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Option Agreements

Options make great business sense for oil and gas companies but not so much for freehold mineral owners.

Option to Lease Agreements have become more widely used in Western Canada in recent years.  Freehold mineral owners are typically presented with a one page option agreement which provides an oil company or its land agent (the “optionee”) with the right to acquire a lease of the freeholder’s mineral rights at some future point in time.  The form of lease which the optionee may choose to execute is typically attached.  The consideration offered the freehold owner for signing the option generally ranges from $500 to $1,000 per quarter section.  The time period during which the option may be exercised is frequently set at a year but may be considerably longer.

To an oil company, options represent an exceedingly cheap way of securing a potential interest in oil or gas rights.  To a freeholder whose mineral rights have not been leased for years or whose lease rights have been tied up indefinitely with either a suspended gas well or a gas well producing minimal royalties, the $500 or $1,000 may seem like free money and the potential for a new lease with a more substantial bonus consideration may be tempting.

The problem is that the optionee invariably knows something that the freehold mineral owner doesn’t.  Before agreeing to an option, freeholders should review their technical circumstances and any lease agreements that are purportedly binding upon them.  Sometimes options make business sense for a freeholder but far more frequently option agreements expose the freeholder to being taken advantage.  FHOA can help you understand your technical and contractual circumstances and the potential risks associated with options.

We Can Help!

As a member of FHOA, we can help you to understand why the oil company is seeking an option to lease your rights, what your risks are, whether signing the option is in your best interest and, if not, if whether there are changes to the option agreement or associated potential future lease which could be negotiated to more adequately protect your mineral rights.

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If you can, get involved. If you have skills or training which could help FHOA attain its goals, let us know. FHOA always needs volunteers to assist with seminars, to help with phone outs before seminars or even join the Board.

Spread the word. The more members that FHOA has, the greater our potential influence. Many freeholders who could use our help, particularly those who do not use the internet, remain unaware of FHOA’s existence.

If you have time constraints, make a financial donation to assist us in paying for judicial and regulatory hearings. Donations from Alberta residents are particularly helpful as the Alberta Government’s Community Spirit Program provides matching grants for donations by Albertans to not for profit organizations such as FHOA.


Want to Learn More and Get Involved?

Being a member of FHOA gives you many benefits and services not available to non-members (some additional fees may apply), including:

  • a common voice representing the interests of Freeholders with government bodies and regulators

  • help understanding leases and many other agreements

  • help understanding regulations and obligations to protect your rights

  • a knowledge base for some of the confusing technical information

  • access to experienced industry professionals to assist in negotiations

  • information about the going rate in your area, and so much more…..

*Additional fees may apply

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  • We wish to thank FHOA, with special recognition to David Speirs, for the information /assistance he gave to us regarding the energy sector. His knowledge of Freehold Owner leases was particularly helpful to us as novices when we became Freehold owners over a decade ago.

    Garold and Yvonne Miller

  • I am eternally grateful for what I have learned through FHOA and their Board of Directors. Because of FHOA, our family can safeguard our mineral rights for future generations, and we have enhanced our lease negotiation skills as a collaborative family unit. The expertise and dedication of FHOA directors has supported our efforts in every aspect of mineral ownership.

    Joan Olafson

  • Our mineral rights have been passed down for generations. We joined FHOA in 2007 to help us understand an agreement with an oil company. FHOA was so helpful, providing suggestions were able to take the company and have adjustments made to our lease agreement. The information provided on the website, by FHOA representatives and at FHOA meetings helped us better understand lease provisions. If we had to sign another lease, I would have FHOA help again. Because of this value, we continue to be a member year after year.

    Jackie Anderson

  • Freehold Owner’s Association (“FHOA”) has a wide variety of information with access to various expertise for freehold mineral owners like me, who do not have the technical and legal expertise, nor the financial capability to do it on their own.

    Bill Schmidt

  • Our family is very thankful for FHOA. They made it possible to force a major oil producer to pay legitimate royalties owed to all five family members for off-set drilling beside our mineral rights.

    Betty Frey