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Is the automatic renewal clause in my natural gas lease valid?

Middleburg, PA |

I have a lease with a natural gas company on my farm. At the end of the lease is a clause providing for it to automatically renew after the 5 year primary term. Price per acre has gone up since the original contract, so I would rather this lease lapse and I renegotiate at a higher price. Is such a clause enforceable?

Attorney Answers 2

Posted

Such clauses are extremely specific. It's not possible to give an accurate answer without reading the precise language of the clause and, more likely, the entire lease.

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Posted

While I do not practice in your state and would recommend that you consult an oil and gas attorney to review your lease, these clauses are usually enforceable when negotiated at the inception of a "paid-up" lease where they form part of the consideration to the operator. If the initial bonus payment was for the first year's rental only and the lease calls for delay rentals to be paid on an annual basis and such payments hve not been made in a timely manner, you may cause to challenge whether the lease (and the automatic renewal) lapsed.

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