New Well

It appears a well is going to be drilled on my farm. What kind of fee are people receiving for "site use". Also I have an old lease that grants me up to 400,000 MCF of gas for 2 houses on property. I believe I've read this isn't feasible with the deep wells. If not what has anyone been able to get as a substitute?

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Permalink Reply by Jim Litwinowicz on June 12, 2011 at 9:34pm

Where is the farm located?  The lease language will probably determine what you get instead of the 400,000 MCF.  They may pay the equivalent of the gas in cash. It is very difficult to get free gas as this gas is too high a pressure (2000 PSI )and also burns so hot that it would damage your furnace or stove. And you are responsible for installing pressure reducers and hookups and you must carry insurance for any damages that result from accidents.

As for the surface disturbance, that should be covered somewhere in the lease.  If not, contact the company and see what you can do. As far as I know people are getting any where from $15,000 as a base up to $5,000 per acre disturbed.  But since you already have a signed lease, you will have less negotiating power. If they need your permission for the location of well, access road, or pipelines that would give you a little leverage.

 

Good Luck!!

 

 

Permalink Reply by craig on June 13, 2011 at 12:54am

A relative of mine has accepted an offer of $2,000/year instead of free gas. I don't know what is to be paid for a drill site on the property  though.

 

Permalink Reply by Finnbear on June 13, 2011 at 12:05pm
That might be a good deal today, but if gas prices double, it won't look so great. If it is not tied to the fluctuations (increases!) in gas prices, in time it will end up not being such a good offer for the landowner (great for the O&G though).
Permalink Reply by Finnbear on June 13, 2011 at 12:03pm

Only YOUR lease can tell what fee you might receive for "site use". If you didn't negotiate it before you signed, you might not receive anything. One lease offer I received for my Belmont County land specifies $15,000 for each well pad site on my land but makes no mention of how much land they will use for a well pad. I have seen leases with anywhere from $1,000 to $30,000 offered for this.

Same thing applies with "House Gas" usage. If you didn't negotiate this before you signed the lease, you get nothing.  With these deep shale wells, I have seen O&G producers pay the lessor a dollar amount in lieu of allowing house gas usage. This is in addition to your lease-specified royalty.  When negotiating this, make sure it is tied to the price of gas at the time of the payment each time it is paid to protect against inflation and fluctuating gas prices as time goes on.  My brother is negotiating with CHK on the property where he resides and that is their solution to the "House Gas" issue. I have been told the gas produced from these deep horizontal wells is not suitable for house gas usage as it comes out of the ground and needs to be "processed" before it is suitable for an end user. They would not give any more detail about what this "processing" involves but I believe it involves drying the gas and I know from experience that moisture in your gas supply is a pain in the @$$ in the winter months here in OH. I spent too much time thawing regulators and drying lines from the well on my small farm this past winter but that is the price to pay for "free gas".

I hope these items were negotiated before the lease on your farm was signed. Read and study your lease and know it so that you will be prepared for what happens when this well is drilled.

Permalink Reply by J.M. on June 17, 2011 at 11:55am
On finalized contract (Oct. 2008) we received $2000 per year for home gas allowance....also receive $2000 per wellhead if well is drilled on our property.
Permalink Reply by craig on June 17, 2011 at 1:27pm
"Read and study your lease and know it so that you will be prepared for what happens when this well is drilled."  ----How true!

How unfortunate that there are still folks who sign a lease without knowing for sure what it says. Reminds me of all the folks who signed mortgages some years ago that didn't know they were variable rate....shame on the fools who sign legal documents without knowing the content. 

 

Permalink Reply by michael j belaj on June 19, 2011 at 5:33am

Craig What you have posted is so true alot of people lost their homes to the bank they signed a mortgages that only paid the interest and bank fees no prinsable. Alot of the people I talk with about leases only care about the sign on bonuse and not the content of the lease I call it the greed factor. When the money is gone you will still have the lease if you signed with a lease flipper you are in big trouble.  I know of a company that had gross sales of 125,000.00 for 2010 and they are signing leases @ 2250.00 per acre ask the question wheir is the money comming from if you dont like the anser do some reserch. Thanks Mike

Permalink Reply by michael j belaj on June 19, 2011 at 5:14am
jnm 400,000 mcf would be alot of free gas I think your lease would read 400,000 cubic feet and that is still alot of free gas. The gas in the Utica shale is hot and their is alot of moisture in this gas also the pressures are very high it is just not safe to run off the well head into your home. Most of the companies that plan to drill have taken the free gas clause out of the lease. I have seen alot of land owner gas lines they run them through culverts in trees above ground they use the ornge plastic very low pressure but cheep and when their house blowes up they want to sue the oil company. Their should not be a free gas clause in the leases for the Utica shale a expolsion clause would be better.  Good luck with your lease Michael Belaj
Permalink Reply by jnm on June 19, 2011 at 7:00am
I know 400,000 mcf should probably read 400,000 cf but it does read 400,000 mcf; hopefully that gives me some leverage
Permalink Reply by tg mott on June 19, 2011 at 2:07pm

Hi jnm

 

I would take that lease to a good legal firm MONDAY, you have a serious mistake in you lease.

best to verify if the lease is a good one as written. iF SO and there is a good well on your lease then much money into you account unexpectedly and big legal hassle comming????

 

tgm

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