Certain circumstances may allow you to break an existing oil and gas lease, freeing you to negotiate a new, more favorable lease agreement.

With recent booms in exploration in places like Texas' Barnett Shale and the Haynesville Shale, a common question is whether a landowner can break an existing oil and gas lease. Like any contract, an oil and gas lease can be broken. However, if a landowner breaks a lease without cause, they may be in breach-of-contract and may be liable for damages to the operator. An oil and gas attorney can review your situation and help you determine what, if any, circumstance may allow you to break your lease without negative consequences.

Operator may be in breach of contract

Oil and gas leases are usually very complex and nuanced contracts. Their terms define specific royalty schedules, duties, deadlines, and operating limits for operators. Land protection and other clauses may impose additional requirements on operators. If an oil and gas company has failed to meet any requirement under the terms of the lease, they may be in breach of contract.

Lease may limit scope of production

The existing lease agreement may limit the scope of exploration and production the operator may conduct under the lease. An older lease, for example, may not explicitly include rights to extract and product from reserves at depths that weren't practical to develop in the past. New drilling and production methods have opened up access to much deeper reserves.

Operator fails to fullfill implied duties

An operator may have an implied obligation to protect your interests from drainage by developing the lease (if they aren't) or by exploiting a deeper reservoir (if only shallow reserves are being produced) if other operators begin exploiting the deeper reservoir from adjacent tracts of land. Similarly, as new production methods make deeper reservoirs on your land accessible, an operator my have an implied obligation to develop those resources if that's what other reasonable and prudent operators would do. Either circumstance could provide an opportunity to break an existing oil and gas lease, and negotiate a new, more favorable lease with the same or another operator.

Contact an Oil and Gas Attorney

A very thorough examination of your oil and gas lease agreement by an experienced oil and gas attorney may identify areas of opportunity for an exit from your existing oil and gas lease. If you believe you have a strong case for breaking an existing lease, you should contact and oil and gas attorney for advice.