Mayhall Fondren Blaize

Looking at the oil/gas leasing process

In our last post, we began speaking about a lease dispute between the Interior Department and a Louisiana company concerning a tract of land in the northern part of Montana’s Badger-Two Medicine area. As we noted last time, it is important for companies who lease property for oil, gas and mineral rights to work with an experienced attorney to deal with any disputes that arise.

Perhaps even more important, though, is to work with experienced legal counsel in drafting and negotiating the terms of an oil, gas or mineral lease and navigating the leasing process

The first step in the leasing process is to submit a bid to the Mineral and Energy Board. The bid should nominate a specific tract of land, identify the resources to be developed, and propose a price for the lease. The board will then consider the tract nomination submission and documentation, publicize the nomination, and provides details regarding the submission of a sealed bid.

When the Board meets, bids are reviewed by the Geology and Engineering Division of Office of Mineral Resources, which examines scientific data connected to the tract. If the division clears the file, the Office of Mineral Rights will then evaluate the bonus amount and royalty percentage.

The board is responsible for reviewing other aspects of the bid, and will hear the recommendations of subcommittees before deciding whether to approve the lease. In this process, various aspects of the lease are scrutinized and it is important for the party proposing the lease to have an advocate. We’ll continue exploring this topic and look at the current proposed oil and gas lease form offered by the Office of Mineral Resources. 

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