If parties are concerned that an AMI description may not be sufficiently certain, it is
advisable to include a “catch-all” or “savings” clause to ensure that the AMI is enforceable at
least insofar as it covers those lands that clearly lie within the AMI.
36
2. The AMI Trigger
The triggering event of the AMI obligation typically comprises the following
elements: (a) an acquisition (b) by a party (c) of an acquired interest (d) within the AMI term.
The “acquisition” element typically includes (i) a direct or indirect acquisition of an acquired
interest within the AMI, (ii) a proposed acquisition of such acquired interest, or (iii) a direct or
indirect acquisition of an option or right to acquire such acquired interest. The definition of
“party” is typically expansive and includes the parties to the agreement and all related parties and
affiliates. The “acquired interest” element is a central point of negotiation, as it can significantly
expand or restrict the scope of the AMI obligations.
37
Parties should also establish a term for the
survival of the AMI to prevent a potential violation of the rule against perpetuities in certain
jurisdictions
38
and to limit its effects to within the anticipated period of time contemplated by the
parties for the particular venture. Negotiating termination events must also be carefully
35
E.g., (i) “To the extent the boundaries of the lands outlined on Exhibit ‘B’ do not lie on or along survey, section,
or other governmental tract lines, the Parties intend to include partial surveys, sections, or governmental tracts in the
AMI,” or (ii) “It is the intent of the parties hereto that the heavy dark lines highlighted in yellow lie on survey,
section, or other governmental tract lines, and that no partial surveys, sections or governmental tracts be included in
the AMI. If any portion of the survey is within the dark line, then all of that survey is within the AMI.”
36
E.g., “If for any reason it is or becomes unclear as to whether any tract of land lies within the area covered by the
AMI, the Parties intend the AMI to be effective with respect to any and all lands clearly within the outlined area.”
37
Parties may elect to include a broad or narrow definition of the term “acquired interest”; e.g., “any lease, mineral
interest, royalty interest, overriding royalty interest, or renewal or extension thereof covering lands within the AMI”;
or “any oil and gas leasehold interest (including any renewal, modification, amendment, or extension of same); or
any other interest in the oil, gas and mineral estate, including any working interests, operating or non-operating
rights, fee mineral interests, production payments, net revenue or net profits interests, carried interests, royalty
interests, overriding royalty interests, and any other interest in oil and gas rights, or rights to earn or acquire any
such interest under a farmout/farmin contract, farmout option contract, or any other right to explore for, drill for,
develop, produce, exploit, store, dispose of, process, compress, separate, transport, market, or distribute oil or gas or
other associated hydrocarbons; or any other right or interest in any treatment and processing plant, equipment,
machinery, fixtures, facilities, flow lines, pipelines, gathering lines, easement, permits, licenses, servitudes, rights of
way, surface leases, salt water disposal well, injection well, water well, and other surface rights, and other tangible
personal property or improvements, located in or on the AMI, or used or held for use in connection with the
operations of any of the rights or interests described above; or any other option or right to acquire any of the
foregoing.”
38
The rule against perpetuities has been held applicable to oil and gas leases. Nantt v. Puckett Energy Company,
382 N.W.2d 655, 659–60 (N.D. 1986). However many courts have expressed an uneasiness against invalidating
mineral leases under the rule. See Lansdown, Golden v. SM Energy Company and the Question of Whether an Area
of Mutual Interest Covering Oil and Gas Rights is Binding on Successors and Assigns, 89 N.D. L. REV. 267, 279–-
81 (2013) (for a discussion on the tendency for courts to uphold the intent of the parties when interpreting mineral
leases). For example, the Kansas Supreme Court held that an AMI agreement does “not involve the vesting of
future interests in real property and [therefore does] not constitute a restraint upon the alienation of that property.”
First National Bank & Trust Company v. Sidwell Corporation, 678 P.2d 118, 126–27 (Kan. 1984). See also
Courseview, Inc. v. Phillips Petroleum Co., 258 S.W.2d 391 (Tex. Civ. App.—Galveston 1953, write ref’d n.r.e.)
(holding that an AMI agreement does not create a right in any real property).