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Changes are afoot at the Louisiana Office of Mineral Resources as the State Mineral and Energy Board’s Lease Form Sub-committee met in an informational session July 7, 2016 to review the Proposed New Lease Form. Highlights of the changes include:

  • Liquidated damages equal to double the annual rental payment where lessee fails to commence secondary or tertiary recovery methods, or fails to commence drilling of ultra-deep well.
  • Creation of “suspending events” in force majeure clause. Suspending events include lack of availability of personnel or materials, unreasonable delay of governmental agency or political subdivision to grant permits, an order of a Federal court preventing operations or production in paying quantities, a third party actor shutting down and unreasonably refusing to reopen facilities through which hydrocarbons produced from the lease normally pass through, and the catch all “other events” not described in the lease but recognized by the Lessor.
  • Liquidated damages in the amount of $100/day beginning on the 31st day after Lessee has received notice that he failed to provide a survey or unit plat with his conventional unit or pooling agreement.
  • Requirement to drill and parameters regarding “offset wells.”
  • Liquidated damages in the amount of $100/day beginning on the 31st day after Lessee has received notice that he failed to provide required well and survey data, among other information.
  • Update to method by which “fair market price” of hydrocarbons is determined when paying royalty as well as disallowing deduction of certain post-production costs from royalty payments.
  • New commercial general liability insurance requirement to equal no less than $1,000,000 per occurrence and $2,000,000 in the aggregate.
  • In the event of a title dispute, Lessee may petition Lessor for permission to deposit all royalty and rental payments in an interest bearing account, or initiate concursus proceedings, or take other action as required by Lessor.
  • Liquidated damages in the amount of $100/day commencing after the end of the “restoration period” (one year after lease termination, if not extended by request of lessee) where lessee fails to plug all wells, remove all equipment and restore the leased premises, among other obligations.

The Proposed New Lease Form can be accessed here: Click Here