Lease Ratification: Understanding Land Rights for Oil & Mining

Wide shot of a row of oil pumps at sunset

Gas, oil and mineral companies lease private land for drilling and mining. This arrangement often presents a win-win situation: the companies establish wells and mines at a reduced cost because they lease the land rather than purchase it outright; the landowners earn royalties for gas, oil or minerals that the companies take from their properties, often with minimal disruption to the ways in which they typically use their land. Rather than write new leases each time the land changes ownership, the companies may ask landowners to ratify an existing lease.

Parties to the Lease

The lessors are the individuals who own the property and who lease out the rights to extract gas, oil or minerals from it. The gas and mineral companies that lease the land are known as lessees. When there's only one landowner, there's only one lessor; when there are concurrent owners with undivided interest in the property, each must act as a lessor.

Executing a Lease

A properly executed lease is one that will hold up in court. It contains relevant information about the property, the purpose of the lease, the terms of the lease, the parties to the lease and the payment or other "consideration" the lessee must pay in exchange for the right to use the property in whatever ways the lease allows. In certain cases, an individual other than a lessor signs the lease on the lessor's behalf. For example, a guardian may sign on behalf of a minor or an attorney-in-fact may sign for the individual whose power of attorney she possesses.

Ratifying a Lease

If there's any question about the intent of the landowners in signing the gas or mineral lease, the lessee may ask the lessor to affirm the lease to reiterate their acceptance of it. This may occur when a minor on whose behalf a guardian signed turns 18, for example, or when a lessor's agent has signed on his behalf. A company may also ask a concurrent owner to ratify a lease that other interest holders have signed.

Lease Ratification Language

A typical lease ratification repeats some of the information found in the lease. It names the lessors and lessees, for instance, and it notes the payment to the lessors and contains the legal description of the property. It also specifies the location where the deed is recorded. It acknowledges that the individual being asked to accept, or ratify, the lease is a lessor or co-lessor, even if she wasn't named as a lessor on the lease.

Things to Check

Read lease ratifications carefully to make sure the lessee hasn't made any changes that might affect you adversely. The Clark Law Firm in Pennsylvania, which represents landowners in their dealings with the Marcellus Shale companies drilling for gas in the northeastern part of the state, notes that lease changes do sometimes benefit the lessor and help preserve her ability to earn royalties, but this isn't always the case.