No-Surface lease but now they want the surface

Hello, we are new here.  We have a no-surface lease with Range Resources.  Now they have decided they would like to put a well pad on our property after all.  They have not offered us anything in payment, just want us to sign a new agreement that pretty much gives them the right to use our surface as they please.  We will get a lawyer involved if we decide this is worth pursuing, but wondered if anyone here could give current information as to going rates for well pads and the mess associated with it all.   If they don't pay anything, or much at all, we're not interested in going any farther or changing our agreement.  We don't have timber or crops, but our land has a high potential for residential development (we have had offers).  Even though the well wouldn't take up many of our acres, we are sure just having it on the land will affect that development potential.  We'd really appreciate it if anyone with solid info could share it.  Thanks.

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Permalink Reply by Teri on June 18, 2012 at 5:42pm

I have not dealt with Range Resources, but have been approached by another company.  $2,000/disturbed acre is what we have refused to consider.  In our case, the surface area, approximately 7 acres, would be taxed as commercial property instead of farm land.  Huge increase. We would loose crop income, which over time is quite significant, plus loss of current crops already planted.  Land value around site is considerably less attractive to builders or farmers due to placement proposed.  Also remember the compensation will be taxed as income, another huge consideration. 


Remember, there are NO guarantees of future income.  Speculation only.  It is a very personal decision.  It depends on your choice of some cash now and a roll of the dice, or the right to enjoy the surface of your land for as long as you desire. 


Proceed with caution . . . make sure each and every word of any document is reviewed by a qualified attorney.

Best of luck!

Permalink Reply by Feenzis on June 18, 2012 at 6:20pm

Thanks -you're all really helping us feel better about our decision to say no.  They paid enough for our lease that they will want to include our 100+ acres in a unit at some point.  Without substantial consideration, we'd just as soon see one of our neighbors host the well pad.  I think they are being coy (love that word Jim Shoos!) and wonder if they will even bother calling us back.  Considering the lack of detail and low-level landman who approached us, it's possible that this was just an exploratory contact to see if we'd be dumb about it.  We were dumb on some aspects of our lease so I guess they had reason to think we might.

Permalink Reply by Kathleen on June 18, 2012 at 8:27pm
If for some odd reason you start leaning the other way consider having them add the oil co. has to pay any additional taxes imposed by any government agency. This would cover cauv loss to these acres, my lease has that wording indepth so if you ever wish to see it I would be more than happy to scan it for you. Also if you choose to move this way a lawyer in your area with good experience might be able to get that and a spud fee included, than a road fee, pipeline fees, loss of that other area you mentioned you would lose access to. These addendums that are in many leases could become lucrative for you in the long run. From hearing my neighbors talk no one has ever really gotten anything good out of these talks without someone who knows the business involved. Another thing I would have added is no foriegn pipelines on the property only those associated with this pad. The pipelines alone could kill the chance of you ever surveying off parcels for sale. Does anyone have a picture to share of what a unit fully finished and in production looks like? Does it look real unsightly or something along the lines of what the NG storage areas look like. If that's similar to what it would look like I've seen parcels divided near the center township storage area and the builder didn't have any problems selling the houses from what he told me years ago by miller rd, columbiana county. Also would adding a pad language have the same tax effects or would that be considered a capital gain like selling off timber? Also has any oil co out right bought someone's acreage for a pad? I really would want to see what the finished product looked like. Remember though in 10-15 years they could come back and frack all the wells again.
Permalink Reply by craig on June 18, 2012 at 10:03pm

You can go to my home page and see shots of a local wet gas well in Beaver County Pa that has one lateral, is fraced, and is online. There are 3 small 'aux. pads' that contain the support equipment for separation and processing gas before entering a nearby transmission line. In fact one of the pictures is on the Main GMS page, left side, scroll down.

Permalink Reply by Kathleen on June 19, 2012 at 8:43am
Thanks Craig,

That's not too bad. We had a pump jack and a nasty smelling oil container on a farm in mahoning which was probably the same over all size to that photo but in that photo it looks clean and neat. Trees could be placed around a lot of that. I'm guessing they come back enough to warrant a toilet on site. That portapotty was my scale for size :0)
Jim ShoosPermalink Reply by Jim Shoos on June 19, 2012 at 2:36pm

This may be considered as an ethereal thought process... but given all of the allegedly negative implications that have been raised by Teri and others, why would your neighbors desire to "host a well pad" any more than you would.  If you follow this logic to its conclusion, no well pads would ever exist and no wells would ever get drilled.  How is it any less of an imposition on your neighbor than it would be on you?  The reality is that somebody has to be "inconvenienced" or nothing gets accomplished. 

Permalink Reply by Feenzis on June 19, 2012 at 5:08pm

Well, to be blunt about it - the neighbors gave up their surface rights and we did not.  They probably  got more of a lease bonus than we did.  When we were negotiating, we were offered a substantially higher amount for surface included.  We accepted less to avoid the "inconvenience" and now they apparently want us to be inconvenienced anyway, with no added consideration.  Whether our neighbors desire it or not, they gave the O&G the right - and we did not.  It may all be a moot point anyway; it might've just been a "feeler" to see how we would respond.

Permalink Reply by Teri on June 20, 2012 at 2:16am

COMPENSATION!  That is what gets things accomplished!!  That along with a very specific surface agreement for the land owner's protection with no surprises. 

Once again, a VERY personal decision.  This is big business and I for one will not even consider such a low rate of compensation in exchange for the loss of land with no guarantee of future income.

We are being asked to basically "gift" the land so that the developer and others in the unit might realize future income.  I am not that generous.

Permalink Reply by Mickgyver on June 19, 2012 at 12:53am

Hello Feenzis

Recently i have read that many banks do not want to loan money for property with or near an oil well .

This was a large hold up for some people i know as well. The lease offered had several good addendum's except for a 20 acre pad allowance that would pay the surface owner $20,000 and the lease also had no pugh clause unless you have 60 acres or more .

if you want to lease your mineral rights but plan to sell any of your property before a pad is placed on the property this limitation would certainly restrict the sale gf the property  with this chance of a 20 acre loss of property looming in the future for any prospective buyer  and the surface owning buyer would only get $20,000 total forever and the land will be useless for any agricultural usage if all 20 acres are affected, or until all traces of the well are gone.

this would also allow any company that gets the lease assigned to them the right to absorb 20 acres of land while the lease is still valid ,wherever they feel it will be best for their project and only pay $20,000 to the current surface owner since permission will not be with held unreasonably.

Then if they put the pad on you while you own it ,you will get 20 acres of royalty money which is good for you if the well is good but again the property value may drop according to some in the banking industry .

There could also be pipeline issues that put limitations on where other underground wiring ,and plumbing can be located for future construction .

I am planning on questioning a few of the larger banking institutions to see if they loan for properties in the main stream where the oil wells will likely be placed , also if the price of real estate would be more valuable with no surface equipment visible versus piping and other equipment that may be needed or allowed according to the lease agreement.

There are several articles on the net where people are not happy even being close to wells that are not restricted to electric motors and silencing enclosures so it will pay to do a little homework and research the details in your lease as others have suggested

Although the companies may not use all of the acres they are allowed with the pad size limitations it is still an allowed possibility unless you are guaranteed this differently in the addendum list that over rides the main lease

I would think that keeping the no drill lease intact and allow the companies to go deeply under your property will more than pay you enough to not worry about the small fee you will get for a pad on your property .

They may try to tell you that you wont be included in a unit if you don't agree to modify your original lease but this is something you need to evaluate as far as the value of the sale of your property for residential or business usage

You may get lucky and they let the lease expire and you could lease to someone in the future for a better deal for your situation if you have enough property to do this .

good luck Mick

                                                     

Permalink Reply by Feenzis on June 19, 2012 at 9:32am

Very thought-provoking, Mick.  Thank you to all. 

The advice to look to the lease is good in most cases, but in ours, the lease is a specified no-surface-use lease so there is no language regarding limitations, area size, permissions, payments for siting, or anything.  These things are probably spelled out on a lease that allows surface use, but in our case, no.

The pitfalls certainly do seem to outweigh the benefits, so if they do come back we'll probably tell them thanks but no tanks (pun intended)

Permalink Reply by Mickgyver on June 19, 2012 at 12:54pm

That sounds like a wise idea as the lease woul have some variable restrictions added  if you agreed to the changes they desire .

Permalink Reply by NY Gas Rights on June 27, 2012 at 4:09pm

There has pnly been ONE bank that has ever claimed they will not write mortgages due to a lease on the land. That is in Ithaca, NY, (communist headquarters for the northeast). The banking department reigned in their political activism.

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