Volume No. 9 Issue No. 2 February 2012  



  Protect Our Wells: addressing oil and gas leases
  By Lindsey Harrison

     Protect Our Wells, a nonprofit organization advocating for private well owners, invited Ed McCord, a Colorado Springs attorney with experience in oil and gas laws, to a meeting in January to speak on negotiating oil and gas leases.
   Sandra Martin, president of POW, and McCord presented a copy of a generic lease agreement associated with Meadow Lake Airport. They highlighted key points to consider before signing a lease, especially as it pertains to water.
   “I advise you to work toward an addendum that gives you some language in your interest,” McCord said. Including terms that will protect the water and getting baseline testing done are both significant to a lease if an accident occurs that would require mitigation.
   “You need to have your water baseline tested for quality and quantity,” McCord said. The most valid test is done just prior to the start of the drilling, he added. If it’s done beforehand, oil and gas companies can't deny it if their operations played a part with a water problem. McCord said proving who caused the water contamination is hard to prove in court.
   “I've litigated against oil and gas companies, and it's tougher than nails,” he said. “The experts they have can be very hard to fight. Getting an expert to testify on your behalf is hard because they often work for an oil and gas company.” The best line of defense is getting the baseline testing done, he said.
   There are mitigation procedures in place if contamination occurs, McCord said. “It's getting the proof that the oil and gas operations caused it that's the hard part,” he added.
   McCord also said that a middle man or land man – not the drilling company – is the first to approach a homeowner about negotiating leases. Martin said the Transcontinental Oil Co. was the first to initiate contact with Meadow Lake Airport regarding their lease. And the lease specifically stated that Transcontinental would not be the company doing the drilling.
   It's important to know the actual company doing the drilling because that company is the one negotiating the lease, Martin said.
   McCord said companies often have pre-approved clauses that an oil and gas company will include in an addendum, and it's different for each company. “They won't give you the pre-approved clauses,” he said. “You have to find out what they are on your own. But if you ask for something on their list, they'll give it to you. If it's not on the list, they may say no or they may check with their higher-ups.”
   Martin said she would work on putting together a generic lease addendum so people know the pertinent questions to ask the companies. She also recommended a technical report, “Hints on Negotiating an Oil and Gas Lease” written by Judon Fambrough, a senior lecturer and attorney, who produced the report for the Real Estate Center at Texas A&M University.
   It’s important to support one another through the process, Martin said. She said she hopes to have more meetings to address further issues that could surface during negotiations. “We really need to talk to each other,” Martin said. “We need to find out who's been approached with a lease and who's signing a lease. We need to make sure we all add language to those leases to make them stronger for ourselves and for our neighbors.”
 
 
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