I’ve heard that there’s a good bit of top leasing going on in certain parts of West Virginia right now.  So I thought a short post about top leases would be appropriate.

A top lease is a lease that is taken while there is a lease already in place.  A company will top lease when they think that the company that already has the lease isn’t going to do anything with the property.

Probably the best example of this situation in West Virginia right now is all the Chesapeake leases that were taken back in about 2007-2010.  CHK didn’t do anything with a lot of them, and they’ve either assigned them to other companies or are just holding on to them.  Some of those properties they’re holding on to are getting top leases.

There are sometimes prohibitions on top leasing in existing leases; Antero calls it a Right of First Refusal, for example.  It gives them the right to accept any lease that is negotiated on the property while their lease is in place.  They can refuse if they want, of course.  They like to stay in control.  I like to negotiate those out of my clients’ leases whenever possible.

Signing a top lease is a good opportunity for a mineral owner to get some security.  You’ll get a new bonus before the old lease runs out, and get a chance to talk with a company that is interested in developing the property.   For a lot of my clients, their previous lease was the first time they delved into oil and gas law.  The second time around will, hopefully, be a better experience for them.  At very least, it will be more lucrative.