Most landowners have little experience with oil, gas and other mineral extraction leases. You or your family may have owned land for years or decades. You may not even understand the distinction between surface ownership and mineral ownership, as your property may not have been suspected of having oil or gas present, or if it was known, it may have been uneconomic to extract it.
Because of the great number of legal issues implicated in developing land with oil and gas leases, it is best to have knowledgeable legal advice early in the process. You may have to negotiate with the entity or its agents that are seeking the oil and gas lease, but you may have additional negotiations, depending on the ownership structure of the land.
For instance, if your family owns property in California that was farm or ranchland, it may have been passed down through multiple generations since the original deed was obtained. This means there could be numerous family members with an interest in the property. Before you begin to work with the oil company or driller, you should determine exactly who owns what.
This will permit you to create the strongest position from which to negotiate the details of a lease agreement. It can also foreclose on potential disputes within the family, which may play on long-standing friction between relatives. By developing a coherent ownership of potential contiguous parcels, you can maximize the value you may receive from an agreement.
It can also lay the groundwork for the development of a separate business entity to receive the royalty payments from the oil company. This may be necessary if the lease could produce a significant income stream and could be useful for tax and estate planning matters.