Primers and Insights

The in-house attorney and in-house landman’s home for commentary, insight, and analysis of upstream oil and gas issues.

Legalese: Standard Interpretive Boilerplate

Posted by: Austin Brister in Primers and Insights

“Legalese Schmegalese.” I first started reviewing contracts back in my days working with TIC Wyoming, Inc., a subsidiary of the Kiewitt Corporation, reviewing large scale heavy industrial construction contracts for construction jobs such as oil refineries, natural gas compressor stations, and coal mine facilities.

I’ll be honest with you: my first impression of all the boilerplate legalese at the end of a contract was that it was totally unnecessary. I had the impression that these provisions were not ‘essential deal terms,’ and were drafted by some uptight committee of scholars. This attitude is not uncommon amongst transactional attorneys – they are often concerned with ‘getting the deal done’ and making sure the ‘deal works.’

Since then, however, I have developed a different attitude. While the essence of the deal may be encapsulated in the other provisions of the document, subsequent dispute negotiations, arbitration, mediation, and litigation almost always involves the boilerplate language in one way or another. Read More »

29May

Farmout Agreements: Key Decisions and Negotiation Points

Posted by: Austin Brister in Primers and Insights, The Deal Corner

Introduction

As I stated in my Part One of my Farmout Agreement Series, farmout agreements can be somewhat less “straight-forward” than other common oil and gas agreements. Contracts, Leases, JOA’s, for example, are each highly standardized and have one or more publishers of highly-adopted forms. Farmout Agreements, on the other hand, range from mere one-page letter agreements to highly formalized and lengthy contracts, prepared and negotiated over several rounds of back and forth red-lining. An attorney cannot simply turn to his form books (or form folder for the tech savvy), and is unlikely to find any comprehensive checklists for drafting the agreement.

While there is no standardized form, a standard set of terminology has certainly developed that will guide most decisions, negotiations, and drafting exercises. Below, we’ll consider several of the most crucial provisions of a farmout agreement, including:

The Duty Imposed;
The Earning Barrier;
The Interest to be Earned;
Number of Wells to be Committed to the Agreement; and
Timing of Issuance of Farmout Acreage.

27Feb

Non-Participating Royalty Interests – A Simple Concept with Complex Rules

Posted by: Austin Brister in Primers and Insights

I had an excellent time this week presenting to the Houston Association of Lease and Title Analysts on February 25, 2014, at the Houston Petroleum Club. It was a great turnout, as I believe we had almost 250 attendees. We covered the basics of NPRI’s, before diving into some of the more complex resulting rules, such as ratification, community leasing, and some complications created by Horizontal Drilling.

~~I’ve included a copy of my powerpoint presentation below~~ please contact me if you’d like a copy of this presentation. Thank you very much to HALTA for having me, and thank you to everyone that attended. Please don’t hesitate to shoot me an email with any questions or comments.

Also, note that I’ll be publishing a follow-up article in the ALTA Magazine soon, and will also be presenting at the 29th Annual NALTA Conference in Nashville.

Photo some rights reserved by djonesphoto

20Jan

Where the Use of Forms Goes Wrong

Posted by: Austin Brister in Primers and Insights, The Deal Corner

The Proliferation of Forms:

The wide-spread use of forms in the oil and gas industry has created nothing short of a revolution in allowing land professionals to expedite the process of putting complex agreements in place. Additionally, this “forms culture” has dramatically helped to ensure excellent quality legal drafting and coverage of legal concepts in a continuously developing and complex legal regime — oil and gas law.

One example of such a widely used form is the Model Form Joint Operating Agreement published by the AAPL. Additionally, several publishers have created their own version of the ubiquitous “Producer’s 88” oil and gas lease form (which, on an unrelated note, has caused great confusion due to the same name being used for a wide variety of lease forms). The Association of International Petroleum Negotiators have also developed several forms for use in the oilpatch. As one last example, Kanes Forms has published a wide variety of forms, such as affidavits, mineral and surface deeds, assignments, and various agreements for use in the oil and gas industry.

But is this widespread reliance on forms purely positive? If not, then what are some of the major landmines to be aware of?

Where Are Forms Inadequate?

One of the first lessons I learned back when I was drafting and negotiating agreements in the construction industry was this: forms are a great starting place, but they shouldn’t be used blindly. The exact same principal applies in Oil and Gas. Some of the reasons for this include: Read More »

6Jan

Mineral Liens: Collecting Unpaid Debt for Oilfield Service Companies

Posted by: Austin Brister in Primers and Insights

Purpose and Application of Mineral Liens

Everyone in the construction industry is intimately familiar with the “Mechanic’s Lien,” which gives a security interest in the title to real property (and sometimes personal property) to those who have supplied materials or labor to improve the property. In some jurisdictions, the liens are broken down further into sub-groups, such as the the “Materialman’s Lien,” “Construction Lien,” “Supplier’s Lien,” or “Laborer’s Lien.” But one lesser known type of lien can be crucial to oilfield service companies in collecting on debts owed to them: the Mineral Lien.

Liens are similar to a sort of mortgage or deed of trust on the property, acting like a cloud on title, and having the effect of hooking the owner into paying you for your services or labor before selling, financing, or refinancing the property. Mineral Liens were designed specifically for companies like oilfield service companies, to give them an easier route to collecting their debts, and receiving money rightfully owed to them. Read More »

26Dec

Farmout Agreements: The Basics, Negotiations and Motivations

Posted by: Austin Brister in Primers and Insights, The Deal Corner

Farmout Agreements are one of the most widely used agreements in the oil and gas industry.^[1]Special thanks to Professor Lowe for his excellent article on this subject, Analyzing Oil and Gas Farmout Agreements, Sw. L.J. 759 (1987). However, there is no largely adopted model form. As such, they vary a great deal. Kanes Forms has provided several Farmout Agreement Forms, but these have not been adopted as an industry standard, and so every farmout agreement approached must be fully analyzed and every term must be understood. This multi-part article will summarize the common ground, and provide a framework for analyzing the various options for certain provisions. Read More »

Footnotes[+]

Footnotes
↑1	Special thanks to Professor Lowe for his excellent article on this subject, Analyzing Oil and Gas Farmout Agreements, Sw. L.J. 759 (1987).

5Mar

Terminology Behind Federal Leasing

Posted by: Austin Brister in Primers and Insights

“Common” Oil and Gas Law

As time passes, the “academic minds” have recognized more and more that Oil and Gas Law is not simply a mixture of advanced property law and advanced contract law. To the contrary, the advent and progression of the energy era as well as continued advancement into non-conventional plays has seen the formation of a robust energy culture, so sophisticated and business savvy that its typical negotiations have become forms, those forms became largely standardized, and has allowed a body of case law to envelope its every detail to the point that a new body of law has emerged: oil and gas law. ^[1]See Bruce M. Kramer, “Property and Oil and Gas Don’t Mix: The Mangling of Common Law Property Concepts,” 33 Washburn LJ 540 (1993). Read More »

Footnotes[+]

Footnotes
↑1	See Bruce M. Kramer, “Property and Oil and Gas Don’t Mix: The Mangling of Common Law Property Concepts,” 33 Washburn LJ 540 (1993).

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