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Oil/Gas/Royalty Lease Shale


My mother was contacted by US Shale Energy, LLC regarding leasing her mineral rights which amount to a 1/3 share of 40 acres.  They are offering $4000 for 3 years plus an "equal one-fourth part of the proceeds from the sale of all oil, gas, and condensate produced".  My concern is that the contract does not specify if the 'one-fourth' is on the gross or the net.  I believe the wording should be more specific.  Also, I'd like to know if the standard lease for shale is on the gross or the net.

The language is indeed for the gross production minus the severence taxes because the words in the document state "...the sale of ALL oil, gas, and condensate produced."

The lease probably also states that the operator has the right to use natural gas free of charge for pumps, motors or as an energy source to produce the well.

Nonetheless, you are well within your rights to add a clause to the lease that states:

The royalties paid based upon production derived from lands covered under this lease shall be calculated and paid based upon the gross sales of the oil, gas, or other hydrocarbon to a third-party purchaser in an arms-length transaction.  The calculation of the production and subsequent royalty shall be gathered at the mouth of the well and the Lessor shall have audit priveleges of the Lessee, or their assigns, books during regular working hours".

This clause should clear up the confusion and give clarity to how the royalty is calculated.  


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Cliff Williams


I will try to answer any question you have. Even if I reject a question, I still will give a shot at what I would do in your position. The only questions I will not take a shot at would be a highly technical engineering or geological question. I am beginning to see quite a few questions from land men and other oil companies and that doesn't matter to me either. I will attempt to help.


I am an oil and gas attorney that has been in the business for more than 20 years. I have held a series 22 and 63 securities license, been in oil and gas operations, land man, division order analyst all prior to obtaining my law degree. Today, I typically write title opinions verifying ownership of oil and gas minerals, assist landowners in negotiations on oil, gas and mineral leases, easements and conveyances. I also assist oil and gas companies with the sale of working interest ownership as well as common business law issues.

State Bar of Texas, Member of the Tarrant County Bar and the Dallas County Bar Associations.

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I have a B.S. degree which I rely upon more than my Business Mgmt degree or Law degree...

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