Tuesday, October 19, 2010

Producers Should Follow Lease-Signing Practice Tips To Avoid Potential Lawsuits

A lawsuit has been filed in federal court in northern West Virginia by a group of lease holders who are upset that a company has elected to cancel leases due to market conditions. Click to read an article about this lawsuit. The basic allegation in the complaint is that landmen hired by the producer made specific promises to obtain leases from the gas owners, which the plaintiffs allege the gas producer ultimately failed to fulfill, thereby damaging the natural gas owners.

There are a number of practice tips that natural gas producers should keep in mind as part of lease-signing activities. Here are some of these:
1. make certain your independent landmen or brokers are clearly advised as to the extent of their authority to bind the company;
2. make certain the above authority is clearly communicated in writing to the natural gas owners prior a lease being signed; and
3. communicate in writing with the prospective lessor as soon as possible if the producer has decided not to be bound by the lease.

For more information, please contact Richard Gottlieb at rgottlieb@lgcr.com.