Favored Nations - from Wayne County e-mail

It would be great if a large group of landowner would combine their
>> resources and share in the legal expenses. However, this does not seem
>> to work because each land and mineral owner has different goals and they
>> often want to make better deals than their neighbors. One way to get
>> around this is to have a "favored nations" clause. The requires the
>> lessee to give the lessor terms equal to the best terms for some distance
>> around the land in question. So, no matter what Farmer A has in his
>> lease, if Farmer B is within the area of interest, an he gets better
>> terms, Farmer A's terms will improve. Again, this requires that the
>> landowners/mineral owners truthfully share information. This is
>> something that they often won't do. Nobody wants to let his neighbor
>> what his financial business is. Again, the lessees prey on this
>> mentality to break down the individual lessor.The favored Nations Clause is wonderful security for moving negotiation
> forward. With that clause you can be sure that there wont be a better deal
> to the next group over yonder. There are usually distance limits on them.
> I have seen 2 mile circumferances here. The negative side is you have to
> be a detective to find leases in your area that were agreed on that
> exceeded what you got. But then this is a small tight community and
> eventually everone tells. Especially if they have bragging rights.
Thats
> why the NWPOA has the clause inFAVORED NATIONS CLAUSE (BONUS ONLY): In the event Lessee pays a bonus
> amount greater than the amount paid to Lessor, for an oil and gas lease,
> and/or pooling action, in this section within one (1) year from the date
> hereof, Lessee agrees to pay to Lessor the difference between the bonus
> amount already paid per acre, and the amount per acre of the greater bonus
> paid.
At the end of six months from the date of this Lease, at the written
> request of Lessor, Lessee agrees to determine the average cash
> consideration paid per leasehold acre ("bonus") for all oil and gas leases
> taken by Lessee for the six month period starting from the date of this
> Lease over lands in a five (5) mile radius of the Leasehold Premises, and
> if the average bonus amount paid by Lessee for such leases is greater than
> the bonus paid to Lessor at the signing of this Lease, Lessee will pay
> Lessor the difference as additional bonus. WmBa +/- Ck
FAVORED NATIONS: If at any time or times prior to a well being completed
> on the leased premises, or prior to a well being completed in any pooled
> or unitized units in which the leased premises are included, Lessee or its
> assigns shall obtain a lease from or make a contract with a mineral owner
> under the Leased Premises other than Lessor, then Lessor shall be entitled
> to any benefits paid for, granted or reserved in such lease or contract
> which are greater or more favorable than those paid for, granted or
> reserved in this lease. Lessee shall pay Lessor immediately Lessor's
> prorate share of such benefit, including without limitation, bonus,
> royalty, rental or shut-in payment or any other benefit more favorable to
> such mineral owner than the payment for or the benefits of this lease. If
> necessary in the opinion of Lessor, then Lessee shall amend this lease to
> confer such benefits upon Lessor.
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