Modern oil and gas leases often contain restrictions on the right of the lessee to assign the lease to third parties. The lease may require the consent of the lessor to any assignment, or it may impose conditions on the right to assign — for example, that the lessee retain an interest in the lease and/or remain operator.
Recently I received a draft of an article that will be published next year in the Buffalo Law Review addressing the validity of restrictions on assignments in oil and gas leases, and the authors asked that I make it available on this blog. It is titled “The Validity of Restraints on Alienation in an Oil and Gas Lease,” and it is authored by Luke Myer and Rory Ryan, professors at Baylor Law School. There are actually two draft articles, one explaining the issue in layman’s terms and a second providing a more scholarly legal analysis with citations. The second article is titled “Aggregate Alienability.” The articles I think give a good analysis of the issue. There is actually little authority on whether restrictions on assignment, or “restraints on alienability,” in an oil and gas lease are valid. The authors make a good argument that such restrictions are valid. Good information for oil and gas lawyers, including tips on how to draft restrictions that are more likely to be upheld and enforced. The draft articles can be viewed here and here.