OIL & GAS
Oil & Gas
While the coronavirus pandemic caused oil prices to plummet in 2020, the Russia – Ukraine conflict has caused a sharp price increase. Thus, some oil companies in Michigan may be increasing their investments and exploration & production activities. Some long-delayed projects are getting a closer look, and developing technologies may allow for evaluation of whether to revisit projects that previously had been shut-in and abandoned.
New projects and revisiting previously abandoned projects often require the oil company to obtain new leases from landowners. Those leases typically involve consideration of important issues such as:
- Bonus: A one-time payment to the landowner typically made after the lease is signed.
- Primary Term: The time within which the developer must commence drilling a well. If the well is successful, the lease typically remains in effect for as long as oil & gas are produced from the well.
- Royalty: The payment to the landowner over the life of the lease. Typically, the royalty is calculated as a percentage of the revenue generated from the well.
- Development/Nondevelopment: Some leases allow for the production of oil and gas from beneath the property, but forbid the operator from locating the drilling site or conducting any other activity on the surface of the property.
- Restoration: At the conclusion of the lease, it is important to provide for what will be done with the physical equipment on site and how the property will be restored.
Contact Storey PLLC regarding Oil & Gas
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