Common Oil and gas Lease Terms

ASSIGNMENT Permits a company to sell or transfer a lease to another firm.
EXTENSION The original lease term is typically for a period of 5 years.  This clause grants the company the right to extend the initial term for an additional period, often five more years.
FACILITIES  CLAUSE Delineates setbacks from drilling activity to a dwelling, barn, water wells, roads, or other structures.
FORCE MAJEURE Ordinarily involves natural disasters and other circumstances beyond the control of a party to the lease.
INDEMNIFICATION If given by the company in its lease, the landowner is protected from certain types of liabilities connected with the company’s activities on the affected land.
INJECTION WELL A well whose purpose is to receive waste water and other products from oil and gas wells.
ON-SITE STORAGE Permits the company to utilize land for underground storage of natural gas, possibly from another property.
PITS Unless prohibited in the lease, a company may be allowed to deposit drilling waste into pits on the affected property. Companies now rarely use pits for the storage of waste water.
POST-PRODUCTION COSTS The company may deduct some of these costs of producing the natural gas before royalties are paid If the lease permits.
PUGH Protects a landowner from the company holding rights over an entire parcel, where only a portion of the parcel is being used for drilling.
WATER TESTING If called for in the lease, requires the company to independently test the landowner’s drinking water supply, and within a specified distance of the well, before, and sometimes after, drilling.


Prepared by Geauga County Planning Commission, January 2012

Note:  The foregoing does not constitute or represent legal advice.  Please consult with an experienced attorney before entering into a lease on your property.