Mineral Title and Oil and Gas Lease Review Checklist: A Practical Checklist

Summary. This checklist runs mineral title work and lease review in the order the transaction requires: establishing what is actually owned, including the severance history, the fractional interest in net mineral acres, which of the five mineral sticks are held, and whether a dormant mineral statute applies; then the lease clause by clause with the negotiation position on each; the surface use agreement; the division order verification that determines every payment thereafter; and the monitoring that catches a lease held past its term.

What this checklist is for. Establishing mineral ownership and reviewing a lease. For the framework, see Oil, Gas, and Mineral Rights. For the negotiation, see Negotiating an Oil and Gas Lease.

Phase 1 — Establish ownership

Do not sign, initial, or cash anything until this phase is complete.
Obtain the deed chain for the tract from the county records (most are online and free).
Identify every severance, reservation, and mineral conveyance in the chain, with dates and instrument references.
For each reservation, determine what fraction of what — the double-fraction problem ("one-sixteenth" meaning half of an eighth royalty) has produced decades of litigation.
Determine whether each instrument conveyed a mineral interest (with leasing and bonus rights) or a royalty interest (without them).
Compute net mineral acres = fractional mineral interest × gross acreage.
Identify which of the five sticks you hold: develop, lease (the executive right), bonus, delay rentals, royalty.
Identify any non-participating royalty interests burdening the tract.
Check for any existing lease of record, and whether it has terminated.
Check whether a dormant mineral act or marketable title act in the state affects the interest, and whether a preservation filing is required.
Check for life estates and remainders, and the state's open-mine rule.
Check for unprobated estates and missing heirs in the chain.
Check for tax sales, foreclosures, and judgments that may have reached the minerals.
Check the state agency's permit and production database for the section and surrounding sections.

Phase 2 — Before responding to an offer

Ask the landman for a copy of the proposed lease in full, including any exhibit or addendum.
Ask what area is being leased and what the operator's plans are.
Solicit at least one competing offer.
Check recorded leases in the section for the terms neighbors obtained.
Determine whether the state permits forced pooling, and on what terms, including the risk penalty.
Confirm whether a spouse's signature is required (community property, homestead, dower).
Engage counsel experienced in the state's oil and gas law.
Set your own timeline. Deadlines asserted by a landman are almost never real.

Phase 3 — Lease review, clause by clause

Granting clause:

Substances covered — and what "other minerals" includes in this state
Land description accurate; no acreage you do not own
Rights beyond production: injection, storage, disposal, water use, seismic — strike or limit

Habendum clause:

Primary term length — ask for three years, no option (or price the option)
Secondary term condition — "produced," "produced in paying quantities," "capable of producing," or "operations." Weaker conditions favor the operator.

Royalty clause — the most valuable review:

Fraction — 1/8 is historical, not standard; ask for 3/16 or 1/4
Valuation point — "at the well," "at the point of sale," "market value," "amount realized"
Deduction language — ask for gross proceeds with no deduction for gathering, compression, dehydration, treating, separation, processing, fractionation, marketing, storage, or transportation
Affiliate sales addressed — royalty computed on the affiliate's arm's-length resale price
Taxes — Lessor bears only its proportionate share of severance and ad valorem
Gas used on the lease — royalty-free or not

Savings clauses:

Shut-in royalty — amount, frequency, two consecutive / four total years maximum, notice requirement, and a "capable of producing in paying quantities" condition
Cessation of production — days permitted
Continuous operations — days between operations
Force majeure — scope, and note it is construed narrowly

Term-limiting clauses to ADD (they will not be in the form):

Horizontal Pugh clause — releases acreage outside producing units at the end of the primary term
Vertical Pugh clause — releases depths below the producing formation
Retained acreage clause — caps acres held per well
Continuous development clause — requires a new well every [180] days to hold undeveloped acreage

Pooling clause:

Maximum unit size (gas and oil separately)
Whether the operator may pool without consent
Whether it may amend or reform a unit after formation — require consent
Requirement to file the designation of record and furnish a copy
Royalty allocated on a surface acreage basis

Other:

Warranty — strike it; make the lease without warranty, with liability limited to a return of consideration
Payment timing and interest on late payments
Detailed check-stub requirements
Audit rights — four-year lookback, costs shifted on a material underpayment
Assignment — notice, and assumption by the assignee
Release of record on termination, with a deadline
Surface — no operations except under a separate agreement; setbacks from residence, wells, ponds, and structures
Most-favored-nations, where obtainable
Venue, governing law, and dispute resolution, chosen deliberately
Addendum controls over the printed form — say so expressly

Phase 4 — The surface use agreement (separate document)

Pad, road, and pipeline locations by survey and exhibit; consent required to change
Setbacks from residence, barns, water wells, ponds, and property lines
Maximum disturbed acreage
Access route, gates, cattle guards, fencing
Water sourcing — whether and at what price
Produced water and waste — no pits or lined pits with removal deadlines; no on-site disposal
Dust, noise, lighting, and hours, with standards
Damages — per acre for pad and roads, per rod for pipelines, per item for structures, crops, timber, and livestock, plus an annual payment for the duration of use
Reclamation — standards, deadline, topsoil handling, seed mix, and security (bond or escrow)
Baseline water well testing before operations, at the operator's cost, results provided
Indemnity and insurance, with the landowner as additional insured
No assignment without assumption
Check the state's surface damage statute and negotiate above its floor

Phase 5 — After signing

Record the lease or a memorandum; keep the original.
Calendar the primary term expiration and every savings-clause date.
Monitor the state agency's permit and production database for the section.
Watch for a unit designation filed of record affecting your tract, and verify it complies with the pooling clause.
Retain all correspondence, the addendum, and proof of bonus payment.

Phase 6 — Division order and payment verification

Verify the decimal: (net mineral acres ÷ total unit acres) × royalty fraction. Ask the operator for its calculation and check it.
Do not sign a division order that alters the lease — many states provide by statute that it may not, and that payment may not be withheld for refusing a nonconforming one. Strike offending language.
Verify the check stub shows: property, well, production month, volume, price, decimal, gross value, each deduction by category, taxes, and net.
Compare deductions against the lease's deduction language.
Confirm compliance with the state's prompt payment statute, including interest on late or suspended funds.
If payments stop, ask in writing whether it is a shut-in, an accumulation below threshold, a title suspense, an operator change, or a cessation of production.
Exercise audit rights periodically where the lease provides them.
Track unclaimed funds and escheat deadlines.

Phase 7 — Curative work, where title is defective

Affidavit of heirship for an unprobated estate.
Probate or determination of heirship proceeding where an affidavit is insufficient.
Correction deed for an ambiguous or erroneous description.
Stipulation of interest among co-owners to resolve a fractional dispute.
Quiet title action where a competing claim or a stale instrument clouds title.
Ratification where a non-participating royalty owner's joinder is needed.
Release of an expired lease — demand it in writing, citing the state's release statute.
Preservation filing under a dormant mineral act, where required and still available.
Do this while family members are alive to sign. Heirship problems compound with every generation.