How Will We Know a FAIR Oil and Gas Lease When We See It/Them?
PART 1 - Intro and definitions.
In Crawford, landowners are being told to wait for the Utica boom to come here, then good leases will flow freely, or similar "wait for better" advice. While we're waiting, let's discuss how we'll be able to tell if the much-discussed good lease is FAIR.
The USA is one of only a relatively few places where fairness to the landowner is supported as a cultural, political, and legal concept. In many less fortunate and free countries, the government owns all mineral rights, and a discussion of a fair lease is not applicable, so let's enjoy the rare privilege of discussing the details of this special freedom of ours!
To start it off, I offer the following definition of Fairness - All participants have equal access to all essential resources and information and have equal opportunity to share in the risks and benefits. All contracts and negotiations are free of fraud. For longer term deals, both parties bring a record that predicts they'll behave honorably for the life of the deal.
I also offer the one example I've found discussed in the public domain that appears to be a fair oil/gas lease - The original King Ranch lease, believe it was in 1929. It met the definition of fairness as follows:
Both parties to the lease had equal access to all required resources - Drilling required space, timber, a few specialized tools, and lots of labor - both parties had similar access to those. The risks were shared fairly - the driller had a significant risk of dry holes, but had to risk relatively little capital and labor expense. Over time, the benefits flowed to both parties, the community, and the nation, significantly enriching all, so the level of fraud must have been very low on both sides - (teapot dome came later:-)
So, all you patient fellow landowners, lawyers and reps, E&P folks, etc (yes, even adamant environmentalists), let's discuss the following questions, or any other you may add:
Is there a better definition of Fair, or any details that need to be added?
Which "normal" lease terms are most nearly Fair and which are most one-sided?
Are there any other more recent public domain leases out there that meet the above definition?
How can we re-insert more Fairness into our eagerly-awaited leases?
Why is it so rare to see lease fairness as a discussion topic?
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Replies to This Discussion
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Permalink Reply by 2z248p19vqnh9 on
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would you be such a person to aid in any endeavor, sldouglass? just askin', is all...
...but wouldn't you say that it IS wise for the LANDOWNER to do their 'due diligence' - so that WHEN a so-notable person of the lawyer-type WOULD be engaged to go over the 'fine-points' to bring things closer to 'engagement' of the two parties, they would a better idea (for themselves) of just WHAT is 'being said' so that it won't 'be like Greek' to them?...getting ready for the...
...'last, final agreed to fittings' of a 'bridal dress/LAND CONTRACT'. THEN to be 'signed, sealed, and delivered. (just a thought...) *NEVER stop 'thinking'. Use your noodle! That way, you'll know it better when 'someone's trying to 'one-up' you', or at least have a BETTER IDEA. Ultimately - it's YOU who decides as the LANDOWNER (because YOU are the one that will 'be IN BED' with 'them', whomever that may be...). Just somethin' to think about...but that said, like what I hear sldouglass sayin'.
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Sam,
It's well known that Blackjack, unique among casino gambling games, can be played such that the odds will favor the individual player. If your understanding of the somewhat complex game is COMPLETE, and your operations, including keeping a running card count are PERFECT, and the house PLAYS BY THE RULES of the game, you can shift the odds from favoring the house to favoring the player. That's why I chose it as the analogy in this matter - it seems quite apropos to the situation we're in. It's also true that the house can do both "legal" and illegal things to weaken or nullify all the player's hard work and achieve their universal business goal of sending all clients home with empty pockets. Examples would be to deal from multiple decks and shuffle more frequently for the former, and using their CCTV security system to look at my hand and adjust the dealer's betting for the latter. When I choose a casino, I can look at all the legal things and choose one that offers the best environment for my venture. Figuring out whether a casino does illegal things is much harder, because obviously such will not be visible without some diligent research, and I might learn things that will hurt me in the process - if they're willing to cheat at cards, breaking a few knees won't bother them much. All these would seem to be good analogies.
The bottom line here is that when big wealth is at stake, we should do enough of that research to know who to avoid doing business with, or else all the negotiating skill in the world will still result in empty pockets or at least leaving too much of our wealth on the table.
I've already got first hand experience with leasing in 1984 and 2003, and I've read a lot of leases, including both the proposed and actual Hilcorp Lawrence County leases. I fully understand that even in fair market, the overwhelming economic power imbalance results in some very one-sided negotiations. I also see some surface evidence that the 2000 leasing may have been across the line, but it will take some more research to know if that's true. Did the lessees know and plan to develop a market-controlling horizontal HBP position by vertical drilling gerrymandering, or didn't they? That question should be easy for some of the participants here, since they probably have first hand knowledge of when the first forecasts for Horizontal technology deployment were published (by Haliburton?) to Atlas, RRC, etc. As a landowner, all I know is that the leases were the standard-practice-at-the-time documents, and there was no public knowledge of large units and layer severance (and, btw, the total lease value was way below what would pay an attorney or landowner group). I also know that my ability to form a drill-ready unit is blocked by HBP-junk-wells. I know that could be just coincidence and the market reality at the time, but it also could have been really good forward-looking and slightly dishonest business strategy at work.
I also know that the wealth that will be transferred out of Crawford County if horizontal lease bonus rates are "controlled" by, let's say $2000 per acre, by this market defect is potentially in the billions and that's before we look at "market control adjustments" to royalty rates. It happened in the Bakken, and it can happen here.
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Bob...if I'd ever go the 'betting route' in this manner...you'd be MY rhm (right hand man) ...however, I tend to believe the old 'standby' that the haw (house always wins)... concerning Crawford Co. leases being 'controlled' - I'd have to say so...lom (lock on the market)...
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SO 'HOT!' - SHELL game SUCKER-PUNCHED? - Go Marcellus & Utica S...
See, Bob, I know/understand 'bigger companies'/large fish...swallowing 'little fish'. I had the thought that the G/O Co.'s knew exactly WHAT they had here / were going stealth to 'lock up'...the 'play' was this...
You touched on ATLS/REXX...we'll they WERE the 'big fish in the small pond'...and they DID 'use' the *kind, friendly landman* - a fella' that people would be 'comfortable with & just 'that looks good, I'll sign the bottom line' - GOTCHA'!
...the 'big boys (Shell +)' KNOW what's here (in one discussion, there was some gal who said as much...if/when I find that - I'll forward it to you...THAT is a 'house move' in the haw (the 'house always wins')...
WHAT is in their 'best interest'...let's go back to 'gambling'. YOU know that for rpm (regular people's minds) that it IS 'gambling', but for a strategic mind such as yours...it is 'choice' of the 'lesser evil'. IF I'm understanding this all, even in the slightest bit...that YOU will do your 'homework' before you get there so that you KNOW where YOUR best advantage will be. Am I even close? i.e. - you 'know the game', and play your hand intelligently. WELL done...
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back to my thoughts on the G/O land 'lock-ups'...it was KNOWN 'by the G/O house' what is where & how to 'play'...now comes the 'down & dirty work'...the landowners in good ole' RURAL (trusting...) USA were 'picked off' by the little 'oh, that's JOE...HI, Joe!' landmen - WHY was it done this way?...because of the 'trust factor' with these landowning 'good ole' boys'. It breaks my heart & soul because I KNOW how these people are - they TRUST.
TRUST...God be with those individuals who 'shafted' any & all USA LANDOWNERS deceitfully. These are GOOD people who - at the time, were NOT privy/advantaged with the computer availability of present day, BUT it should somehow be able to be 'ties into'/woven into these people's 'SNAKE-OIL leases'...that they signed under duress - YES, I think that may be so. They were given the classic 'slight-of-hand'.
The little-mid-G/O Companies did the 'footwork' of getting the paper signed...THEN the leases could be 'purchased'/taken over by the BIG BOYS - for a price, but basically chump-change for these Gorilla's.
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Why things have 'stopped/slowed up'? WELL, I personally think that people ARE just now, SLOWLY becoming 'edgamicated' as to WHAT is happening around them...and THANKS to this sight + other problems ... they've 'pulled in their horns' ... can't be TOO obvious, can the 'pick-pocketers'?...interesting indeed. *CASE in point:
M&P BEING SUED / CLASS-ACTION SUIT AGAINST HALCON, M&P &...
...ok, now there's quite a bit to 'trudge through' with this one, Bob...see 'GG, Feb. 12, 2013 @ 11:14pm...
WATCH OUT for C/X Energy...do you get those little 'postcards'? Don't they just make you laugh? When I look at one - I want to yell out to everyone - DON'T DO IT!!! IT'S A CON!!!
M&P law? - when you see these two mentioned together - RUN (or stick around & LISTEN...then you'll know their 'hustle'...
THEY are trying to 'twist up' Crawford Co., but maybe they've 'stopped' for now - because of the 'problems' they've incurred...breakin' down the house?! Tra-la-la-la...Tra-la-la-la-lie...
I'll stop for now (so it doesn't get too long)...but you know what you're looking for & what you read when you read it from what I can gather from your last post...I am happy to help you.
I get tired of 'beating my head against the wall'...TRYING to help people be able to UNDERSTAND for themselves...but it is refreshing to hear someone be sincere in their quest for knowledge - a true seeker. I will aid you best that I can.
Thank you for your sincere interest...more people NEED to be so inclined. The old 'you can lead a horse to water'...senario. This IS try to help you, it just takes time (lots of time...)!
If YOU have the 'time & patience' with me...I'm in it for 'the long run', friend. I'll do what I can to aid you.
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As one light lights another, nor grows less - so nobleness enkindles nobleness.
James Burke Connections II #2 - Sentimental Journeys - YouTube ... believe it not, these really help me to think when I have them in the backround & watch as WELL...
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GG
If I understand your points correctly, I thing I agree with them.
I regard it essential that the landowner read the lease carefully and more than once. In fact, when I have had occasion to speak to lawyers on the subject, I have told them the same thing.
Try to get real answers to the things not understood. In some cases the answers will not be forthcoming.
And try to get answers from more than one source and weigh the reliability of the answers.
We all have to try to do our best in this complicated area and sometimes that "best" will not be enough.
As to the lawyer thing, the best deal [if you can swing it] is to pay by the hour or some method that does not depend on the closing of a deal. That puts the client in control.
Good luck. -
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Gracias, sldouglass * Crabmeat Hoelzel (tastes better when you get straight answers) - simply the best, maybe someday everyone shall 'enjoy' (the BEST of everything, that is...). Shalom.
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I'm going to try to get you a few things to look through that I had 'hanging around', Bob... http://www.law.uh.edu/faculty/bwells/oilgas/2012Chapter5.pdf
THIS ONE was the one I was looking for from Joe Corrado, I believe, good explanation: http://www.kgs.ku.edu/PRS/Fracturing/Frac_Paper_SPE_152596.pdf
Contains interesting information that is really good to know: Can a company horizontal drill under my land without a lease? - Go ...
THIS is always something to consider:Have any groups considered drilling your own well? - Go Marcellus &...
While you're at it - gotta' think about THIS TOO...PIPELINE ROW COMPENSATION "WHEELAGE" - Go Marcellus & Utica Sha...
Gotta 'watch your back' because no one else WILL...read: SO 'HOT!' - SHELL game SUCKER-PUNCHED? - Go Marcellus & Utica S...
and last, but not lease...Lance Nimmo is pretty 'heads up' on this & in a somewhat similar, but different situation as what I'm understanding you are finding yourself, Bob...Shell drops the floor out of Lease Offer - Go Marcellus & Utica...
-------------- SHELL is a 'big bad brute'...stay away from HalCON (yes, I capped the 'CON' for they were tied up with CX Energy in the Mercer Co. debacle - lots of PAIN there to get sorted out - probably STILL going on...beware, be very*very AWARE!, Bob (for YOUR 'own good'.
You're 'off to the races now! given you a bit of MY 'time & energy', hope that you get something out of it all...there ARE nuggets - seek & you shall find. Tally Ho!...
...Steak Rooney here I come (at the Hyde out Park! Yippee!! T. Hee)...work on it enough & you'll enjoy the fruit of the good ole' 'teehee'...vs. T. Ho-Hum...but that is YOU to learn for yourself! Enjoy.
asonelightlightsanothrnorgrowslesssonoblenessenkindlesnobleness - imho...
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OK, BOB...this one is LOADED! WELL worth your time to go over...patterson well - Go Marcellus & Utica Shale: Leasing, Drilling ...
You've REALLY got some 'homework' now - excellent discussion the whole was around.
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You have Frank Dux to thank for this one...one of the people who commented toward him (negatively) led me to THIS very priceless/good discussion (imo-in my opinion)...nice folks. Frank may be a person to cross matters with, ask & you will...T. Hee
T. Hee - Wikipedia, the free encyclopedia ...you'll learn more about the brashness dispelled his way (and mine.). No skin off our 'green-backs'...you'll understand IF you are prepared to sift through all of the M.O. (muck out...) of the Gasland Barnyards...
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As one light lights another, nor grows less - so nobleness enkindles nobleness. cinn (change is nothing new) mtc (my two cents), komo (keep on moving on)...botb (best of the best)...I don't know the 'computer slang stuff', but I'm having fun with it (really don't care much, but need to TRY to keep up - MY way...that way I can live with/deal with it just fine.) haid (how am i doing?)....CHEERS - heads up. ENDEAVOR. WE are John Galt!
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Bob - I suggest you read through these articles/GMS dicussions...Depletion "Type Curves" from company websites show a dramatic drop ......
...and thenXi Jinping’s vision: Chasing the Chinese dream | The Economist...
I would suggest you maybe getting to know *Lance Nimmo...Shell drops the floor out of Lease Offer - Go Marcellus & Utica......this is one of His discussions...believe he's in Slippery Rock/Butler area somewhere...
...UNBELIEVABLE,, DID NOT SEE THIS COMING - Go Marcellus & Utica S......
What I am sending you now is a compilation of various sites that I found insightful - for you to expose your inquiring mind to...I do hope that this is helping you out...
As one light lights another, nor grows less - so nobleness enkindles nobleness. Seek and you shall find...
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GG, and anybody else who may be following...
I must apologize in advance for not reading all the valuable references you've graciously posted here. It's that time of year when I have to put down the pen and pick up some tools and do some actual work on this and related projects. I have read some of them in detail, I'll try to get back to them next winter, and I have one more "conclusion" to add to this discussion...
I'm going to quote 3 good and wise rules to live by from American culture that would seem to be apropos here:
1. "Be always sure you're right, then go ahead." Davy Crockett, 1787
2. "Never go anywhere without a knife" Leroy Jethro Gibbs, NCIS, present day
3. "Don't depend on your knife in a gunfight" (anybody want to put source credit on this?)
So when I go to the gunfight that is the negotiation we all anticipate, I'll have studied all I can to be sure I'm right. That will be my knife. But if landowners and our groups can't do anything to weaken the Crawford HBP Cartel, I guess I'll be the bloody corpse who brought only a knife to that gunfight. See you all there, and in the "mass landowner grave" for all eternity. Remember, we only get one more chance to get this right, then our G&O wealth is irreversibly transferred out of our possession. If we don't get enough lease revenue to transfer ALL of our FAIR SHARE of that wealth to something more usable, we're giving it away. It's 100% OUR WEALTH now if we're unleased, and we have a duty to manage it for a fair return for ourselves, our heirs, and the economies of Crawford County and PA, and USA.
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I'm right there with you, Bob...Tiddlewinks? Used to play this with a penknife with the boys - flipping of all the fingers, then wrists, elbows...then the shoulders...up to the chin, then nose...had to put the point of KNIFE at the 'body place, then FLIP it so it would STICK in the ground...'. *Each round you had to do ALL before, then proceed to 'the next level'...STEPS....
Sometimes I'd win, others - no...but had fun all the way. Loved the challenge.
YOU'VE got the 'end all' gist of the rubik's cube by the tail, Bob.
Believe you/me...THEY have had us 'in their sights' since the 50's. Ready, set, PULL!
Look up the Lance Nimmo kid - you both seem to have quite a bit of GOOD street-smart, no nonsense, 'just the facts, Jack' mental HARDNESS to withstand the billows of the gale.
Shell drops the floor out of Lease Offer - Go Marcellus & Utica...
...as far as 'tearing through' all of the things I've forwarded for you (and everyone else - IF they so choose to read through...)...it's NOT 'going anywhere'...it's just like the G/O under your feet in a way...
When you get to it - you get to it. It's Spring, I completely understand. You get done what you need to get done & WHEN - in your own, sweet time...you get around to it - you will.
Where there is a will, there is a way! ENDEAVOR.
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As one light lights another, nor grows less - so nobleness enkindles nobleness.
Frank Dux...another player to 'tap' for HE has been through many variables & can help aid...AND be able to share about 'pitfalls' that he has encountered along the way as WELL...as things happen. YOU will know, because YOU will 'be prepared'...that's what they DON'T WANT....
Their 'shell game' is frustration, confusion...the CON!...but YOU 'know your games'! Play WELL....
What has changed, what has stayed the same...▐ SKYFALL ★ Complete Soundtrack ᴴᴰ ★ Thomas Newman▐ - YouTube
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I can not imagine that fairness has anything to do with O&G leasing.
The lessee wants a lease from the landowner on the best terms possible and that is the landman's job. I have not seen an initially offered lease that is not oppressive to the landowner - although the lessee will often agree to some carefully worded changes, some of which may be helpful.
The landman will not lie to the landowner since that might raise questions about the effectiveness of the lease, but do not expect the landman to tell everything s/he knows. The landman is not a friend - he/she is a skilled negotiator to get what the producer wants.
And watch for the clause near the end of the lease that says: "Do not believe a word I told your." If it ain't in writing and signed by the lessee, the lessee is not bound. That is what the words of the lease say.
There is a problem with landowners because they start adding up dollars and lose sight of the importance of words that have been carefully selected with the help of skilled lawyers. It is rare indeed that you will find a Utica-Marcellus lease with a drilling commitment. But you will find several clauses extending the lease for a term that seems like forever.
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Yes, EXCELLENT advice, sldouglass - much appreciated.
Hollenbeck Gas Site with Service Rig Testing the Gas Well - 2-26-13...
***Fracking Teddick Site - 4-25-13 - YouTube > both documentaries by Vera Scroggins
These are BOTH very good documentaries of Fracking Well sites with explanations of what is going on where...THIS is what things will get to look like as drillings take place.
Vera Scroggins veraduerga@yahooo.com & 607-237-9685 *this person was 'mental beaten' FROM GMS by GMS 'police'...WATCH these documentaries - real EYE-OPENER (she is good!)
As one light lights another, nor grows less - so nobleness enkindles nobleness.
***Bob Jenness - when you get the chance - Lance Nimmo...(also on GMS *Shell drops the floor out of Lease Offer - Go Marcellus & Utica...).
YOU BOTH sound rational in your mind-set...WHEN you get to it - no worries. The G/O ain't going anywhere too quickly, I'd say....
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