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Negotiating an Oil and Gas Lease

In the last several years, there has been increased interest in leasing land in southwestern Indiana for oil and gas operations. With this renewed interest, I wanted to provide some of my ideas regarding certain key provisions to consider while negotiating an oil and gas lease.

One important provision to negotiate in an oil and gas lease relates to the types and amount of insurance coverage to be provided by the operator while performing operations on your real estate. Many form oil and gas leases do not require the operator to carry any insurance with respect to those operations. With risks related to personal injury and property damages that may arise from oil and gas operations, you would be well advised to negotiate an insurance provision that requires the operator, at a minimum, to provide commercial general liability insurance and pollution liability insurance with respect to operations on your real estate.

Another important provision to consider when negotiating an oil and gas lease relates to the operator’s obligation to indemnify the property owner for claims. The word “indemnify” means to bear liability for another party. In this case, you want the operator to agree to indemnify you as the property owner for any and all types of claims that might arise from an operator’s activities on your real estate.

You would also be well advised to try to include an attorney’s fees provision in your oil and gas lease so that the operator has to pay your attorney’s fees if you have to pursue a lawsuit against the operator related to operator’s activities on your property.

There are many other important provisions that you should consider prior to executing an oil and gas lease. You would be well advised to consult with an attorney that has experience in negotiating oil and gas leases prior to signing such a lease.