Replies to This Discussion

Permalink Reply by Uncle Buck on April 26, 2010 at 9:51am

If you signed the Wyoming County landowner's Lease, it states below that the Lessee (Chesapeake) has the option to add an additional 5 years. If they do, they must pay you, the Lessor, the original $5,750/acre bonus again:

(b) Lessee is hereby given the option to extend the primary term of this lease for one (1) additional five (5) year period. This option may be exercised by Lessee at any time on or before the expiration of the original primary term by notifying Lessor of its intent to exercise its option to extend the term and simultaneously therewith paying a lease bonus to Lessor in an amount equal to the original signing bonus, Five Thousand Seven Hundred and Fifty and No/100 dollars ($5,750.00), per acre paid to Lessor by Lessee; this payment shall be based upon the number of net acres then covered by this Lease and not at such time being maintained by other provisions hereof. If, at the time this payment is made, various parties are entitled to specific amounts according to Lessee’s records, this payment may be divided between said parties and paid in proportion to each party’s rightful ownership in the leased premises. Should this option be exercised as herein provided, it shall be considered for all purposes as though this Lease originally provided for a primary term of ten (10) years.

Permalink Reply by Ian Barber on April 26, 2010 at 9:58am

thanks, Uncle Buck. Tried to find link to the lease page I saw on here one day. (need more coffee!) About the mineral rights, does that give Chesapeake right s only during period of lease?

Permalink Reply by Uncle Buck on April 26, 2010 at 11:18am

I believe the minerals covered in the lease only pertain to oil and natural gas: " the sale of all oil, condensate and liquid hydrocarbons."

Also, I think as long as they are actively persuing or getting any of these mineral from the leased property they will pay the landowner a 20% royalty (based on your portion of a pooled unit).

According to the following section, as long as they are working on a well the lease continues. If they cease any activity for 90 consecutive days, the lease terminates: "In the event a well that had been placed into production, requires reworking, recompleting, deepening, plugging back or repairing and such operation is in search of or in an endeavor to obtain production of oil or gas, and is being conducted in good faith and with due diligence, the Primary Term, and any extensions thereof pursuant to Paragraph 2 herein shall be extended to allow completion of said operation, provided however, that in no event shall Lessee cease said operation for more than ninety (90) consecutive days. Cessation of said operational activity for more than ninety (90) consecutive days terminates the lease term."

A link to the Wyoming County landowners Lease follows: http://www.pamarcellusshale.com/Testimonials.html

Permalink Reply by Robin Fehrenbach Scala on April 26, 2010 at 4:19pm

Make sure you understand that what you signed is NOT a sale of the gas rights. It is a LEASE of the gas.
For instance, if Chesapeake does nothing on your land during the 5 years of the lease, and then does NOT pay you again to keep the lease going, they have NO rights after that.
What Chesapeake CAN do within the 5 years is start production in some way (either directly on your land or by including you in a unit) and then the lease is "held by production", which is different in that you will either start collecting royalties from gas sold out of the well or else the well may be on hold if there is no pipeline.

In the meantime, you still OWN the gas rights, even while Chesapeake has a lease. You could actually SELL those gas rights to an investor for a lump sum of money (while still keeping the lease bonus Chesapeake gave you) but that would mean you no longer get a royalty if a well is drilled and you no longer have control over what happens to the gas under your land (if any).

Does that make things a little clearer?