What must happen when the entire interest of an oil and gas lease is transferred?

When the entire interest of an oil and gas lease is transferred, it is essential to notify the holders of the royalty interest. This is crucial because royalty interests are often fractional interests that entitle the holder to a share of the production revenue from the leased property. The transfer of the lease can impact these holders significantly since it may change the party responsible for managing the lease and the procedures for revenue distribution. Notification ensures that royalty interest holders are aware of the new leaseholder and can adjust their expectations accordingly regarding payments and responsibilities related to the lease.

The other options do not accurately reflect the requirements associated with transferring an oil and gas lease interest. For instance, selling the asset at auction is not a necessary step in the transfer process, and requiring all tenants to sign off on the lease is generally not standard unless specified in the lease agreement. The statement that information must only be shared with the government misrepresents the nature of disclosure required in such transactions and does not involve notifying interested parties, such as royalty interest holders.