If you own land in Texas and it holds minerals like oil or gas, lease terms matter more than you may think. These rules decide how long a company can use your land, when they must begin work, and what happens if they do not. A clear lease can help protect both your land and your long-term income. That is why knowing the parts of a lease is key, especially terms like the primary and secondary phases. Let us explore what these terms mean and how you can use them to your advantage.
In This Article:
- Understanding Oil and Gas Leases in Texas
- What Is the Primary Term?
- Transitioning to the Secondary Term
- Legal Protections and Common Clauses
- Environmental and Safety Updates
- Recent Court Decisions and What They Mean
- Economic Trends in Mineral Leasing
- Best Practices for Texas Landowners
- Avoiding Long-Term “Held By Production” Risks
- Conclusion: Protecting Your Rights and Your Land’s Value
Understanding Oil and Gas Leases in Texas
Oil and gas leases are legal documents between landowners and energy companies. These leases let companies access the ground beneath your land to find oil or gas. The lease has rules on how and when this can happen. Each lease is different, but many share common features. Knowing these details can help landowners make smart choices and avoid long-term problems.
The Railroad Commission of Texas oversees oil and gas activities in the state. This group helps enforce safety practices and keeps projects in line with the law. Their job is to protect landowners, the environment, and the public. If you are leasing land, their rules can affect how long work lasts and how your land is used. This is why Texas landowners should stay informed.
What Is the Primary Term?
The primary term is the first phase of an oil and gas lease. It gives a set number of years for the company to begin drilling or to start production. This part of the lease works like a test period. If the company does not begin work during this time, the lease usually ends on its own. This allows you to lease your land to other, more active companies.
Most primary terms in Texas last between three to five years. This time gives the company a chance to make plans, build equipment, and begin drilling. But if they do not act within the term, the lease ends. As a landowner, that gives you back full control. This helps limit land being tied up by companies who never follow through.
Why Primary Term Length Matters
A shorter primary term often benefits the landowner. It means you are not stuck waiting years for work that may never happen. Shorter terms help keep your land in motion and ready for better offers. You can add rules to the lease that require signs of progress. One such example is a clause that demands work must begin within the first year.
This kind of pressure makes sure your land does not sit unused. Another option is to ask for regular updates or proof of plans. In many cases, landowners include penalties for missed deadlines. With these strategies, you control the timeline instead of the company. Being proactive makes your mineral rights more valuable over time.
Transitioning to the Secondary Term
The lease does not always end after the primary term. If the company starts working and finds oil or gas, the lease moves into the secondary term. This term allows the company to keep drilling and producing as long as money is being made. This part of the lease can last many years, sometimes even decades if oil or gas continues to flow.
The key phrase to watch for is “production in paying quantities.” This means that oil or gas is being produced in a way that brings in more money than it costs to extract. If that rule is met, the lease typically stays active. But if production stops or becomes unprofitable, the lease may end. As a landowner, you must monitor this part closely.
What to Watch for During the Secondary Term
Many landowners fall into long lease contracts that offer little progress. Some companies only produce a small amount of oil just to keep the lease alive. This behavior prevents landowners from leasing the rest of their minerals to someone else. That can slow down needed income and keep land from being fully used.
The best solution is to include terms that require constant activity. A continuous operations clause is a good tool. It states the company must remain active or risk ending the lease. Another smart clause to use is the shut-in royalty clause. This forces the company to pay you a set amount if production stops but the well still has future value.
Legal Protections and Common Clauses
Many landowners in Texas add smart legal language to their lease. These protections help ensure a good balance between both sides. One common clause is the Pugh clause. It lets you lease parts of your land not being used to other companies. This boosts your income and spreads your risk.
Another helpful clause is the depth severance clause. It limits the lease rights only to the depths the company is using. Everything below that can be leased to someone else. These terms allow landowners to make full use of all resources under their land. A well-written oil lease helps protect long-term value and income.
Keeping Track of Lease Performance
It is smart for landowners to track what is happening on their land. Many owners just sign and forget the lease. But there are risks in putting too much trust in the oil company. Check production logs, notice any slowdowns, and collect records. The more you know, the more control you have.
Producing companies are required to report data to the Railroad Commission. You can access these reports freely online. This helps check if companies are meeting the terms. If you see signs of poor activity, it may be time to question the lease. Watching closely makes it easier to act if something seems wrong.
Environmental and Safety Updates
In recent years, Texas has added more safety rules to oil and gas work. The state works with the Environmental Protection Agency (EPA) to improve standards. One focus area is injection wells, which reduce underground pressure. Poor use of these wells has caused minor earthquakes. New rules help stop damage to land and buildings.
The updated laws also aim to close old, unused wells. Old wells can pollute groundwater or leak gas. Cleaning them helps protect your land’s long-term health. If your lease includes old wells, ask how they will be handled. Make sure the lease terms reflect cleanup plans and safety checks. These rules can lower risk for families, crops, and animals.
Changes from 2024–2025 Legislation
The Railroad Commission has updated several rules in 2024 and 2025. One big change is how inspections are done. There are now more surprise checks, and fines have gone up. This helps encourage better safety and timely repairs. The changes also make it easier to report violations.
Companies must now plan better for spills and air damage. If laws are broken, regulators can now suspend work faster. These updates should give landowners more peace of mind. Still, you should ask about these rules when creating or renewing a lease. Make sure your lease terms meet current laws and reflect your rights.
Recent Court Decisions and What They Mean
Texas courts often help define lease terms by past rulings. This is especially true when it comes to the secondary term. In recent years, judges have made it clear that token production does not count as enough to keep a lease alive. The courts now look at how much oil is made and whether there is real profit.
If your lease enters the secondary phase, check if production is truly active. A few barrels per month may not meet the required performance levels. If in doubt, speak with a minerals attorney in Houston Texas. They can help review your oil lease and check its terms. Staying alert helps prevent long-term lease issues.
Economic Trends in Mineral Leasing
The market for mineral rights and oil leases is always shifting. In 2025, more companies began looking for long-term, stable lands to develop. This trend can create great offers for landowners. However, it also means more complex deals, with more small print. Knowing when to act takes both timing and knowledge.
Working with experts can help you compare lease deals. Look out for clauses that limit your choices. Try to stay flexible while protecting your rights. More groups are also teaming up—state and federal agencies included—to improve fairness. These shifts affect the lease terms companies are now offering to landowners.
Land Use and Your Property’s Future
Be sure your lease fits how you use your land now and what you want later. If you farm or raise animals, the lease rules about land use must be clear. Some companies can cause damage with roads, pipelines, or spills. Adding firm terms on clean-up and land care can protect your future use.
Ask for limits on where structures can be built or where trucks can drive. Include repair promises in writing. If land gets damaged, the company should fix it. This keeps property value high and reduces risks. Land use is part of every lease, so pay attention from the start.
Best Practices for Texas Landowners
- Review your lease terms yearly to stay up to date.
- Keep hard copies of signed leases and production statements.
- Request regular updates from your oil or gas operator.
- Be sure you understand keywords like “paying quantities” or “shut-in.”
- Add lease clauses that reflect your land’s unique needs and goals.
Getting reliable records makes it easier to act if problems arise. Many landowners get behind because they do not monitor progress. A real estate lawyer for landowners can help track these terms and offer advice when needed. By staying organized, you protect your mineral interests and reduce risks.
Avoiding Long-Term “Held By Production” Risks
Some leases stay active for years with very little activity. This is known as “held by production.” In these cases, companies do the bare minimum to hold the lease. That stops you from leasing your land to others who could do more. To prevent this, include rules that demand real effort.
Add deadlines and clear activity outlines to stop misuse. If the company stops working, the lease should end. Review shut-in and Pugh clauses as early safeguards. These tools limit how long your land is tied up with no progress. Being strict upfront helps avoid legal fights later.
Conclusion: Protecting Your Rights and Your Land’s Value
Knowing your oil lease terms is one of the best ways to protect your land and income. From primary to secondary terms, each phase has rules you need to understand. If the lease runs too long without real work, you may lose better chances. Use smart clauses to guide activity and keep control.
Be mindful of environmental updates, lease laws, and production records. Together, these details affect your land’s health and your profits. If you need guidance, the team at Daughtrey Law Firm has experience in Texas mineral law and can help you make informed decisions when it matters most.
