No "secondary term" expressed in expired lease

I have a lease that expired in 1939. The lease was for 2 years and the exact terms in the lease states "and after the last mentioned date (1939) this lease shall become null and void" There is nothing else, It does not say as long as oil and gas is being produced or anything.

The oil and gas company still continues to produce oil and gas from the well even though the lease has been null and void for 76 years. Even after I told them in 1998 that the lease was expired and we needed to discuss new terms.

Is there something I'm missing here or is it going to take an attorney to get them to stop.  

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Permalink Reply by Barry D on July 3, 2015 at 3:14pm

Mitchell,

As long as a well produces oil and or gas I believe the leased property is "HBP" held by production, and terms of the lease remain in force and the lease is valid.

I am not an oil and gas attorney and this is my opinion.

However, think of it this way, why would anyone drill a well if at the end of the "Primary Term" the lease would become null and void ? The company would lose it's investment in the well.

 

Permalink Reply by Pondage on July 3, 2015 at 3:37pm

This lease is an amendment to the the original lease from 1907. For and in consideration of $1.00 the second party and so on. The original lease is what the well was drilled on. I see your point. But "there is always a but" It seems to me that your point would be valid if the lease stated as long as oil and gas is produced. It does not. I'm not being sarcastic at all with this question, but what makes you think that it is HBP if there is no terms in the lease to validate the HBP clause? Is there a law?      

Permalink Reply by Barry D on July 3, 2015 at 3:52pm

Mitchell,

Yes, I believe there is case law, but I'm not an attorney.

Did the 1907 have the wording "...as long as oil and or gas are produced..." ?

What was the purpose of the amendment ?

Permalink Reply by Pondage on July 3, 2015 at 3:53pm

Barry,

Yes it did. It changed the whole lease terms, removed the oil stipulation added a time frame of two years changed the price of the original lease and removed the wording it shall be in effect as long as oil and gas is being produced and marketed of said premises. 

Permalink Reply by Barry D on July 3, 2015 at 3:57pm

Sorry but that is game, set match. Since the well was drilled under the terms of the original lease the property is HBP and the lease is valid ( as long as royalty payments have been maintained).

As always, my opinion.

You can always consult an oil oil and gas attorney for a more reliable review.

Permalink Reply by Dexter Green on July 4, 2015 at 2:12am

Mitchell,

If the company is still producing commercial quantities you're going to have a hard time arguing that the lease should be abandoned.  Additionally, they operated it outside the original term of the lease for, as you said, 76 years, and nobody cried foul.  At this point I'd be surprised if a judge didn't view that as a passive agreement.

Mike MurphyPermalink Reply by Mike Murphy on July 4, 2015 at 3:53am

if the well that was drilled is still producing you are held by production and that company still holds your mineral rights but if that well has been not producing or plugged the mineral rights would be yours to release

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