We may not think much about it because generally they are both under the same
category as mineral rights leasing. But oil and gas leasing are actually
different from each other.
The first obvious difference would be
concerning their forms. Gas, unlike oil which is liquid, is first processed from
its gaseous state and liquefied for transport. For the transport a network of
pipelines is used. The liquefied gas is transported from its well and passed
through a natural gas pipeline. This is because gas is not always used in the
area where it is found. A network of pipelines had to be made as a means of
transport.
Natural gas can either be intrastate or interstate. It is
called intrastate gas if it is produced and consumed in the same state. If it
has to be transported from one state to another then it is considered as
interstate gas. Interstate gas is federally regulated.
For oil or crude
oil, local refineries are often used. So there is not much of a transport
issue when it comes to oil production, consumption, and leasing.
The
different means of transport for oil and gas would create a significant
difference in oil and gas leasing. Transporting gas along the pipeline means a
more solid capital investment. The price and demand for gas is also influenced
by the season and need for natural gas. This makes gas leasing much harder to
regulate and measure than oil leasing.
The gas sales contract is also a
factor in gas leasing. The price of gas was first regulated by the federal
government. During this time, gas contracts were held with long-term commitments
and the contracts could last as long as ten to twenty years. As time went by,
the contracts became much shorter in duration, due mainly to the deregulation of
the gas prices. Oil leasing, on the other hand, do not suffer the strains that
gas leasing has to undergo since it has never had the same regulations as gas.
The transport of oil to local and regional refineries also did not prove as
troublesome as the transport of gas did.
Regarding royalties, it is
easier to to offer royalty with oil leasing. Oil royalties can be paid in either
oil or cash. The owner of the land can opt to receive oil from the oil company
and market it himself. Most owners, though, still go for oil royalties in cash
at the posted price of the oil.
This is not so for gas royalties. Gas
royalties are usually paid in cash. This is because gas is more difficult to
offer a royalty due to its gas-to-liquefied state. Its volatility makes cash the
best option for landowners.
The price of gas is also difficult to give a
solid value to because of the fluctuating markets for gas. Many landowners would
go for gas royalty in market value, and ensure that the gas royalties are paid
in cash.
Despite their differences, oil and gas leasing terms for the
royalties can be negotiated in a similar way. Land owners can specify separate
royalties for oil and gas production, and they can put in a due date for the
receipt of royalty payments. They can also put in an interest charge for late
payments.
========
The author of this article is a webmaster and
is currently working on Leasing Mineral
Rights. Feel free to contact her at keywriterm@gmail.com for any inquiries
or concerns.
Was this article helpful to you? Leave a Public Comment or
Question:
This Article has been viewed 14
times.
Article added to SearchWarp.com on Monday, September 15, 2008 View other articles written by Mary Ann Porsuelo(276)
If you found this article interesting, you may want to check out:
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
