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California Oil and Gas Law Blog

States may receive more federal royalty money

California is a land ripe with many natural resources which result in some of its land being leased out for the sole purpose of harvesting these resources. Some land may be leased from private individuals or corporations while other land may involve leases with the federal government. When the federal government is involved, it may end up paying the state of California royalties.

The amount of money paid by the federal government to the state for leases involving the extraction of natural gas and oil has been the subject of legal action and political policy over the past couple of years. As reported by Courthouse News Service, effective January 2017, the federal government was supposed to increase the amount of money it paid to states for these royalties per an order dated July 2016.

Someone wants your mineral rights. Can they drill?

If someone has approached you with a lease offer for the minerals or the oil on your California land, it is not unreasonable to think the person who is talking with you represents a company that excavates minerals or other natural resources. Sometimes this is the case. However, there is the chance the party you are conversing with is actually farther removed from an actual drilling operation or has no ability to drill at all.

As Mineralwise explains, the party that approaches you for mineral rights could be one of three types. As previously stated, sometimes you are contacted by a person who actually works for an excavating outfit such as an oil and gas company. For instance, a landman that is directly employed by the oil company itself might talk to you about granting the oil company a lease.

States may lose right to opinion in drilling under Trump

The current presidential administration is making changes to a 1972 law that gave coastal states like California the right to stall or stop offshore drilling in federal waters. Governors of states up and down both coastlines contested a recent proposal to open all coastlines to offshore gas and oil drilling according to the Los Angeles Times.

The Coastal Zone Management Act gives coastline states a voice when it comes to industry development or federal projects that extend up to three miles off the coast of the state. The changes proposed by the administration will not change the current law but may affect how states are able to enforce it. The changes are seen as positive by the oil industry in removing barriers to the development of natural gas and oil resources.

Details matter in mineral rights contracts

Whether you are the owner of land in California or the representative of a company interested in accessing the resources that may lay below the surface of a particular piece of property, it is important for you to understand how agreements between these parties may work. When entering into any contract involving the rights to a mineral, whether rock, oil or something else, great care should be taken to identify the fine details in order to prevent future disputes.

As explained by Geology.com, a mineral rights contract may be structured in a number of ways. One option is to establish a lease that grants access to the land for a limited period of time. The intention here is that a company can use this time to explore and test the viability of any resource presence and production opportunity during this time. At the end of the lease period, they may pursue a purchase or walk away and all rights then return to the land owner.

What not to do during mineral lease negotiation

If you are a California landowner, signing a oil and gas lease can be a profitable proposition. However, the negotiation process can be complex and time-consuming. Typically, the proposal to you favors the producer. At Ehrlich, Pledger Law, LLP, we have the expertise and experience needed in negotiating and preparing the lease documents.

According to MineralWise, one of the most important things not to do is show your enthusiasm to the leasing agent. An emotional response often signals you are ready to sign whatever documents they supply. In doing so, you may not get the best terms and miss out on a great deal of potential upside.

The advantage of having a contract service provider

The oil and gas industry in California are booming and is highly competitive. Interested natural gas investors are constantly scouring the industry for opportunities to capitalize on potential discovery opportunities. Investors who intend to be successful and remain in the industry as respected leaders must be strategic about delegating responsibilities and making the types of business decisions that will allow them to make competitive movements. 

One resource that they can utilize in bringing their vision to life is a contract service provider. According to HACCP Mentor, contract service providers are responsible for giving some type of service to investors that further facilitate their achieving of organizational objectives. Often, the tasks they choose to delegate are ones that could be time-consuming or require competencies that they do not have enough of.  

What is the purpose of an operating agreement?

When you are dealing with oil and gas transactions in California, a great deal of time and communication will go into creating agreements and implementing protocols designed to protect both parties from being taken advantage of. One of the measures you may use to protect your assets is an operating agreement. The purpose of this negotiation is imperative to your ability to confidently and legally continue doing business with another party. 

Can you imagine how frustrating it would be to do business with another entity without a contract of some kind? Contracts allow you to clarify important terms, designate responsibilities and verify the conditions under which the contract is valid and usable.

Understanding why the drop in gas prices is bittersweet

For many people in California, a decline in the amount they have to pay for gas prices is a welcomed site. People often still discuss how foreign it seems to pay less than $1 for a gallon of gas, but everyone agrees that those days have long since passed. However, what many people may not realize is that a drop in the price of gas has both positive and negative effects. 

Throughout the history of America, there have been times when lower gas prices were primarily favorable, but with the drastic changes to the nation's economy throughout time, lower gas prices can have far-reaching effects in more than one way. As the largest producer and consumer of oil in the world, the natural resources industry in the United States can have startling effects on several other notable industries when it fluctuates. 

A look at what your assets may be in the oil and gas industry

When you are first starting in the oil and gas industry, chances are you will encounter many learning curves as you gain experience in buying and selling your assets. At Ehrlich Pledger Law, LLP, we have helped many people in California to protect their assets and work through complications with contracts that may have been misinterpreted. 

As with any type of business, your involvement in the oil and gas industry allows you access to many assets. Often, it requires hard work, strategic movement and time for you to gain assets and transform them into fully functioning components of your business. The way you choose to go about investing in the industry and the way you utilize your strengths will affect the type of assets you ultimately choose to purchase. 

Authority scope of the DOGGR

While states like North Dakota may have received a lot of attention in recent years when it comes to domestic oil production, the fact remains that the state of California continues to be a major player in this market. If you are involved in this industry, you will know just how regulated this business can be and how important it is that your company follow appropriate laws and guidelines. For this reason, it is important to have a good understanding of what the Division of Oil, Gas and Geothermal Resources is and what its scope is relative to your activities.

As explained by the California Department of Conservation, the DOGGR was first established more than 100 years ago to promote safe operation and extraction of natural resources from California's land and ocean bounty. The agency has responsibility for all onshore wells statewide as well as all wells in the Pacific Ocean located within three miles of the California coastline.

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