Oil and Gas Leasing: Everything Landmen Need to Know

Posted by CourthouseDirect.com Team - 26 August, 2015

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The oil and gas industry is undergoing a lot of changes to regulations and the prices of oil. It was once thought employees in the industry couldn’t make significant wages, but the truth is quite the opposite now. Landmen have the opportunity to make nearly $100,000 a year with little to no prior experience. Oil prices are increasing, and the number of employees in the industry is decreasing, which means Landmen have ample opportunity to enter a very lucrative career.

While becoming a landman doesn’t require a lot of experience, it does require the desire to learn. Regulations and procedures within the industry mean there’s a steep learning curve. Provided one has the ability and willingness to understand the complexities of the industry, a successful career lies ahead.

What Is a Landman?

A landman is all at once a geologist, a courthouse aficionado, and a businessman. Landmen serve as the oil and gas company’s public contact. They scope out potential drill sites, negotiate deals, and manage legal issues and regulatory permits or other paperwork. Many landmen have business or law degrees, though this is not always required. Some universities offer specific degree programs for Landmen that focus on the business and legal aspects of finding and obtaining land.

What Does the Leasing Process Entail?

The leasing process involves several steps that encompass areas of both business and law.

Step 1. Get to Know the Land

The landman will be given a map of the property to be leased by the company. This map will outline areas where the company wishes to drill, and it’s the landman’s job to determine who owns the property and how to obtain it. Land is divided by section, township, and range. A section is 640 acres, and a township and range is comprised of thirty-six sections. The section map is broken up into sixteen separate quarters, each of which represents 40 acres. The company will usually supply landmen with up to five sections for research.

Step 2. Determine Ownership

Property ownership can be determined through local courthouse records. Once the land sections are identified, the landman can visit the county courthouse to find out who owns the property and the minerals underneath it. Many times, there will be more than one owner, especially if the tract of land is large. Unfortunately, land ownership is not indicative of mineral ownership.

Occasionally, the property owner and mineral rights owner is the same person, but this isn’t always the case. A mineral reservation and other deeds may indicate another owner. Likewise, a landman will also need to make sure he or she is operating within drilling regulations. Wells must be drilled outside of certain distances and at certain intervals. The Texas Railroad Commission (also known as the Railroad Commission of Texas, or RRC) is responsible for maintaining records of all the active wells in the area, so this is a good place to start.

Step 3. Acquire Leases

Once the owner of the minerals is identified and compliance with regulations is ensured, the next step is to acquire a lease from the owner. The oil and gas company will give landmen parameters for contacting owners and obtaining a lease. The landman will be given a dollar amount to offer the mineral owner. The lease will contain the following information:

  • Lessor’s name and contact information
  • Time and date of lease
  • Lease term (how long the oil company has to explore and drill)
  • Royalty payments to the owner for land use
  • Bonus payments should the oil company wish to extend the lease
  • Conditions of the lease
  • Covenants in the owner’s best interest, which the oil company must abide by
  • Any additional clauses considered binding on the lessor or oil company

Step 4. Permitting, Compliance, and Follow-up

Finally, the landman must report leases to the necessary permitting bodies to obtain surface usage and access. In Texas, this is the Railroad Commission. The RRC will require the oil company to provide extensive reports on drilling procedures before a permit is given. Once the permit is acquired, the drilling operation must remain compliant with various regulations. The company will have to submit reports throughout drilling to prove compliance. Finally, the landman is responsible for notifying the owners when drilling will commence and for abiding by the lease terms.

Oil and gas leasing is the core of the landman’s job, so knowing the process is extremely important to move forward in this competitive industry!

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Topics: Oil and Gas


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