellus Shale strata, such as the Utica Shale, and those will be developed in time as well.

A lease might include this language:

…to transport by pipelines or otherwise across and through the Leased Premises Oil and Gas from the lands covered by the Lease, for so long as the transportation of such production may be desired by LESSEE;

This provision allows the oil and gas exploration company (the “Lessee”) to lay natural gas pipelines across your land even if your land is not used for the well pad.  Many leases include a provision that the company’s right to keep these pipelines in place remains even after the lease you signed has terminated and you are no longer receiving royalties.  Often a lease will state that no additional money is paid to the landowner for use of their land for pipelines.

Most leases provide something like the following:

…the placing of tanks, equipment, electric power lines, telephone lines, water lines, impoundments and ponds, compression and collection facilities, roads, structures for the production of Oil and Gas, together with the right to enter into and upon the lands covered by the Lease at all times for the aforesaid purposes.

Many landowners say that the landman assured them that there will be no ‘surface operations’ on their property – that their land will only be ‘drilled under.’  While that may be true, the lease will often still provide that the company can do much more than drill under the landowner’s property.  The sentence above is common in oil and gas leases and one can only imagine the impact of any of these structures on their land.  The last sentence permits the company to enter your land “at all times.”  Drilling operations run around the clock so this might mean at 5:00 in the morning, or after midnight, or whenever.

All leases will describe the leased premises:

The lands covered by the Lease are situated in [        ] Township, [       ]  County, Commonwealth of Pennsylvania, Tax Parcel Number(s) [          ], being all the property owned by LESSOR or to which LESSOR may have any rights in said Township, and including all adjacent or contiguous lands owned or claimed by LESSOR, although not included within the boundaries of the land particularly described above.

This language can take a landowner by surprise.  Suppose that you own several parcels of real estate in a county or different counties – one parcel you live on, and the other parcels are farmland that you inherited years ago.  You intend to only lease the minerals rights to the farmland (which is identified specifically by Tax Parcel ID and a description of the deed) and you sign the lease with the language above included.  You have just leased the mineral rights to the land under your home.

Oil and gas companies may want to aggregate your land with adjacent lands:

LESSOR grants to LESSEE the right at any time to pool or consolidate the Leased Premises with other lands, whether owned by or leased to LESSEE or owned by or leased to others, to form an oil, gas, and/or coalbed methane gas pooled unit for the purpose of drilling a well or wells thereon.

Oil and gas exploration operations have two footprints – one above ground and one below ground.  Above ground, operations include such things as the well pad, impoundment pit, the well head, etc.  A well pad can cover several acres.  Add to that the hundreds of other acres that are needed for a staging area for water trucks, access roads, metering or compression facilities, pipeline routing, etc. and one can see why the company needs to lease large swaths of acreage.  Even if you lease your mineral rights your surface land may never be touched.  The companies need the leases also to cover the subsurface area that will be drilled and fracked.  To accomplish all of this the companies combine the leased lands into a ‘pool’ or ‘unit.’  This is important to understand because whatever royalties are paid from a producing well will be split among the landowners in the ‘unit’ and will be based on their respective acreage.  It is also important because companies can rely on ‘commencing operations’ on lands other than yours, but you are still bound by the terms of the lease that you signed.

Many oil exploration companies buy and sell leases as part of their business model:

LESSEE shall have the right to assign and transfer this Lease in whole or in part at anytime, and LESSOR waives notice of any assignment or transfer of this Lease.

Signing an oil and gas lease is a business deal, but it has a personal side as well.  You hopefully have researched the company you intend to lease with, you have some idea how fiscally strong it is, how environmentally conscious it is, how long it has been around.  To the companies, these lease holdings are commodities that are sometimes bought and sold.  It is only fair that you get to decide who holds the lease to your mineral rights, Right? If you signed a lease that includes the language above, the answer is ‘Wrong.’

Every lease will have a primary term and circumstances for extending that term:

This Lease shall continue in force and the rights granted to LESSEE shall be quietly enjoyed by LESSEE for a term of Five (5) years (the “Primary Term”), and as long thereafter as operations are conducted on the Leased Premises, or as long as well(s) producing Oil and Gas in paying quantities or well(s) capable of producing Oil and Gas in paying quantities from the Leased Premises or from lands unitized or pooled therewith, in the sole judgment of LESSEE.

This is a short paragraph in the typical oil and gas lease, but it is arguably one of the most important.

Oil and gas exploration companies generally want to hold the leased mineral rights for a period of years until they actually begin drilling.  This could be because the price for natural gas is down, or their rigs are operating elsewhere, or for any number of business reasons.  So the company will pay you a ‘bonus’ (a set dollar amount per acre leased) as part of a ‘paid up lease’ and their obligations to you are fulfilled for the Primary Term, generally five (5) years.

What happens when the Primary Term expires?  What if the company has not yet started drilling, and may not be ready for some time beyond expiration of the five (5) year Primary Term, but it would like to still hold the lease to your mineral rights.  Often companies will attempt to extend the Primary Term, sometimes without additional money paid to you, by relying on “and as long thereafter as operations are conducted on the Leased Premises” or “well(s) capable of producing Oil and Gas in paying quantities from the Leased Premises or from lands unitized or pooled therewith” language in the lease.  “Operations” are sometimes defined in the lease, sometimes not, but in nearly every case the term “Operations” is more expansive than actually drilling a hole in the ground.  It may include seismic testing, or it may include putting up a fence or excavating an access road (on your lands or lands that you don’t own but that have been ‘pooled’ or ‘unitized’ with your land).  A “well capable of production in paying quantities” has been determined by Pennsylvania courts to be generally at the sole discretion of the oil and gas exploration company.  Whichever vice is used, the effect is the same – your mineral rights remained leased out to the company despite the fact you may not have received a dime in royalties.

As noted above, this article discusses some of the most common, and important, provisions you will find in an oil and gas lease, but each lease and each situation brings with it specific issues.

Remember that an oil and gas lease might affect your rights to your land for generations to come.  Do your homework and learn about the company you are dealing with and most importantly if you are not an oil and gas leasing expert it is in your best interest to get help from someone who is.

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Oklahoma Bar Journal

Interpreting assignments of the oil and gas lease.

By Jereme M. Cowan

Under Oklahoma law, an oil and gas lease grants a cluster of rights in land,1 forming an estate in real property with the nature of fee.2 Like many of the sticks in the metaphorical bundle, the estate created under the oil and gas lease is freely assignable and divisible.3 As a result, oil and gas leaseholds can be transferred, in whole or in part, by the holder of the oil and gas lease, such practice being a central element to oil and gas development.4 Furthermore, the transfers of leasehold are usually executed and delivered by legal instruments ubiquitously titled “assignments,” which are filed of record in the same manner as any instrument affecting title to real property.5 Given the history of Oklahoma’s oil booms,6 not to mention Oklahoma’s current role in the U.S. shale boom, assignments inundate many of the county clerk records where oil and gas exploration is prevalent. Therefore, it is likely that an examination of oil and gas land titles in one of these counties will require the interpretation of assignments. BASIC RULES OF CONSTRUCTION Assignments are a contract and a conveyance.7 As such, they are to be read in accordance with the basic rules of contractual interpretation,8 which comprise not only those findings in Oklahoma’s case law but also the statutory provisions of 15 O.S. §§151-178. In a nutshell, Oklahoma’s rules on interpreting assignments begin with prioritizing the true intent of the parties, as gathered from the four corners of the instrument.9 If the assignment is unambiguous, then the written instrument will govern,10 along with all technical terms in the assignment being interpreted as commonly understood among persons in the oil and gas industry.11 However, if there is an ambiguity, then the contractual interpretation can be aided by extrinsic evidence in order to resolve the intrinsic uncertainties of the assignment.12

These rules make it imperative for an attorney conducting a title examination to understand the business and terminology of the oil and gas industry as it pertains to the transfer of leasehold, not to mention understanding general rules of land titles and the law of oil and gas. The purpose of this article is not to give a complete account of the oil and gas industry nor an account of all rules governing the transfer of oil and gas rights in the record title. Rather, the purpose is to give an introductory and cursory overview, presented on a step-by-step basis, for an attorney who may find themselves, either willingly or unwillingly, examining assignments of oil and gas leases filed in Oklahoma. STEP 1: WHAT TYPE OF INTEREST? First and foremost, the title examiner needs to determine the type of interest being assigned (or reserved) in the leasehold. More often than not, if the assignment is transferring an interest in a lease without overriding royalty language or net profits language, then a working interest is being assigned. When there is ambiguity, the title examiner should remember that a working interest is the right to  work  on the leased property — searching, developing and producing oil and gas. On the other hand, an overriding royalty interest is share in production attributable to a particular lease. STEP 2: WHAT AMOUNT OF INTEREST? Working interests tend to be relatively straightforward. Either the assignor is purporting to assign all of its right, title and interest under a lease, all of a lease (read 100 percent) or a fractional interest in a lease. Digressing a bit, now would be a good moment to discuss the difference between all right, title and interest  of the assignor  and 100 percent of a lease. All of the assignor’s right, title and interest could be 100 percent or could be some fractional interest. It depends on what the assignor owns of record. If an assignor assigns a lease without any fractional limitations or without the foregoing language limiting it to the assignor’s right, title and interest, then the assignor is purporting to assign 100 percent of the lease. The prudent examiner notes the distinction.

Overriding royalty interest can sometimes not be as straightforward. Often, the assignor decides to use a formula for the computation of the assigned or reserved overriding royalty interest. For example, a recitation in the assignment reads as follows: an overriding royalty interest equal to the difference between 20 percent and lease burdens. Here, the overriding royalty interest would be calculated by first adding up all the lease burdens, such as a one-eighth landowner’s royalty and a previously conveyed one-thirty-second overriding royalty interest, and then subtracting that number from 20 percent, which is represented mathematically as: 20% - (1/8 + 1/32) = 4.375%.

There are various business reasons for computing an assigned or reserved overriding royalty interest with the subtraction of lease burdens from a certain percentage, the most prominent being that assignments of leases typically cover a block of leases, which contain various lease net revenue interests. Showing the overriding royalty interest as a formula rather than a specific number allows the assignor to either retain or convey the leases at certain net revenue interest. In the prior example, assuming the assignor was assigning the overriding royalty interest, it was retaining an 80 percent net revenue interest in all the leases covered by the assignment except, of course, those leases which were already burdened greater than 20 percent. STEP 3: WHAT LEASE IS COVERED? All leasehold interests derive from a lease. Therefore, it is imperative that the examining attorney determine what lease is covered by an assignment. If the assignment covers one or just a few leases, then the lease(s) will probably be described somewhere in the body of the instrument. If the assignment covers multiple leases, then typically they will be described in an exhibit “A” attached thereto. However, it should be noted that in some cases an assignment may not describe a particular lease or leases but instead will include language that it is the intent to assign all leasehold rights in a particular tract of land, usually the unitized area. For example, an assignment may read that all of the assignor’s rights in the leasehold covering the SW/4 are transferred to the assignee without giving further explanation as to the underlying leases.  In this particular example, the assignor is conveying whatever leasehold rights it may own from whatever source such rights might derive as to the SW/4.

STEP 4: WHAT ARE THE LIMITATIONS TO THE ASSIGNED INTEREST? By far the most challenging (and often most ambiguous) aspect of an assignment is the limitations to the assigned interest. Like land itself, a lease is a bundle of sticks. A lease can be cut and carved any which way, limited only by the imagination of the oil and gas industry. If an assignor wants to assign a lease insofar as that lease covers a particular formation in the strata, then the assignor can do so. The following are standard limitations that the examining attorney should recognize.

An assignment can be limited to the wellbore of a well. A wellbore limitation means that the assignor is assigning only those rights to production from the wellbore of a certain well, arguably at the total depth it existed at the time of the assignment. All interest outside the wellbore are excluded from the assignment, entailing that a wellbore assignee can produce from shallower formations in the wellbore but cannot produce from deeper formations or lands outside the wellbore.

The central problem with wellbore only assignments is determining when in fact there is a wellbore only assignment. The title examiner should be aware that a wellbore assignment is the narrowest of assignments. Very limited rights to the lease are being assigned. It can be argued that the lease or unit and the lands covered by the lease or unit need only be described for informational purposes, as it is rights to the wellbore being assigned. Furthermore, the fact that a well or unit is mentioned in the description of the lease does not entail that the assignor intended to convey wellbore rights only. More often than not, a reference to a well or unit in Oklahoma is for informational purposes.

Some assignments are limited to certain depths or to a particular formation. For instances, an assignment may limit the assigned leases “insofar as said leases cover the Woodford Formation” or “insofar as from the surface to a depth of 8,100 feet.” Depth limitations are usually more prominent than wellbore limitations and are considerably less ambiguous. Furthermore, title examiners should always read an assignment thoroughly to determine whether a depth limitation is pertinent. Many times, such a limitation is buried in one of the numerous special provisions of the assignment or placed in one of the exhibits attached thereto.

In order to accommodate the formation of units, leases will often be assigned only as to a portion of the lands covered thereby. For example, a participant enters into a joint operating agreement with the operator that has proposed the drilling of a 40-acre unit well located in the NW/4 NW/4. If the participant owns all of a certain lease covering the N/2 NW/4, the participant may decide to assign only that portion of the lease covering the NW/4 NW/4, thereby retaining all rights in the NE/4 NW/4. Therefore, assignments may contain limitations as to the area acreage being conveyed.

CONCLUSION The foregoing steps serve as an introduction to interpreting assignments of oil and gas leases. Most certainly, each step of analysis could be accompanied by a more detailed explanation. That said, the key point to be made here is that the interpretation of assignments in oil and gas land titles requires a familiarization of the business practices of the oil and gas industry, not just an understanding of the governing law.

ABOUT THE AUTHOR Jereme M. Cowan is a managing partner at Cowan & Fleischer PLLC. Mr. Cowan’s practice fo-cuses on oil and gas land titles. He has planned, moderated and spoken at a number of oil and gas seminars sponsored by the Oklahoma Bar Association.

1.  See Hinds v. Phillips Petroleum Company , 1979 OK 22, 591 P.2d 697, 698 (1979) (stating that “[t]he cluster of rights comprised within an instrument we refer to ‘in deference to custom’ as an ‘oil and gas lease’ includes a great variety of common-law interests in land”). 2.  See Shields v. Moffitt , 1984 OK 42, 683 P.2d 530, 532-33 (1984) (finding that “the holder of an oil and gas lease during the primary term or as extended by production has a base or qualified fee,  i.e. , an estate in real property have the nature of a fee, but not a fee simple absolute”). 3.  See Hinds  at 699 (concluding that leasehold interests are freely alienable “in whole or in part”); Eugene Kuntz,  Kuntz, a Treatise on the Law of Oil and Gas , Volume Five, §64.1, 259 (1987) (asserting that the oil and gas lease is freely assignable “in the absence of a provision to the contrary”);  see also Shields  at 533 (holding that a lease clause restricting alienation was void). 4. John S. Lowe,  Oil and Gas Law in a Nutshell , Sixth Edition (2014). 5. Joyce Palomar,  Patton and Palomar on Land Titles , 3rd Edition, Volume One, 3 (2003). 6. Kenny A. Franks,  The Oklahoma Petroleum Industry  (Norman: University of Oklahoma Press, 1980). 7.  See Plano Petroleum, LLC v. GHK Exploration, L.P. , 2011 OK 18 (2011). 8.  K & K Food Servs. v. S & H, Inc. , 2000 OK 31, 3 P.3d 705, 708. 9.  See Messner v. Moorehead , 1990 OK 17, ¶8, 787 P.2d 1270, 1272. 10.  Messner  at 1273. 11. 15 O.S. §161. 12.  Crockett v. McKenzie , 1994 OK 3, ¶5, 867 P.2d 463, 465.

Originally published in the  Oklahoma Bar Journal --  OBJ 88 pg. 285 (Feb. 11, 2017)

• The Oil and Gas Addendum

Federal Court Rules that Assignment of Oil/Gas Lease May Not Extinguish Liability of Original Lessee

Landowners are often alarmed and angered when they receive word that the oil/gas lease they executed several years ago, after months of intense and personal negotiations, has been assigned to an unknown, unfamiliar gas operator. This anxiety is amplified when the landowner’s phone calls or letters go unanswered, the royalty checks are late or are not made at all and the once well-maintained well pad site is now overgrown and in a state of disrepair. Can the landowner seek redress against the original gas operator? A federal court in Pittsburgh recently addressed this issue and suggested that the assignment of an oil/gas lease may not relieve the original gas operator from liability. This decision could impact thousands of leases throughout the Commonwealth of Pennsylvania. Given the potential impact of this decision, landowners and gas operators alike should carefully review the assignment clauses in their leases and re-evaluate liability risks in light of the federal court’s opinion in Rice v. Chesapeake Energy Corp., et al., 2012 WL 3144318 (W.D. Pa., August 1, 2012).

The Rice case was originally filed on March 5, 2012 in the Court of Common Pleas of Greene County by the landowners, James and Veronica Rice (“State Court Action”). The State Court Action arose out of the oil/gas lease the Rices signed with Dale Property Services Penn, LP (“DPS Penn”) on November 24, 2009 (the “Lease”). Since DPS Penn had subsequently assigned the Lease to Chesapeake Energy Corp. (“Chesapeake”), the Rices also named Chesapeake as a defendant in the State Court Action. The Rices’ Complaint alleged various claims against both DPS Penn and Chesapeake, including trespass, unauthorized access roads, crop damage and failure to pay the well pad drilling fees.

On March 25, 2012, Chesapeake sought to “remove” the State Court Action to the federal court sitting in Pittsburgh, Pennsylvania. Generally, a defendant such as Chesapeake may “remove” an action to federal court only if there is complete “diversity of citizenship” between the parties – i.e., each plaintiff and defendant must be from different states. Although both the Rices and DPS Penn were Pennsylvania citizens, Chesapeake and DPS Penn argued that because DPS Penn had assigned the Lease to Chesapeake, there could be no liability against DPS Penn and, as such, DPS Penn’s citizenship could be ignored and the case should proceed in federal court. The Rices opposed removal on the grounds that, under Pennsylvania law, the mere assignment of the Lease did not automatically extinguish DPS Penn’s liability and, therefore, the claims against DPS Penn remained viable. The federal court agreed with the Rices and sent the State Court Action back to Greene County.

The Rice decision illustrates the complex and unique nature of oil/gas leases. DPS Penn argued that the Lease should be treated solely as a property conveyance. If viewed solely as a conveyance, the promises and covenants set forth in the Lease “run with the land” and can only be enforced against the party in possession of the property at the time of the alleged breach. Pennsylvania law has long observed that “privity of estate” must exist in order to enforce lease or deed covenants. See, Conti v. Duve, 15 A.2d 494, 495 (Pa.Super. 1940) (liability of lessee “grows out of privity of estate [and] ceases when the privity ceases. If he has assigned before the time of performance, his liability would have ceased with his title, and liability would have attached to his assignee…”); See also, Goldberg v. Nicola, 178 A. 809, 813 (Pa. 1935) (“the covenantor of … an easement or a benefit attached to land is not liable after parting with his title …”). Under this analytical framework, DPS Penn maintained that since the Lease was assigned to Chesapeake, “privity of estate” was lacking and, therefore, the covenants could only be enforced against Chesapeake.

The Rices contended, however, that under Pennsylvania law, when it comes to the effect of an assignment, oil and gas leases are treated the same as any other contract. According to the Rices, oil/gas leases contain both “land use and contractual attributes” and that absent consent and release by the lessor, a lessee retains liability even after an assignment. Since the Rices never formally released DPS Penn from the original lease covenants, the Rices contended that the Lease covenants could still be enforced against DPS Penn despite the purported assignment. As support for their position, the Rices relied on a Pennsylvania Supreme Court decision from 1889. In Washington Natural Gas Co. v. Johnson, 16 A. 799, 801 (Pa. 1889), the Supreme Court observed “[t]hat [lessee] continued liable notwithstanding their assignment to [assignee] is very clear. The covenant was their own, and their privity of contract with their lessors continued notwithstanding their assignment of the lease.” Importantly, the Washington Natural Gas court did not require “privity of estate” and enforced the covenants against the original lessee:

“…although their assignment had divested them of the lease, it could not relieve them from their contract.”

See, Washington Natural Gas, 16 A. at 801. The Rices maintained that, despite being over 120 years old, the Washington Natural Gas decision had never been overturned or reversed and remained the law of Pennsylvania. As such, the Rices argued that, contrary to DPS Penn’s assertion, “privity of estate” is not required and the claims against DPS Penn could move forward.

In remanding the State Court Action back to Greene County, the federal court was compelled to follow the rule set forth in Washington Natural Gas. The court observed that the “advanced age of the [Pennsylvania Supreme Court’s] doctrinal rules does not, in and of itself, make them inapplicable.” Rice, 2012 WL 314318 at 5. Since the Washington Natural Gas rule does not require “privity of estate”, the lease covenants could still be enforced against DPS Penn despite the assignment to Chesapeake. The Rice court observed that remand to Greene County was appropriate even through “it is entirely possible, that in state court, [DPS Penn’s] theories to defeat the claims asserted against it will ultimately prevail.” Id. In light of this ruling, the litigation against DPS Penn and Chesapeake will now proceed in Greene County as opposed to federal court.

Although the Rice court did not rule on the actual merits of the Rices’ claims against DPS Penn, the decision is nonetheless significant because it recognizes those claims as being viable against the original lessee. What can we take away from the Rice decision? Unless the lessor specifically “releases” the original lessee, the mere assignment of the lease to another gas operator may not automatically extinguish the liability of the original lessee. Landowners who may have claims for unpaid rentals, incorrect royalties or surface damage should carefully review the assignment clauses in their respective leases. In the event of an assignment, such claims may be advanced against the original lessee.

• Lease Expiration and Lease Development

Oil and gas development can present unique and complex issues that can be intimidating and challenging. At Houston Harbaugh, P.C., our oil and gas practice is dedicated to protecting the interests of landowners and royalty owners. From new lease negotiations to title disputes to royalty litigation, we can help. Whether you have two acres in Washington County or 5,000 acres in Lycoming County, our dedication and commitment remains the same.

We Represent Landowners in All Aspects of Oil and Gas Law

The oil and gas attorneys at Houston Harbaugh have broad experience in a wide array of oil and gas matters, and they have made it their mission to protect and preserve the landowner’s interests in matters that include:

• New lease negotiations
• Pipeline right-of-way negotiations
• Surface access agreements
• Royalty audits
• Tax and estate planning
• Lease expiration claims
• Curative title litigation
• Water contamination claims

Robert Burnett - Practice Chair

Robert’s practice is exclusively devoted to the representation of landowners and royalty owners in oil and gas matters. Robert is the Chair of the Houston Harbaugh’s Oil & Gas Practice Group and represents landowners and royalty owners in a wide array of oil and gas matters throughout the Commonwealth of Pennsylvania. Robert assists landowners and royalty owners in the negotiation of new oil and gas leases as well as modifications to existing leases. Robert also negotiates surface use agreements and pipeline right-of-way agreements on behalf of landowners. Robert also advises and counsels clients on complex lease development and expiration issues, including the impact and effect of delay rental and shut-in clauses, as well as the implied covenants to develop and market oil and gas. Robert also represents landowners and royalty owners in disputes arising out of the calculation of production royalties and the deduction of post-production costs. Robert also assists landowners with oil and gas title issues and develops strategies to resolve and cure such title deficiencies. Robert also advises clients on the interplay between oil and gas leases and solar leases and assists clients throughout Pennsylvania in negotiating solar leases.

Brendan A. O'Donnell

Brendan O’Donnell is a highly qualified and experienced attorney in the Oil and Gas Law practice. He also practices in our Environmental and Energy Practice. Brendan represents landowners and royalty owners in a wide variety of matters, including litigation and trial work, and in the preparation and negotiation of:

• Pipeline right of way agreements
• Surface use agreements
• Oil, gas and mineral conveyances

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New Mexico State Land Office Oil and Gas Division Manual 2023

Web Version  

Why is it that no more than two persons are allowed to own a state lease?

By State Land Office rule, no more than two persons/legal entities may be named as the lessee of record on an oil and gas lease. If two persons/legal entities are the lessee of record on a particular lease, the lessees are joint tenants and the state views each lessee as having a 100% undivided interest in it.

What exactly are Miscellaneous Instruments?

Miscellaneous Instruments are other contracts and instruments entered into by the lessee that do not affect record title. Per 19.2.100.43 NMAC, The State Land Commissioner does not approve Miscellaneous Instruments. Currently the Commissioner is only accepting three types of Miscellaneous Instruments, these types are identified on the Miscellaneous Instrument Filing Form. Other instruments such as assignments of interest, undivided working interests, overrides, farm outs/rights to explore and produce below a certain depth, overriding royalty assignments, operating rights, financial statements, and powers of attorney, etc. should be filed with the applicable County Clerk’s Office.

What form is required when submitting a record title assignment?

NMSLO’s Assignment of Oil and Gas Lease (form 0-30-A) is required.  The 0-30-A form should NOT be altered; the language of the official form will bind all parties.  Attachments to the form are permissible, if necessary, in order to capture additional signatures. No reservations, percentages or depth restrictions are permissible in a record title assignment.  Please complete the mailing address of the assignee, as lease correspondence will be sent to this address.

• See  Oil and Gas Forms

What are the fees for submitting assignments?

A $100 filing fee is required on each lease for which an assignment of record title is filed. A late fee of an additional $150 per lease is required if the assignment is filed with our office more than 100 days from the assignor’s execution date on the form. The fee for filing miscellaneous instruments is $50 for each associated lease.   All filing fees are non-refundable.

Is the assignment 0-30-A form available on the Internet?

Why does the form 0-30-a require all signatures be notarized.

Any legal instrument that is a transfer of real property must be acknowledged before a notary, required by statute.  Record title transfers are considered transfers of real estate in New Mexico.

Is a transfer of record title on a portion of the lands accepted?

Yes, an assignment of partial acreage may be filed as a record assignment.  To indicate a partial acreage, Record Title Assignment please check the “Partial Assignment” box at the top of the 0-30-A form.  No less than a full quarter/quarter or a full lot of an Oil and Gas Lease will be approved as a 100% Record Title Assignment.

Why does my lease assignment have a suffix number attached to it?

Every time a transfer of record title is approved a suffix number, aka the assignment number, is systematically generated to distinctly identify that assignment.  The number of assignments within an entire lease determines the next assignment number, generated sequentially.

If I have a large number of assignments to make, do I have to complete the paperwork for each and every assignment?

No, Blanket Assignments/exhibits are accepted by NMSLO.  A Blanket Assignment must be completed in triplicate, notarized, original signatures are required on each, and an exhibit A must be attached.  Additionally, a copy of the signed assignment must be submitted for each lease listed on the exhibit.   Blanket assignments are limited to 25 lease assignments per exhibit and filing fees are due for each lease listed on said exhibit.  Please contact our staff for a template of the required exhibit format.

What is an OGRID?

It is an Oil and Gas Remittance Identifier. This is a number that is utilized by three agencies: the State Land Office (NMSLO); the Oil Conservation Division (OCD); and the Taxation and Revenue Department (TRD).  OGRID numbers are used by these agencies to identify each entity and track various transactions and data.

When do I need an OGRID?

When any business regarding Oil and Gas is conducted with the three state agencies, the entity must first obtain an OGRID number, i.e. in order to bid at our State Land Office monthly Oil and Gas Lease Sale, bidders must have an OGRID number.  To request an OGRID please contact NMSLO’s Oil and Gas Division.

If we do not remember our OGRID number, can we submit an assignment without it?

Yes, the Oil, Gas, and Minerals Division staff will research the OGRID number if it is left blank on the assignment form. The OGRID number will be documented on your returned copy of the approved assignment.

How do I notify the Land Office of an address change?

A formal request must be submitted either by letter or on the Change of Address Form, available online under  Oil and Gas Forms .  Please provide the new address as well as the previous address.  Please provide current contact information as well.

Do I need to procure and file a bond or a waiver when I acquire a state Oil and Gas Lease?

A Protect Surface Bond Waiver may be filed in lieu of a bond   if   there are no plans for development and no surface disturbance on lease.

Prior to the commencement of development/operations/surface disturbance on a lease, the NMSLO requires that a sufficient bond be filed with, and approved by the Commissioner.

What kind of bonds does the Land Office require from lessees?

• Single lease Surface Damage Bond (Provides Surety for one Oil and Gas Lease)
• Multi-lease blanket Surface Damage Bond (Provides Surety for two or more Oil and Gas Leases)
•  Megabond (Provides Surety for Oil and Gas Leases, etc.  Please see the Megabond form for coverage details)
• A Cash Collateral Assignment is an acceptable alternative to procuring a bond from a surety company.  This form must be submitted in conjunction with the applicable bond form, determined by the amount deposited.
•  Please refer to the  Bond instructions, law and rule document  for detailed information regarding bonds

How do I know when the oil and gas lease sales are held?

The sales are held the third Tuesday of every month. Lease sales are held online through the SLO auction contractor, EnergyNet.

Monthly Oil and Gas   Lease Sale Notices   are posted on the NMSLO website.

When would I need to pay a shut-in gas royalty?

Shut-in Royalty (SIR) payments are due per well, per year.  A completed Shut-In Royalty Payment form and the applicable payment may be submitted if:             

• The associated lease contract contains the shut-in provision.
• The well is capable of producing gas in paying quantities.
• The well is temporarily shut-in due to lack of market or lack of a pipeline connection.
• The lease(s) have not been extended in excess of the time allowed per the lease contract.

The SIR payment due is dependent upon the terms of your lease contract. The payment must be “timely paid,” which means on or before the next lease anniversary date after 90 days from the date of shut-in.  Each payment is reviewed according to the SIR requirements before acceptance or rejection.

What is a stipulation?

A stipulation is an amendment of the terms of an older oil and gas lease to the current lease terms.  Upon the Commissioner’s approval, the lease assignment stipulated to the current lease series terms now has access to the shut-in royalty payment and extension clauses, which were not offered in the older lease contracts.

The Stipulation fee is $150.00, the form and instructions are available on the Oil & Gas Forms page.

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Texas Supreme Court Holds that Assignment Conveyed Entire Lease Interest, Not Merely A Wellbore Interest

Posted by: Jordan Mullins and Michael Szymanski in Case Law Update

Piranha Partners v. Neuhoff , No. 18-0581, 63 Tex. Sup. Ct. J. 474, 2020 Tex. LEXIS 136 (Tex. Feb. 21, 2020)

Where parties assign an interest in a lease with a single existing well, disputes can sometimes arise when the leasehold is further developed. Was the parties’ intent for the assignment to be limited to that single wellbore or did it also include production from later-drilled wells? The Texas Supreme Court reviewed a dispute as to whether an assignment of an overriding royalty interest conveyed an interest limited to an entire lease, a single well, or to the lands identified in the assignment.

In 1975, Neuhoff Oil & Gas (“Neuhoff”) purchased a two-thirds interest in the Puryear Lease, an existing lease covering all the minerals under a tract of land. Neuhoff later sold its two-thirds interest in the Puryear Lease but reserved a 3.75% overriding royalty interest on all production under the Puryear Lease. For twenty-four years, only one well was completed on the lands covered by the lease, the Puryear B #1-28. Then, in 1999, Neuhoff sold its overriding royalty interest at auction to Piranha Partners (“Piranha”). Neuhoff then went out of business, assigning its remaining assets to individual family members (the “Neuhoff Heirs”).

The operator under the Puryear Lease paid Piranha an overriding royalty on the Puryear B #1-28, but on additional wells it drilled on the lease, it paid an overriding royalty to the Nuehoff Heirs, believing Piranha had only been conveyed the overriding royalty interest in the specific well and not on all production under the Puryear Lease. The Piranha Assignment’s granting clause conveyed all of Neuhoff’s interest in properties described in an attached “Exhibit A” which described Neuhoff’s overriding royalty interest by reference to the Puryear #1-28, the land, and the Puryear Lease.

The Texas Supreme Court indicated Piranha erroneously relied upon numerous rules of construction that were not applicable. For instance, Piranha argued that the “greatest estate” canon applied since the assignment used the word “all.” The Court dismissed the canon’s applicability because the Assignment was unambiguous and the remainder of the sentence Piranha focused on included “all…right, title, and interest in and to the properties described in Exhibit ‘A’,” which, nevertheless, required analysis of Exhibit A.

Piranha also erroneously relied on construction rules regarding the clarity by which an instrument must describe a reservation or exception. The Court found those rules inapplicable because the issue was the scope of the grant to Piranha, not a reservation or exception. The Court also dismissed Piranha’s “construe against the grantor” argument, because the assignment was unambiguous.

The Neuhoff Heirs, on the other hand, primarily relied upon so-called “surrounding circumstances evidence,” including descriptions that appeared in the auction documentation and argued this information showed the interest offered was limited to the well. Arguing the flip side, Piranha contended those same documents did not describe the interest as “WBO,” an acronym sometimes used in auction materials to show an offered interest pertained to “wellbore only.” Piranha also pointed to the agreement Neuhoff signed with the auction house, indicating it was not selling a “fractionalized interest.” The Neuhoff Heirs, however, argued that the agreement applied to Neuhoff selling 100% of its interest in the Puryear B #1-28. The Court concluded the auction documents failed to support either side as the documents disclaimed the reliance placed on them by the parties, requiring that the parties instead look to the actual Assignment to Piranha.

The Court ultimately held that Piranha Assignment included all overriding royalty in the Puryear Lease, not just in the land or the wellbore. Rather than apply rules of construction or surrounding circumstances, the Court used a “holistic and harmonizing approach” in construing the language within the Assignment and its Exhibit A. Specifically, the Court focused on several provisions in the Assignment referencing the interest in the lease (as opposed to in a well or lands), and language describing the interest being conveyed as “all oil and gas leases…which shall include any… overriding royalty interests…held by [Neuhoff], as of the Effective Date,” to mean the Assignment to Piranha included all interest then owned by Neuhoff.

In addition, the Court noted the language “All presently existing contracts…to the extent they affect the Leases,” indicated “Neuhoff Oil conveyed its entire interest under the Puryear Lease,” further discrediting the assignment to Piranha was limited to the wellbore or land itself. Other provisions also referenced the lease, including a provision which indicated that the overriding royalty was payable out of oil produced under the lease and pursuant to the terms of the lease. The proportionate reduction clause also referenced the assignor’s interest in the lease.

As a result, the Court concluded that the Assignment to Piranha conveyed the overriding royalty interest as to all production under the Puryear Lease, not just in the Puryear #1-28.

Taken as a whole, the conclusion in this case is largely consistent with the body of case law emphasizing a holistic and harmonizing approach to deed interpretation. This case underscores the importance of ensuring that not only the body of an assignment, but also the exhibits, both carefully describe the intended scope of the conveyance. It also underscores that boilerplate “all right, title, and interest” language is not always merely expansive quitclaim language, but sometimes can have material meaning. It is important to evaluate the rights of either party in the event circumstances change in the future (i.e. drilling and production of an additional well).

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• Appellate Court Holds that “Blanket Easement” for Multiple Pipelines Did Not Require Single Route Across Property - June 8, 2020

• BOEM Finalizes Long-Awaited Overhaul of Offshore Oil and Gas Financial Assurance Regulations

The Bureau of Ocean Energy Management (BOEM) announced its finalization of a rule substantially revising the financial assurance requirements applicable to offshore oil and gas operations. The final rule revises criteria for determining whether oil, gas, and sulfur lessees, right-of-use and easement (RUE) grant holders, and pipeline right-of-way (ROW) grant holders are required to provide supplemental financial assurance above the current minimum base bond levels. The final rule also codifies the federal government’s process for estimating decommissioning costs; clarifies bonding requirements for RUE and ROW grant holders; and removes restrictions on the use of third-party guarantees to fulfill financial assurance obligations. BOEM estimates that a total of $6.9 billion in new supplemental financial assurance will be required as a result of the final rule, down from $9.2 billion estimated in the proposed rule.

BOEM’s final rule marks the federal government’s latest attempt to ensure operators possess adequate financial assurance to cover the decommissioning of oil and gas assets on the Outer Continental Shelf (OCS). BOEM states that the final rule is intended to ensure “the protection of the American taxpayers from exposure to financial loss associated with OCS development, while ensuring that the financial assurance program does not detrimentally affect offshore investment or position American offshore exploration and production at a competitive disadvantage.” The final rule will become effective 60 days after its publication in the Federal Register and compliance will be phased-in over the course of three years.

The History of BOEM’s Financial Assurance Regulations

BOEM’s final rule is the latest development in a multi-year effort to overhaul the agency’s financial assurance regulatory framework. BOEM’s current financial assurance regulations consists of two main parts: (1) base bonds, generally required in amounts prescribed in the regulations; and (2) supplemental financial assurance, which is an amount above the base bond that is required at the agency’s discretion to ensure a lessee or grant holder can fulfill its contractual and regulatory obligations. Under the current regulations, BOEM considers five criteria to assess whether a lessee or grant holder is required to obtain supplemental financial assurance: (1) financial capacity; (2) projected financial strength; (3) business stability; (4) reliability in meeting obligations based upon credit rating or trade references; and (5) record of compliance with laws, regulations, and lease terms. Additionally, BOEM provides further guidance on how it analyzes the five criteria through its issuance of Notices to Lessees (NTLs). Historically, BOEM has waived supplemental financial assurance for many lessees and grant holders.

From 2015 to 2020, in the wake of several major oil and gas bankruptcies, BOEM and its sister agency, the Bureau of Safety and Environmental Enforcement (BSEE), issued NTLs and proposed rules aimed at remedying what the agencies viewed as a significant problem: the federal government’s estimated decommissioning costs greatly exceed the amount of financial assurance held by oil and gas companies operating on the OCS. BOEM estimates that it has financial assurance in place for less than 8 percent of an estimated $38.2 billion in decommissioning liabilities. In its most recent proposed rule issued in June 2023, BOEM proposed significant revisions to its financial assurance regulations to address these risks.

BOEM’s 2024 Final Rule

The final rule, announced on April 15, 2024, is largely consistent with the agency’s June 2023 proposed rule. Significant regulatory revisions resulting from the final rule include:

• New Criteria for Supplemental Bonding: Under the final rule, BOEM will consider a new set of criteria to determine whether OCS lessees and grant holders are required to obtain supplemental financial assurance. BOEM will consider (1) credit rating; and (2) valuations of proved oil reserves. BOEM will accept two forms of credit ratings: (1) a credit rating from an NRSRO; or (2) a proxy credit rating that BOEM determines based on a company’s audited financial statements. To determine proxy credit ratings, BOEM will use S&P Global’s Credit Analytics credit model, but reserves the right to use a different model if it believes that model will more accurately reflect the true credit rating. As a threshold, BOEM will not require a company to secure supplemental financial assurance if it has an investment grade credit rating (i.e., a credit rating from an NRSRO that is greater than or equal to either BBB- from S&P or Baa3 from Moody’s, or the equivalent from another NRSRO). BOEM can also consider the value of proved oil and gas reserves per lease. Using BSEE’s cost estimates, if BOEM determines that the value of the reserves on any given lease exceeds three times the cost of the decommissioning estimate associated with the production of those reserves, then BOEM will not require that company to secure supplemental financial assurance.
• New Process for Estimating Decommissioning Costs: BOEM finalized its proposal to use BSEE’s P70 decommissioning cost estimate to determine whether supplemental financial assurance is needed. BOEM’s probabilistic P70 estimate is the value that BSEE determines to have a 70 percent chance of recovering the full decommissioning cost. In BOEM’s view, “a supplemental financial assurance set based on the P70 value means that, based on the uncertainty and risk applied by BSEE to its model, there is a 70% probability of covering the decommissioning cost of the facility (and therefore a 30% probability of exceeding it).” BSEE’s probabilistic decommissioning cost estimates are based off of actual expenditure data collected from oil and gas companies since April 2016 for wells and facilities, and since May 2017 for pipelines.
• Consideration of Co-Lessees: BOEM will not require supplemental financial assurance for leases where at least one co-lessee meets the credit rating threshold. BOEM recognizes that “all current owners are benefiting from ongoing operations and are jointly and severally liable for compliance with DOI requirements.”
• Changes in Bonding Requirements for ROW and RUE Grant Holders: To evaluate whether ROW or RUE grant holders are required to obtain supplemental financial assurance, BOEM will only consider the grant holder’s credit rating, as ROW and RUE grants do not entitle the holder to any interest in oil and gas reserves. For RUE grant holders, they will now be required to provide base financial assurance of $500,000, regardless of whether the RUE serves a state lease or a federal OCS lease. An RUE grant-holder may now be required to provide supplemental financial assurance if they do not maintain an investment grade issuer credit rating or proxy credit rating equivalent.
• Third-Party Guarantees: The final rule allows lessees and grant holders to use third-party guarantees for supplemental bonding purposes. It also removes the requirement that a third-party guarantee must ensure compliance with the obligations of all lessees, operating rights owners, and operators on the lease. The amendments allow a guarantee limited to a specific amount or limited one or more specific lease obligations, subject to BOEM’s agreement.
• Impacts of Assignments or Transfers of Leases: BOEM may withhold approval of any new transfer or assignment of any lease interest unless and until financial assurance demands have been satisfied. This revision could impact oil and gas transactions and restructurings.
• Timing of Compliance: The final rule will become effective 60 days after its publication in the Federal Register, but BOEM will phase in compliance over a three-year period. BOEM will initially require a company that receives a supplemental financial assurance demand to provide one-third of the total amount by the deadline listed on the demand letter. BOEM would then require a second one-third within 24 months of the receipt of the demand letter, and the final one-third payment within 36 months of the receipt of the demand letter. BOEM states that the “compliance window” will end on the date three years after the effective date of the final rule, and any party receiving a supplemental financial assurance demand after that date will be required to provide the supplemental financial assurance in full as required by the demand, with no phase-in. BOEM acknowledged in the final rule that it maintains the general practice of evaluating lessees, RUE grant holders, and pipeline ROW grant holders for financial risk on at least an annual basis, but that it can demand supplemental financial assurance at any time.
• Appeal Bond: The final rule also requires that any company seeking to stay a supplemental financial assurance demand pending appeal must, as a condition of obtaining a stay of the order, post an appeal bond in the amount of supplemental financial assurance required. If the appeal is unsuccessful, the appeal bond could be replaced with, or converted into, bonds or other forms of financial assurance to cover BOEM’s supplemental financial assurance demand. 

BOEM’s final rule is expected to have market-wide impacts. BOEM’s regulatory amendments will likely require oil and gas operators to obtain billions of dollars in additional financial assurance. This may prove challenging for certain companies, as the US surety bond market for the sector has become less accessible in the wake of major oil and gas bankruptcies.

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Conservation Groups, Interior Reach Settlement in Oil Lease Suit

By Shayna Greene

Environmental groups have settled a lawsuit against the Interior Department over offshore oil and gas lease sales in the Gulf of Mexico.

The federal defendants on Tuesday notified the US District Court for the District of Columbia of the settlement without disclosing its contents. The parties didn’t immediately respond to a request for comment.

• Gulf Restoration Network, Center for Biological Diversity, and Sierra Club claimed the Bureau of Ocean Energy Management didn’t comply with the National Environmental Policy Act when it decided in 2018 to move forward with two planned lease sales
• Judge Reggie B. Walton remanded the case to ...

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Biden administration moves to restrict oil and gas leases on 13m acres in Alaska

Environmentalists celebrate new rules but Alaska politicians call it an ‘illegal’ attack on state’s livelihood and predict lawsuits

The Biden administration said on Friday it will restrict new oil and gas leasing on 13m acres (5.3m hectares) of a federal petroleum reserve in Alaska to help protect wildlife such as caribou and polar bears as the Arctic continues to warm.

The decision – part of an ongoing, years-long fight over whether and how to develop the vast oil resources in the state – finalizes protections first proposed last year as the Biden administration prepared to approve the controversial Willow oil project .

The approval of Willow drew fury from environmentalists, who said the large oil project violated Biden’s pledge to combat the climate crisis. Friday’s decision also cements an earlier plan that called for closing nearly half the reserve to oil and gas leasing.

The rules announced on Friday would place restrictions on future leasing and industrial development in areas designated as special for their wildlife, subsistence or other values and call for the Bureau of Land Management to evaluate regularly whether to designate new special areas or bolster protections in those areas. The agency cited as a rationale the rapidly changing conditions in the Arctic due to the climate crisis, including melting permafrost and changes in plant life and wildlife corridors.

Environmentalists were pleased. “This huge, wild place will be able to remain wild,” Ellen Montgomery of Environment America Research & Policy Center said.

Jeremy Lieb, an attorney with Earthjustice, said the administration had taken an important step to protect the climate with the latest decision. Earthjustice is involved in litigation currently before a federal appeals court that seeks to overturn the Willow project’s approval. A decision in that case is pending.

Earlier this week the Biden administration also finalized a new rule for public land management that is meant to put conservation on more equal footing with oil drilling, grazing and other extractive industries on vast government-owned properties.

A group of Republican lawmakers, led by Alaska’s junior senator, Republican Dan Sullivan, commented ahead of Friday’s announcements about drilling limitations in the national petroleum reserve in Alaska even before it was publicly announced. Sullivan called it an “illegal” attack on the state’s economic lifeblood, and predicted lawsuits.

“It’s more than a one-two punch to Alaska, because when you take off access to our resources, when you say you cannot drill, you cannot produce, you cannot explore, you cannot move it – this is the energy insecurity that we’re talking about,” Alaska’s senior senator, Republican Lisa Murkowski, said.

The decision by the Department of the Interior does not change the terms of existing leases in the reserve or affect currently authorized operations, including the Willow project.

The Biden administration also on Friday recommended the rejection of a state corporation’s application related to a proposed 210-mile (338km) road in the north-west part of the state to allow mining of critical mineral deposits, including copper, cobalt, zinc, silver and gold. There are no mining proposals or current mines in the area, however, and the proposed funding model for the Ambler Road project is speculative, the interior department said in a statement.

Alaska’s political leaders have long accused the Biden administration of harming the state with decisions limiting the development of oil and gas, minerals and timber.

“Joe Biden is fine with our adversaries producing energy and dominating the world’s critical minerals while shutting down our own in America, as long as the far-left radicals he feels are key to his re-election are satisfied,” Sullivan said on Thursday at a Capitol news conference with 10 other Republican senators.

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Biden defended his decision regarding the petroleum reserve.

Alaska’s “majestic and rugged lands and waters are among the most remarkable and healthy landscapes in the world”, are critical to Alaska Native communities and “demand our protection”, he said in a statement.

Nagruk Harcharek, president of Voice of the Arctic Iñupiat, a group whose members include leaders from across much of Alaska’s North Slope region, has been critical of the administration’s approach. The group’s board of directors previously passed a resolution opposing the administration’s plans for the reserve.

The petroleum reserve – about 100 miles (161km) west of the Arctic national wildlife refuge – is home to caribou and polar bears and provides habitat for millions of migrating birds. It was set aside about a century ago as an emergency oil source for the US navy, but since the 1970s has been overseen by the interior department. There has been ongoing, longstanding debate over where development should occur.

Most existing leases in the petroleum reserve are clustered in an area that is considered to have high development potential, according to the Bureau of Land Management, which falls under the interior department. The development potential in other parts of the reserve is lower, the agency said.

The Associated Press contributed reporting

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Interior Department Finalizes Action to Ensure Fair Return to Taxpayers, Strengthen Accountability for Oil and Gas Operations on Public Lands

Final rule will improve responsible stewardship of America’s lands, better protect cultural and natural resources, and implement changes directed by Congress

Date: Friday, April 12, 2024 Contact:  [email protected]

WASHINGTON — The Department of the Interior today announced a final rule to revise the Bureau of Land Management’s (BLM) oil and gas leasing regulations, which will ensure a balanced approach to development, provide a fair return to taxpayers, and help keep drilling activities from conflicting with the protection of important wildlife habitat or cultural sites. 

The Fluid Mineral Leases and Leasing Process rule revises outdated fiscal terms of the onshore federal oil and gas leasing program – including for bonding requirements, royalty rates, and minimum bids – which will increase returns to the public and disincentivize speculators and irresponsible actors. The rule is the BLM’s first comprehensive update to the federal onshore oil and gas leasing framework since 1988, the first update to minimum bonding levels since 1960, and the first increase in royalty rates in more than 100 years. 

The rule codifies fiscal provisions included in the Inflation Reduction Act and implements recommendations from the Department’s Report on the Federal Oil and Gas Leasing Program . 

“These are the most significant reforms to the federal oil and gas leasing program in decades, and they will cut wasteful speculation, increase returns for the public, and protect taxpayers from being saddled with the costs of environmental cleanups,” said Secretary Deb Haaland . “Alongside the historic investments we are making through President Biden’s Investing in America Agenda to clean up orphaned oil and gas wells, these reforms will help safeguard the health of our public lands and nearby communities for generations to come.” 

The rule will guide BLM efforts to focus oil and gas leasing in areas that are the most likely to be developed — areas with existing infrastructure and high oil and gas potential — lessening development pressure on areas that contain sensitive wildlife habitat, cultural resources, high recreational usage, or other special resources and values. This approach will provide transparency and clarity for industry, while better managing public lands for other important resources. 

“This rule will give industry additional certainty about lease terms moving forward and give the public the certainty that their voices will be heard when the BLM is proposing areas for leasing,” said Principal Deputy Assistant Secretary for Land and Minerals Management Dr. Steve Feldgus . “It also addresses a number of longstanding Government Accountability Office (GAO) and Inspector General recommendations, ensuring we have a modern oil and gas leasing program that protects the public’s interests.” 

“Our public lands are owned by all Americans, and the Bureau of Land Management remains committed to managing them in a balanced, responsible way,” said BLM Director Tracy Stone-Manning . “This rule will help protect critical wildlife habitat, cultural resources, and recreational values, and it will ensure a fair return for American taxpayers.” 

The rule also updates minimum bonding amounts for federal oil and gas operations for the first time in over 60 years, helping to ensure that taxpayers are not left with the bill for cleaning up orphaned wells. The GAO noted that the BLM is responsible for managing thousands of idled wells that pose a risk of becoming orphaned. The increased bonds better reflect the actual costs of reclaiming wells and will mean those costs are borne by oil and gas companies rather than taxpayers. More about updates to bonding included in the rule here . 

Key elements of the rule include: 

• Bonding Requirements:  The rule increases the minimum lease bond amount to $150,000 and the minimum statewide bond to $500,000, and it eliminates nationwide and unit bonds. The previous lease bond amount of $10,000 -- established in 1960 -- no longer provided an adequate incentive for companies to meet their reclamation obligations, nor does it cover the potential costs to reclaim a well should this obligation not be met, leaving taxpayers at risk for the cost of cleanup. Bond amounts will be adjusted for inflation every ten years.   
• Protecting Wildlife and Cultural Resources:  The rule helps steer oil and gas development away from important wildlife habitat and important cultural sites by establishing BLM's preference to offer lands for lease that are close to existing infrastructure or have high potential for oil and gas production.   
• Royalty rates for leases are set at 16.67 percent until August 16, 2032—ten years after enactment of the Inflation Reduction Act— then 16.67 percent will become the minimum royalty rate. Previously, the minimum royalty rate was 12.5 percent. 
• Minimum bids:  The minimum amount companies can bid at auctions for federal oil and gas leases increases to $10 per acre, up from $2 per acre. After August 16, 2032, that amount will be regularly adjusted for inflation. 
• Base, or minimum, rental rate:  Leases will include a rental of $3 per acre per year during the first two-year period beginning upon lease issuance, then $5 per acre per year for the subsequent 6 years, and then $15 per acre per year thereafter. After August 16, 2032, those rental rates will become minimums and are subject to increase. Previously, companies paid $1.50/acre for each of the first five years of holding a lease, then $2/acre for the next five years. 
• Expressions of Interest:  The Inflation Reduction Act established a new $5/acre fee for expressions of interest. The rule implements how the fee will be collected. 

Today’s final rule follows a proposed rule issued by the BLM last year. Based on more than 130,000 public comments received from a wide range of stakeholders, the BLM has finalized these key provisions with some technical changes, including adding inflation adjustment mechanisms. 

Biden-Harris Administration Announces New Interagency Effort to Support Tribal Water and Sanitation…

Biden-Harris Administration Takes Critical Action to Protect Alaska Native Subsistence, Lands and…

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Biden administration restricts oil and gas leasing in Alaska's petroleum reserve

The Associated Press

In this undated photo provided by the United States Geological Survey, permafrost forms a grid-like pattern in the National Petroleum Reserve-Alaska, managed by the Bureau of Land Management on Alaska's North Slope. David W. Houseknecht/United States Geological Survey via AP hide caption

In this undated photo provided by the United States Geological Survey, permafrost forms a grid-like pattern in the National Petroleum Reserve-Alaska, managed by the Bureau of Land Management on Alaska's North Slope.

JUNEAU, Alaska — The Biden administration said Friday it will restrict new oil and gas leasing on 13 million acres (5.3 million hectares) of a federal petroleum reserve in Alaska to help protect wildlife such as caribou and polar bears as the Arctic continues to warm.

The decision — part of a yearslong fight over whether and how to develop the vast oil resources in the state — finalizes protections first proposed last year as the Democratic administration prepared to approve the contentious Willow oil project.

The approval of Willow drew fury from environmentalists, who said the large oil project violated President Joe Biden's pledge to combat climate change. Friday's decision also completes an earlier plan that called for closing nearly half the reserve to oil and gas leasing.

Judge rules Willow oil project in Alaska's Arctic can proceed

A group of Republican lawmakers, led by Alaska U.S. Sen. Dan Sullivan, jumped out ahead of Friday's announcement about the new limitations in the National Petroleum-Reserve Alaska before it was publicly announced. Sullivan called it an "illegal" attack on the state's economic lifeblood, and he predicted lawsuits.

"It's more than a one-two punch to Alaska," Alaska Sen. Lisa Murkowski said, "because when you take off access to our resources, when you say you cannot drill, you cannot produce, you cannot explore, you cannot move it — this is the energy insecurity that we're talking about."

The decision by the Interior Department doesn't change the terms of existing leases in the reserve or affect currently authorized operations, including Willow.

The administration also recommends rejecting an Alaska mining road project

The Biden administration also Friday recommended the rejection of a state corporation's application related to a proposed 210-mile (338-kilometer) road in the northwest part of the state to allow mining of critical mineral deposits, including including copper, cobalt, zinc, silver and gold. There are no mining proposals or current mines in the area, and the U.S. Bureau of Land Management determined the road-building alternatives analyzed "would significantly and irrevocably impact resources," the agency said in a statement. A final decision on the recommendation is pending.

Brian Ridley, chief of Tanana Chiefs Conference, an Alaska Native nonprofit corporation, said the administration's "choice to reject the Ambler Road Project is a monumental step forward in the fight for Indigenous rights and environmental justice." The tribes of the Tanana Chiefs Conference had expressed concerns a road would harm their communities, land and wildlife.

Environment

Biden ends drilling in anwr, sparking criticism, as willow project moves forward.

Sullivan accused the administration of undermining U.S. national security interests with both decisions. Alaska political leaders have long accused the administration of harming the state with decisions limiting the development of oil and gas, minerals and timber.

"Joe Biden is fine with our adversaries producing energy and dominating the world's critical minerals while shutting down our own in America, as long as the far-left radicals he feels are key to his reelection are satisfied,'' Sullivan said Thursday at a Capitol news conference with 10 other GOP senators. "What a dangerous world this president has created."

Biden defended his decision regarding the petroleum reserve.

Alaska's "majestic and rugged lands and waters are among the most remarkable and healthy landscapes in the world," are critical to Alaska Native communities and "demand our protection," he said in a statement.

Nagruk Harcharek, president of Voice of the Arctic Iñupiat, a group whose members include leaders from across much of Alaska's North Slope region, in a statement said the decision "does not reflect our communities' wishes." The group's board of directors previously passed a resolution opposing the administration's plans for the reserve, and Harcharek expressed frustrations that local leaders were not consulted before details of the administration's proposal were released last September.

The Biden administration approves the controversial Willow drilling project in Alaska

"From our perspective, essentially what you're doing is you're taking the economic potential and shrinking it to a point where, we don't know," he said in an interview regarding Friday's announcement. "There's a lot of unknowns associated with that."

Oil industry calls reserve decision a "step in the wrong direction"

The American Petroleum Institute, the oil industry's top lobbying group, called the rule "misguided'' and said it sharply limits future oil and natural gas development in the petroleum reserve, "a region explicitly intended by Congress to bolster America's energy security'' and generate revenue for Alaskan communities.

"At a time when the world is looking for American energy leadership, this is yet another step in the wrong direction," said Dustin Meyer, an API senior vice president.

The petroleum reserve, about 100 miles (161 kilometers) west of the Arctic National Wildlife Refuge, is home to caribou and polar bears and provides habitat for millions of migrating birds. It was set aside around a century ago as an emergency oil source for the U.S. Navy, but since the 1970s it has been overseen by the Interior Department. There has been ongoing, longstanding debate over where oil and gas development should occur.

Most existing leases in the petroleum reserve are clustered in an area that's considered to have high development potential, according to the Bureau of Land Management, which falls under the Interior Department. The development potential in other parts of the reserve is lower, the agency said.

The rules announced Friday would place restrictions on future leasing and industrial development in areas designated as special for their wildlife, subsistence or other values and call for the agency to evaluate regularly whether to designate new special areas or bolster protections in those areas. The agency cited as a rationale the rapidly changing conditions in the Arctic due to climate change, including melting permafrost and changes in plant life and wildlife corridors.

Environment And Energy Collaborative

Despite shutdown, trump administration continued effort to expand alaska oil drilling.

ConocoPhillips Alaska, which has leases and projects in the petroleum reserve, including Willow, is reviewing the decision "to determine its scope and effect," according to a company statement.

Environmentalists cheer the decision

Environmentalists were elated by Friday's decision.

"The Biden administration's actions for America's Arctic shows a commitment to conservation that meets the needs of the region's outsized vastness and ecological value," said Kristen Miller, executive director at Alaska Wilderness League. "Our nation's public lands are an essential part of addressing the climate and biodiversity crisis, and this decision could not come at a more critical time."

Activist Bill McKibben called the decision a "massive win,″ adding: "We lost the fight over Willow, but the huge outcry meant that some real good came of that debacle.″

Jeremy Lieb, an attorney with Earthjustice, called the decision an important step but urged "even bolder action to keep the fossil fuel industry out of the Arctic, for the sake of the climate and future generations." Earthjustice is involved in litigation currently before a federal appeals court that seeks to overturn Willow's approval.

A decision in that case is pending.

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Biden administration restricts oil and gas leasing in 13 million acres of Alaska’s petroleum reserve

This July 8, 2004, photo provided by the United States Geological Survey shows Fish Creek through the National Petroleum Reserve-Alaska, managed by the Bureau of Land Management on Alaska’s North Slope. (David W. Houseknecht/United States Geological Survey via AP)

In this undated photo provided by the United States Geological Survey, permafrost forms a grid-like pattern in the National Petroleum Reserve-Alaska, managed by the Bureau of Land Management on Alaska’s North Slope. (David W. Houseknecht/United States Geological Survey via AP)

Sen. Dan Sullivan, R-Alaska, left, with several of his Senate colleagues discuss during a news conference how the Biden administration’s upcoming sanctions on America’s ability to produce oil and critical minerals weaken America’s energy security and embolden enemies on Capitol Hill Thursday, April 18, 2024, in Washington. (AP Photo/Mariam Zuhaib)

Sen. Dan Sullivan, R-Alaska, center, with several of his Senate colleagues discuss during a news conference how the Biden administration’s upcoming sanctions on America’s ability to produce oil and critical minerals weaken America’s energy security and embolden enemies on Capitol Hill Thursday, April 18, 2024, in Washington. (AP Photo/Mariam Zuhaib)

Sen. Lisa Murkowski, R-Alaska, speaks during a hearing of the Homeland Security subcommittee of the Senate Committee on Appropriations on Capitol Hill, Wednesday, April 10, 2024, in Washington. (AP Photo/Mark Schiefelbein)

FILE - President Joe Biden speaks at the United Steelworkers Headquarters in Pittsburgh, April 17, 2024. Biden and former President Donald Trump will go before voters April 23, 2024, in Pennsylvania’s presidential primaries, a prelude to the November general election when the commonwealth is expected to once again to play a critical role in the race for the White House.(AP Photo/Gene J. Puskar)

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JUNEAU, Alaska (AP) — The Biden administration said Friday it will restrict new oil and gas leasing on 13 million acres (5.3 million hectares) of a federal petroleum reserve in Alaska to help protect wildlife such as caribou and polar bears as the Arctic continues to warm.

The decision — part of a yearslong fight over whether and how to develop the vast oil resources in the state — finalizes protections first proposed last year as the Democratic administration prepared to approve the contentious Willow oil project .

The approval of Willow drew fury from environmentalists, who said the large oil project violated President Joe Biden’s pledge to combat climate change . Friday’s decision also completes an earlier plan that called for closing nearly half the reserve to oil and gas leasing.

A group of Republican lawmakers, led by Alaska U.S. Sen. Dan Sullivan, jumped out ahead of Friday’s announcement about the new limitations in the National Petroleum-Reserve Alaska before it was publicly announced. Sullivan called it an “illegal” attack on the state’s economic lifeblood, and he predicted lawsuits.

“It’s more than a one-two punch to Alaska,” Alaska Sen. Lisa Murkowski said, “because when you take off access to our resources, when you say you cannot drill, you cannot produce, you cannot explore, you cannot move it — this is the energy insecurity that we’re talking about.”

The decision by the Interior Department doesn’t change the terms of existing leases in the reserve or affect currently authorized operations, including Willow.

The Biden administration also Friday recommended the rejection of a state corporation’s application related to a proposed 210-mile (338-kilometer) road in the northwest part of the state to allow mining of critical mineral deposits, including including copper, cobalt, zinc, silver and gold. There are no mining proposals or current mines in the area, and the U.S. Bureau of Land Management determined the road-building alternatives analyzed “would significantly and irrevocably impact resources,” the agency said in a statement. A final decision on the recommendation is pending.

Brian Ridley, chief of Tanana Chiefs Conference, an Alaska Native nonprofit corporation, said the administration’s “choice to reject the Ambler Road Project is a monumental step forward in the fight for Indigenous rights and environmental justice.” The tribes of the Tanana Chiefs Conference had expressed concerns a road would harm their communities, land and wildlife.

Sullivan accused the administration of undermining U.S. national security interests with both decisions. Alaska political leaders have long accused the administration of harming the state with decisions limiting the development of oil and gas, minerals and timber .

“Joe Biden is fine with our adversaries producing energy and dominating the world’s critical minerals while shutting down our own in America, as long as the far-left radicals he feels are key to his reelection are satisfied,’' Sullivan said Thursday at a Capitol news conference with 10 other GOP senators. “What a dangerous world this president has created.”

Biden defended his decision regarding the petroleum reserve.

Alaska’s “majestic and rugged lands and waters are among the most remarkable and healthy landscapes in the world,” are critical to Alaska Native communities and “demand our protection,” he said in a statement.

Nagruk Harcharek, president of Voice of the Arctic Iñupiat, a group whose members include leaders from across much of Alaska’s North Slope region, in a statement said the decision “does not reflect our communities’ wishes.” The group’s board of directors previously passed a resolution opposing the administration’s plans for the reserve, and Harcharek expressed frustrations that local leaders were not consulted before details of the administration’s proposal were released last September.

“From our perspective, essentially what you’re doing is you’re taking the economic potential and shrinking it to a point where, we don’t know,” he said in an interview regarding Friday’s announcement. “There’s a lot of unknowns associated with that.”

The American Petroleum Institute, the oil industry’s top lobbying group, called the rule “misguided’’ and said it sharply limits future oil and natural gas development in the petroleum reserve, “a region explicitly intended by Congress to bolster America’s energy security’’ and generate revenue for Alaskan communities.

“At a time when the world is looking for American energy leadership, this is yet another step in the wrong direction,” said Dustin Meyer, an API senior vice president.

The petroleum reserve, about 100 miles (161 kilometers) west of the Arctic National Wildlife Refuge, is home to caribou and polar bears and provides habitat for millions of migrating birds. It was set aside around a century ago as an emergency oil source for the U.S. Navy, but since the 1970s it has been overseen by the Interior Department. There has been ongoing, longstanding debate over where oil and gas development should occur.

Most existing leases in the petroleum reserve are clustered in an area that’s considered to have high development potential, according to the Bureau of Land Management, which falls under the Interior Department. The development potential in other parts of the reserve is lower, the agency said.

The rules announced Friday would place restrictions on future leasing and industrial development in areas designated as special for their wildlife, subsistence or other values and call for the agency to evaluate regularly whether to designate new special areas or bolster protections in those areas. The agency cited as a rationale the rapidly changing conditions in the Arctic due to climate change, including melting permafrost and changes in plant life and wildlife corridors.

ConocoPhillips Alaska, which has leases and projects in the petroleum reserve, including Willow, is reviewing the decision “to determine its scope and effect,” according to a company statement.

Environmentalists were elated by Friday’s decision.

“The Biden administration’s actions for America’s Arctic shows a commitment to conservation that meets the needs of the region’s outsized vastness and ecological value,” said Kristen Miller, executive director at Alaska Wilderness League. “Our nation’s public lands are an essential part of addressing the climate and biodiversity crisis, and this decision could not come at a more critical time.”

Activist Bill McKibben called the decision a “massive win,″ adding: “We lost the fight over Willow, but the huge outcry meant that some real good came of that debacle.″

Jeremy Lieb, an attorney with Earthjustice, called the decision an important step but urged “even bolder action to keep the fossil fuel industry out of the Arctic, for the sake of the climate and future generations.” Earthjustice is involved in litigation currently before a federal appeals court that seeks to overturn Willow’s approval.

A decision in that case is pending.

Daly reported from Washington.

Follow the AP’s coverage of the U.S. Department of the Interior at https://apnews.com/hub/us-department-of-the-interior .

The U.S. just changed how it manages a tenth of its land

The interior department rule puts conservation and clean energy development on par with drilling, mining and resource extraction on federal lands for the first time.

For decades, the federal government has prioritized oil and gas drilling, hardrock mining and livestock grazing on public lands across the country. That could soon change under a far-reaching Interior Department rule that puts conservation, recreation and renewable energy development on equal footing with resource extraction.

The final rule released Thursday represents a seismic shift in the management of roughly 245 million acres of public property — about one-tenth of the nation’s land mass. It is expected to draw praise from conservationists and legal challenges from fossil fuel industry groups and Republican officials, some of whom have lambasted the move as a “land grab.”

Interior’s Bureau of Land Management, known as the nation’s largest landlord, has long offered leases to oil and gas companies, mining firms and ranchers. Now, for the first time, the nearly 80-year-old agency will auction off “restoration leases” and “mitigation leases” to entities with plans to restore or conserve public lands.

“Today’s final rule helps restore balance to our public lands as we continue using the best-available science to restore habitats, guide strategic and responsible development, and sustain our public lands for generations to come,” Interior Secretary Deb Haaland said in a statement.

Under President Biden , the BLM has put a greater emphasis on protecting public lands from the twin threats of climate change and development. Tracy Stone-Manning , the bureau’s director, has warned that hotter, drier climates are driving longer and more intense wildfires and drought across the American West. At the same time, development has fragmented and destroyed wildlife habitat and migratory corridors.

“We oversee 245 million acres, and every land manager will tell you that climate change is already happening. It’s already impacting our public lands,” Stone-Manning said during a Washington Post Live event last year. “We see it in pretty obvious ways, through unprecedented wildfires.”

The fossil fuel industry, a frequent foe of the Biden administration, has chafed at the BLM’s approach. It has called the public lands rule an example of regulatory overreach that will stifle domestic energy production, even as the United States pumps more oil than any nation in history .

Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas companies, said the group plans to challenge the BLM rule in court. She said the policy appears to violate the Federal Land Policy and Management Act, the 1976 law that tasked the bureau with overseeing “multiple uses” of public lands for current and future generations.

“We have no choice but to litigate,” Sgamma said. “These conservation leases seem to be designed to preclude energy development on federal lands.”

The BLM’s proposed rule released last year sparked especially intense outrage in Wyoming, an energy powerhouse that accounts for nearly one-tenth of U.S. fossil fuel production. Some Wyoming Republicans have claimed that the BLM is colluding with liberal environmental groups to put millions of acres off-limits to development.

Sen. John Barrasso (R-Wyo.) said Thursday he plans to introduce legislation to repeal the BLM rule using the Congressional Review Act, which allows lawmakers to overturn regulations by a simple majority vote. “With this rule, President Biden is allowing federal bureaucrats to destroy our way of life,” Barrasso said in a statement.

Aaron Weiss, deputy director of the Center for Western Priorities, an advocacy group, said some Republican officials have spread “disinformation and conspiracy theories” about the rule. He noted that during a House Natural Resources Committee hearing last year, South Dakota Gov. Kristi L. Noem (R) claimed the draft rule would allow Chinese citizens to purchase leases on U.S. lands.

Unlike the proposed rule, the final rule clarifies that “leases cannot be held by foreign persons.” It also offers “restoration leases” and “mitigation leases” rather than “conservation leases” — a linguistic tweak that seems designed to skirt the politicization of the word “conservation,” Weiss said.

Mitigation leases will allow lease holders to offset the impact of their activities. For example, a rancher whose cattle grazing is degrading the land could be required to purchase a mitigation lease during the permitting process. The rancher could then work with a local conservation group to restore nearby habitat for the greater sage grouse , an imperiled bird of the West.

Renewable energy developers won’t be immune from the rule. They could buy mitigation leases if their wind or solar farms are affecting wildlife or watersheds, said Danielle Murray, vice president of conservation policy at the Conservation Lands Foundation.

The final rule also directs the BLM to prioritize landscape health for the first time and to incorporate Indigenous knowledge into its decision-making. The latter is a top priority of Haaland, the first Native American to serve as a Cabinet secretary and lead a department that once oversaw the removal of Indigenous people from their land.

The Trump administration took a vastly different approach to managing public lands than Biden officials. President Donald Trump briefly moved the BLM’s headquarters from Washington to Grand Junction, Colo., a hot spot for natural gas production. More than 87 percent of the affected employees either resigned or retired rather than move to Colorado, depriving the agency of expertise and disrupting its operations.

To lead the BLM, Trump tapped William Perry Pendley , a conservative lawyer who had previously advocated for selling off public lands across the country. Pendley, who was never confirmed by the Senate, pushed the bureau to maximize oil, gas and mineral development.

Should Trump return to office, “the priority has to be oil and gas,” Pendley said in a recent interview .

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David Pecker returns to witness stand in Trump's hush money trial

Feds look to uphold oil and gas leases in carlsbad that lawsuit wants overturned.

Federal land managers sought to uphold public land leases sold to oil and gas companies for drilling in the Carlsbad area amid a lawsuit filed by a local environmental group who wants the sale overturned.

The Bureau of Land Management sold several leases of public land around Carlsbad to oil and gas companies in 2021, providing the acreage for fossil fuel development within the booming Permian Basin.

In January 2023, Carlsbad-based Citizens Caring for the Future, along with Santa Fe-based WildEarth Guardians and the Western Environmental Law Center sued the BLM and parent agency the Department of Interior , arguing the federal government conducted inadequate environmental analysis in approving the lands for lease to the industry.

On April 22, the BLM published the results of a subsequent environmental analysis of the leases in question using updated guidelines and regulations instituted by the DOI in the interim and finding the leases still held up against federal requirements. In its most recent analysis, the BLM reported it found “no significant impact” to oil and gas operations on the contested lands. The agency proposed the leases be maintained.

The BLM opened a public comment period on its latest report until May 21. Comments can be submitted on the agency’s website.

Kayley Shoup with Citizens Caring for the Future said the group was "disappointed" in the BLM's proposal, arguing growing oil and gas operations in southeast New Mexico were damaging to the environment.

"Sadly, the updated analysis fails to take into account the realities we face here in the Permian, such as a lack of strict adherence to state and federal air quality standards and a need to conserve water as our region faces aridification," Shoup said. "Every action, no matter how big or small, matters as human beings work to address climate change."

More: Environmentalists sue New Mexico over impacts from the oil and gas industry

What lands are being contested?

About 5,942 acres on 32 parcels surrounding Carlsbad in southeast New Mexico were offered in the least in January 2021. If operated, the BLM estimated these lands would produce about 5.4 million barrels oil, 31.3 billion cubic feet of natural gas and 18.6 million barrels of produced water. A barrel is about 42 gallons. The operations would disturb about 144 acres of surface, read the BLM’s report.

Shoup said the nomination of the lands was part of a pattern by the administration of President Joe Biden ignoring the impacts of pollution and continuing to support fossil fuels in the Permian Basin and nationwide.

"The decision to move forward with nominating every single lease that was challenged reflects the BLM and the Biden Administration's grave misunderstanding of that simple truth," Shoup said. "Sadly the federal government's  sacrifice of Southeast New Mexico will not only impact those of us here but in the world over."

Why does the BLM believe drilling won't impact air quality?

The report supplemented the BLM’s previous analysis as to air quality, greenhouse gas emissions.

The BLM argued leasing the lands did not guarantee that any wells or oil and gas operations would occur, and that it anticipated no “substantial air resource impacts” from the leasing decision. Drilling would only occur after an application to permit drilling (APD) filed by an operator was approved by the BLM, which would undergo additional air pollution analysis, read the report.

“The Proposed Action does not authorize or guarantee the number of wells analyzed herein,” read the BLM’s environmental analysis.

The report did include development assumptions, the BLM contended, and the agency said emissions could occur during while wells were drilled but would be “short-term” while other continual emission would come from infrastructure like storage tanks or flares during operations. These emissions would not significantly contribute to air pollution in the Permian Basin, the report read, as the 32 wells represent about 0.16 percent of wells in the area in the foreseeable future.

Emissions would also decline as construction was completed, and ongoing well operations would be subject to federal rules ensuring they comply with air quality standards at both the state and federal levels, the report read.

More: 'Forever chemicals' found in Pecos River - What does that mean for your health?

Will the leases affect cultural resources?

About 64 percent of the nominated acreage was known to contain potential cultural resources, and eight archeological sites were documented within the 32 parcels, the report read. Three of those were determined eligible for the National Register of Historic Places, but no known cultural properties were found within the lands. The BLM said no historic properties would be impacted the leasing decision.

Does oil and gas threaten endangered species?

Two federally listed bird species the least tern and western willow flycatcher were known to occur in the are along with a fish species the Pecos gambusia, read the report. Two federal threatened species the piping plover and Pecos bluntnose shiner and a species being considered for federal protection the Wright’s marsh thistle were also known to dwell amid the lands proposed for oil and gas.

Since the initial leases in 2021, the lesser prairie chicken known to live in the region was listed as endangered, but the BLM found none of the parcels leased were in its occupied range.

The BLM said its biologists found the leases would comply with all federal wildlife regulations.

Adrian Hedden can be reached at 575-628-5516, [email protected] or @AdrianHedden on the social media platform X.

This article originally appeared on Carlsbad Current-Argus: BLM wants to uphold Carlsbad oil and gas leases amid local lawsuit

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What is the liability of an outgoing tenant under an 'old' lease following assignment? Is a landlord obliged to pursue the current tenant for any arrears before pursuing a former tenant or guarantor to a former tenant?

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Related legal acts:

• Land Registration Act 2002 (2002 c 9)
• Landlord and Tenant (Covenants) Act 1995 (1995 c 30)
• Landlord and Tenant Act 1954 (1954 c 56)
• Law of Property Act 1925 (1925 c 20)

Key definition:

Tenant definition, what does tenant mean.

A person to whom a lease is granted.

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