Lessor's Preferential Right to Purchase Oil and Gas

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Lessor’s Preferential Right to Purchase Oil and Gas

 

 If the lessor has a manufacturing facility that needs or may need oil or gas as a fuel stock or a raw material, the lessor may want to negotiate a preferential right to purchase oil and/or gas produced from the leased premises.  The following clauses are examples of lease covenants giving the lessor those rights:

 

Lessor’s Right to Purchase Oil.  Notwithstanding anything contained herein to the contrary, Lessor shall have, and hereby reserves, the right and option, to be exercised upon sixty (60) days' prior written notice at any time and from time to time during the term of this Lease, to purchase currently as produced all or any part of Lessee’s share of oil produced and saved from or attributable to the Lessor’s mineral interest in the Leased Premises. The price to be paid by Lessor to Lessee for all such oil production shall be the fair market value thereof at the well.

 

Lessor’s Preferential Right to Purchase Gas.  Notwithstanding anything contained herein to the contrary, Lessor shall have the right and option to purchase all or any part of Lessee’s share of gas produced in commercial quantities from or attributable to the Lessor's mineral interest in the Leased Premises upon the same terms and conditions as those offered in writing by any other bona fide Third Party prospective gas purchaser, including but not limited to the date of initial delivery, price, rate of depletion, take or pay obligations, deliverability, quality, term, tax provisions, pressure base and maximum delivery pressure, for a term not to exceed five (5) years, subject to all valid laws, rules and regulations of the governmental authority or authorities having jurisdiction. Upon receipt of a written notification from Lessee that a prospective gas purchaser has tendered Lessee a contract for the purchase of such gas upon terms and conditions which Lessee is willing to accept, Lessor shall have a period of sixty (60) days thereafter within which to exercise such option. Such written notification to Lessor shall be accompanied by a true copy of such gas contract. If Lessor shall fail to notify Lessee within said sixty (60) days that it elects to exercise its option to purchase such gas production, then Lessor shall have no right to purchase the gas during the contract term. If Lessor elects not to exercise such option and for any reason Lessee shall not thereafter accept such offer, or if Lessee shall accept such offer and the resulting contract expires or is terminated while this Lease is in effect, then in either event the foregoing reservation of a preferential right to enter into a contract to purchase such gas shall continue in full force and effect, and such right shall apply with respect to any new offer for such gas within the period this Lease continues in effect.

Copyright 2011 by Edward G, Hawkins. All rights reserved.