Legal Definitions - free-gas clause

A free-gas clause is a specific provision found within an oil-and-gas lease agreement. This clause grants the landowner, who has leased their property for gas extraction, the right to use a certain amount of the natural gas produced from that property without having to pay for it. These clauses typically include limitations on how the gas can be used (e.g., for residential purposes) and the maximum quantity that can be consumed over a specific period.

• Example 1: Residential Heating with a Cap

  The Miller family owns a large ranch in Wyoming. They lease a portion of their land to an energy company for natural gas exploration and production. Their lease agreement includes a free-gas clause.

  This clause allows the Millers to connect their ranch house to the gas well and use the natural gas for heating their home, cooking, and hot water, all without charge. The clause specifies, however, that their usage is capped at 250 MCF (thousand cubic feet) per year and is strictly for domestic purposes within their primary residence. This directly illustrates the free use of gas by the lessor, with clear limitations on quantity and purpose.

• Example 2: Agricultural Use on Leased Land

  A commercial greenhouse operation in Pennsylvania leases its land for gas drilling. The lease contains a free-gas clause.

  Under this clause, the greenhouse owner is permitted to use a specified volume of the extracted natural gas to heat their greenhouses during the colder months, ensuring their plants thrive. The agreement stipulates that this free gas is solely for agricultural heating on the leased premises and cannot exceed 500 MCF annually. This demonstrates the application of a free-gas clause for a specific commercial or agricultural purpose directly related to the surface owner's operations, again with defined limits.

• Example 3: Multiple Structures on a Single Property

  Sarah owns a property in Ohio with a main house and a detached workshop. She enters into an oil-and-gas lease that includes a free-gas clause.

  The clause allows Sarah to use the produced gas for heating her main house and for powering a small generator in her workshop. The lease specifies a combined annual limit for both structures and restricts the use to non-commercial activities directly associated with her property. This example shows how a free-gas clause can cover multiple structures on the leased property, provided the usage adheres to the stipulated purposes and quantity limits.