Every landowner support PA Senate Bill 356 regarding pugh clauses

PA State Senator Introduces Bill That Would Add Pugh Clause to Leases


 Pennsylvania state Senator Gene Yaw (R-Lycoming County) has introduced legislation that would effectively add a Pugh clause to leases being unitized for development of shale gas.  Senate Bill 356, which was introduced by Senator Yaw and several others on January 31, has been referred to the Senate Committee on Environmental Resources & Energy for consideration.  A Pugh clause releases the portion of leased acreage that is not included within a production unit.  Senate Bill 356 would apply only to units formed after the effective date if the bill were passed and to development of unconventional reservoirs, as defined in the bill.

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Permalink Reply by Jack Straw on February 9, 2013 at 10:32am

Thank you for posting this.

I am surprised that no one has commented over the past five days ... on what is a matter that is of great potential importance to many who frequent this site.

I have done a little research and Senator Yaw was joined in introducing this legislation by three fellow Senators:

Senator Gene Yaw 23rd Senatorial District

Bradford. Lycoming, Sullivan, Susquehanna and Union Counties

 

Senator Rich Kasunic 32nd Senatorial District

Fayette, Somerset, Washington, and Westmoreland Counties

 

Senator Elder Vogel, Jr. 47th Senatorial District

Allegheny, Beaver and Lawrence Counties

 

Senator Lisa Baker 20th Senatorial District

Parts of Luzerne, Monroe and Susquehanna Counties and all of Pike, Wayne and Wyoming Counties

 

The short  text of the proposed legislation is available here:

http://www.legis.state.pa.us/cfdocs/legis/PN/Public/btCheck.cfm?txt...

 

This Landowner friendly legislation will doubtless be fought by the O&G Operators.

 

I suggest that you contact your Senator and express your desire that he/she support this legislation.

 

All IMHO,

                  JS

 

 

Permalink Reply by Armstrong Land on February 9, 2013 at 10:53am

seems to defy the landowners and the operators right to contract.

Permalink Reply by Jack Straw on February 9, 2013 at 11:34am

 

It seems to defy the operator’s ability to tie up a large portion of a landowner’s property by not including it in a Production Unit.

It seems to defy the operator’s ability to use a “Boilerplate” lease to unnecessarily tie up undeveloped acreage by ignoring the Implied Covenant of Further Exploration.

It seems to defy the operator’s ability to use a “Boilerplate” lease to unnecessarily delay development of acreage by ignoring the Implied Covenant of Reasonable Development.

Nothing in the legislation seems to defy the landowner’s and the operator’s right to contract; it simply eliminates a situation that has been abused.

It seems to simply (in a tacit fashion) recognize the Implied Covenant of Reasonable Development and the Implied Covenant of Further Exploration; principals that have too long been ignored to the benefit of operators and to the detriment of landowners.

 

All IMHO,

                     JS

Permalink Reply by Armstrong Land on February 9, 2013 at 12:07pm

Don't these landowners have every opportunity to negotiate pugh clauses in their leases?

Permalink Reply by Jack Straw on February 9, 2013 at 12:24pm

Don't these operators currently have every opportunity to refuse to negotiate pugh clauses in their leases?

The legislation would remove the need for such negotiations; it to a degree codifies the right of the landowner to expect the operator to honor the Implied Covenant of Reasonable Development and the Implied Covenant of Further Exploration.

The legislation would strengthen landowner rights; what would possibly be wrong with that?

You are on the side of the landowner, are'nt you?

You do recognize the Covenant of Reasonable Development and the Implied Covenant of Further Exploration, don't you?

 

JS

Permalink Reply by lucky on February 9, 2013 at 1:30pm

First these landowners signing these boiler plate leases are mostly farmers and lack the wherewithal to neg. better than a room full oil and gas lawyers who drew up the leases. most have signed signed their lease at their kitchen table with extremely talented "car salesmen" and have no idea what they actually signed until it is too late.

Secondly without this type of reasonable protection here is an example of what happens, 

Farmer X signs up his 500 ac farm as do his neighbors. Leasing Company Y creates a 1000 ac unit using only one acre of Farmer's X 500 ac. Company drills a well and now holds the farmer's entire 500 ac farm as held by production forever by using just the one acre.,  The farmer now will only gets paid 1/1000th of a  % of the actual royalty. his other 499 ac are held in inventory for at least 20 years.

Between the lack of any type of pugh clause and clauses allowing unlimited deductions are allowing companies to literally steal profits from unknowing landowners. 

Permalink Reply by craig on February 9, 2013 at 2:57pm

A family member currently has 186 acres tied up with 1/4 acre being in a unit.

Very practical for the O+G operator, very mad is the family member. Bring it on.

Permalink Reply by Jack Straw on February 9, 2013 at 3:23pm

Craig,

The industry abuses the Landowner, and then they winge, whine and cry when they are called out on their most excessive abuses.

As a Libertarian at heart, I am most reluctant to see the Government becoming involved … but, as the industry winges, whines and cries, they need to ponder the fact that they have brought this upon themselves. If they had not pulled stunts as reprehensible as were visited upon your family member, they would not now have to duck for cover.

If they had “policed” themselves (and kept their actions within reasonable bounds of decency); they would not now need damage control; they would not now need to pay for additional lobbyists in an attempt to derail proposed legislation, they would not need to make additional campaign contributions, they would not need to unleash their lowliest minions (aka landmen) on this board.

 

I hope that readers will do a Google Search and find the web site of their respective Senator … and email their Senator, asking that they look favorably upon this landowner friendly legislation (just as you will look to see how they vote).

I hope that readers will enlist the support of friends and family in contacting their respective PA State Senators.

 

All IMHO,

                      JS

Permalink Reply by jeff on February 9, 2013 at 5:23pm

"Lucky"

EXCUSE... ME!!!

You seem to think farmers are all pretty dumb! That just goes to show how intelligent you aren't. I can see why you go by Lucky - that's all you have going for you. Farming is a science now that requires a lot of continual education and updating, not to mention tons of just common sense. I know a lot of farmers who know how to read and comprehend and have a lot more wherewithal than you show.

Permalink Reply by lucky on February 9, 2013 at 6:12pm

Jeff,

You misunderstood my post and in turn missed the point I was making. First. I am a farmer and second my neighbors and friends are farmers, thus my point is and was that many multi generation farmers might know farming but are out of their element neg an oil and gas lease against corp. oil and gas  lawyers .so let's pass on the insults and stay on point.

Craig made the point in his post better than I did because his family evidently signed a lease with no pugh clause. 

Bottom line, this is a bill landowners need and should be supported by all.

Permalink Reply by craig on February 9, 2013 at 6:30pm

It was a relative and one of the first to sign in 2005/2006 era, before shale was even discussed in  our area. We do look at it this way though....

If enough of us wouldn't have signed back then, the first 2 vertical deep wells in Beaver County wouldn't have been drilled when they did to get the core samples and data down to 14,000'. This info, along with other info, was instrumental in getting interest in this area and ultimately CHK in the area. But to add insult to injury, they do these underhanded deals, knowingly. It is a shame companies stoop this low on occasion.

Permalink Reply by Jack Straw on February 9, 2013 at 6:40pm

The Oil & Gas Industry has had the benefit of about six generations of Attorneys specializing in O &G leases. They have had 150 years to hone those Boilerplate leases in a manner that best represents the interests of the Oil & Gas Industry.

 

It would be simple if it were us against them … but it is not. It is us against 150 years worth of them.

 

A simple Farmer is no match.

A simple School Teacher is no match.

A simple Banker is not match.

A simple Doctor is no match.

A simple Politician is no match.

A simple University Professor is no match.

 

It does not start with a level playing field; the tables are tilted against the landowner.

There is likely nothing we can do that will ever level that playing field.

It is not about intellect, it is not entirely about knowledge …. It is about experience, and the limited experience we can quickly gain … all against 1 ½ centuries of accumulated experience.

 

The most that we can hope to accomplish is to reduce the skew a bit.

We can band together and educate ourselves through the sharing of information, opinion and knowledge.

We can obtain the services of experts who are paid (and dedicated) to represent our interests.

And, we can take a deep breath and try to muddle through as best we can.

 

All IMHO,

                   JS

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