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?
Views: 4013
Replies to This Discussion
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Permalink Reply by Bob Jenness on
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Sam,
I really hope this thread helps us all grow our imaginations big enough to embrace the concept of a FAIR lease. That, after all, is why I started it. I would go so far as to expect that any landowner or group who decides to act as their own "landman" (with support from a skilled attorney, of course), by negotiating only directly with drillers would enter the process only only after they are in possession of a carefully crafted prototype lease including all the FAIR terms and conditions cited by GG and others in this great forum. Both the Lawrence County group "starting point" lease and the posted (and quickly removed) EMLO/Hess lease were steps in this direction, but obviously, each group should invest some work to create "their" prototype lease to reflect their community needs, geologies, and market realities. In my business experience, those who enter negotiations with crisp, clear targets and bogies for each negotiable item do much better than those who enter with even the best-crafted "negotiate for the best deal possible in this market" goal. I've been part of doing this for a project with a 1000 page technical spec, so I know it can be done for complex stuff like leasing. I really hoped that my paid landowner group or this forum would have published (or at least shared with members) such a "target" by now.
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INDUSTRIOUS. 1,000 page tech. spec.?...
CONFLICT RESOLUTION / WIN-WIN...situations/scenarios?...
Fracking Teddick Site - 4-25-13 - YouTube ***Vera Scroggins Documentary (VERY 'facts/jack' - straightforward documentary...so YOU can see just HOW a 'Frack Site' looks, sounds while IN 'operation' - *EXCELLENT!*
Vera Scroggins (veraduerga@yahoo.com, ph# 607-237-9685) - she gives personal TOURS....
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As one light lights another, nor grows less - so nobleness enkindles nobleness.
Fracking Hell: The Untold Story - YouTube ...look up 'Halliburton Loophole' information....
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BOB - I KNEW that I had this safely held somewhere...sometimes it takes me a 'BIT' to find these things again...but I DID find it & now YOU'LL have this!!! GOOD!
Do you have a lease being held by a shallow well - Go Marcellus &am...
Go to 'Reply by Robert W. Sandera on January 22, 2013 @ 11:36pm...EXCELLENT!!! Glad I found it 4U!!
As one light lights another, nor grows less - so nobleness enkindles nobleness. ENDEAVOR! (SUCCESS!!!)
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Joy of Fracking - YouTube ...enjoy(?)....very, very good, Bob.
As one light lights another, nor grows less - so nobleness enkindles nobleness. ENDEAVOR.
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Rumored fair behavior by a Crawford County HBP holder...
I've recently heard a rumor that one of the old time Crawford HBP holders voluntarily abandoned, plugged, and released some vertical wells and associated infrastructure. There might even be public record in the DEP to support this. If true, this would constitute surprisingly fair behavior and a small piece of evidence that the "Crawford HBP Cartel" I've previously hypothesized in this thread may actually on occasion treat Crawford landowners more gently than the "controlled market" that one of them touted to investors. I remain open to further evidence to support this new trend of fairness (or even just a benevolent cartel:-). I continue to look forward eagerly to overwhelming proof that I've been under the influence of a conspiracy theory, and in the meantime, I'll put such companies on my short list of those I'd discuss leasing with...
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Bob, if I may ask...where in Crawford Co. are you?
Do you happen to know Ray Schnieder?...from what I recall/remember - I believe that HE was instrumental in getting PA's 'water pipes'...something like that, ALL 'STANDARDIZED'...so that if something happened to a pipe somewhere, you wouldn't have to 'get the same diameter pipe' to MATCH UP for any repairs. They would ALL be 'interchangeable' with what Ray did with his H2O 'INDUSTRY STANDARD'.
I believe at one time, he was in Conneaut Lake area?...
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I had mentioned it somewhere sometime back that THIS would be good 'SOP' (Standard Operating Procedure) for the G/O industry as WELL...time does tell.
You KNOW that the pipelines are NOT 'mapped' as to WHERE they lay IN/throughout PA, don't you? From all I've heard - no one knows where all of PA's G/O pipelines go...INTERESTING....
As one light lights another, nor grows less - so nobleness enkindles nobleness.
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GG,
No, I don't know Ray Schneider. We might have crossed paths in my youth in Linesville in the 60's, but I have no memory for that detail and age. Sounds like he's an engineer I'd respect, though. I've done some standards work myself. My interest is now in the Conneaut Lake area, and there are a few friends from my youth still around there.
As to the Pipelines, it's my understanding that even the big, well surveyed lines are rendered obsolete by the sheer volume from Horizontal wells, so precisely where they are is of interest only to scrap metal dealers and individual landowners who may hope to someday re-use them to get gas to their houses.
The whole free gas thing is interesting, isn't it? The industry seems to be saying that "pressures and risks are so high that we can no longer include free gas in our leases". On the other hand, I've trusted my next breath to a regulator that goes from 3K PSI to ambient, works reliably under salt water, and costs less than a C-Note. Has anybody actually negotiated, drilled, and used free gas from a horizontal well? If so, please share it with us to use as a negotiating lever.
I've also had the thought that the whole free gas infrastructure thing could be solved electronically. I'd readily accept a lease that provided a "payment card" account filled monthly with an allotment of gas(oline) or discount at my driller's partner's stations. Let's put that in our target fair lease!
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Sound like an interesting proposition...but if YOU were the G/O Co. - what would your thoughts be THEN?...'free gas'... there are x2 products removed from wells:
*Nat'l Gas - Heating & Industrial Activity
*Petroleum - Transportation system (Professor Tony Ingraffea - Cornell Fracking Hell: The Untold Story - YouTube)...
You know whose opinion I would be interested in hearing on the FRACKING water situation...Jared L. Cohon, PRESIDENT Biography - Carnegie Mellon University | CMU. HIS forte' is 'Hydro Engineering'...THAT would be intriguing to me.
Anyway - if you don't ask, you don't get, right?...Ask away!!!
As one light lights another, nor grows less - so nobleness enkindles nobleness.
Like that word, "TARGET"...focus on the target. Bullseye.
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Interesting thought...know how CX Energy/HalCON in Mercer Co. went 'belly-up' leaving many landowners 'dazed & confused'?...and in many cases 'tied up' with leases they signed...BAD! EVIL!!!
Pray that DOESN'T happen in Crawford!...Anyway, I have a theory on the 'strategy' of the 'G/O consortium' concerning this 'FIASCO'.
WHAT is 'unique' about Mercer/Butler area...HINT: both Crawford & Butler Co. have 'bodies' that are results of them...LAKES!
*Conneaut Lake - largest natural freshwater lake in Pa.
*Morraine - result of ICE AGE GLACIER that has deposited 'decay' that has turned into G/O...and there are MORE LAYERS than had previously been assumed. ***THIS is 'KEY'!
I learned from discussions with various individuals (I talk to everybody - if you can't guess...ha-ha)...that there was one well site in Mercer that as they are going down...they are SURPRISED the DEEPER they go...that there are MANY layers/levels/POCKETS that they just didn't know were even there.
***How do you like THEM apples?...pretty tasty info., eh?...
THAT brought my thoughts to ***WHY*** did the 'landowner group' debaucle/slaughter HAPPEN in Mercer in the way that it did?...I think (and may be dead wrong...) that they want to 'bring a fear factor' to the area so that they can keep LAND LEASES ***LOW$$$*** because I believe that there is going to be an EXPLOSION here G/O wise...& they don't want to PAY TOO MUCH/acre.
I may be way off...but it just didn't 'sit right' in my mind when I learned what happened to individuals in Mercer Co.
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NOW (try to 'follow me' here...), what does Conneaut Lake have that is similar to that area in Mercer?...Conneaut Lake is a very, VERY DEEP lake...what? - around 160', but I believe 180' deep is more correct. Did I hear that they found a 'wooly mammoth' at the bottom of the lake (and have seen some 5-6' muskies, too!) as WELL as when the Cochran School was being built...ANOTHER *Wooly Mammoth...or am I way off key here?
ANYWAY...I think that THIS particular area is a HOTBED that they really need to get 'tied up' on the CHEAP before the 'cat is out of the bag'...but, like I said, I could be totally wrong. BUT it is all too 'strange', don't YOU find it to 'sound strange'? I don't know how much research you've put in to this...doesn't matter. I just know that in learning/knowing industries somewhat loosely, more than anything... I DO 'go by my GUT' pretty well (as well as research play as well...)...but as YOU know - you can RESEARCH until you've 'blue in the face'.... When 'push comes to shove' there's ALWAYS a bit of a 'gamble' - and THAT is the FUN part!
I'll never forget picking up a couple hundred shared or so of Netscape on Friday afternoon...I just had this 'gut' on it. Monday - announced 'take over'...COMS - rolled at the PALM play. Good. Lycos - remember that one? that one I DIDN'T 'roll...had 1,200 shares busted x40 pts. in one swing, but thought it was going higher (for takeout...)...it was one of those 'maybe yes/probably...lower probability of 'no' - lost that, but got out with my shirt. Liked 'defense stocks' after 911, but they didn't play out the way I thought. Nano-technology...now looking around at this '3-D Printing'...and the G/O, the healthcare...like a myriad of potential interests (gotta' keep your 'iron in the fire', eh? lettin' too much of my own cat outta the bag/shaket.
...anyway - it's all in a little smarts/know-how put together of information + GUT(S)...
NOT antsy on anything for now...but concerning THIS G/O Mercer/Crawford Co...just have a 'gut' on it.
Only time (and God, ultimately) KNOWS...but it sure is a fun ride! As one light lights abother, nor grows less - so nobleness enkindles nobleness.
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NOW that I've shared new concepts concerning 'moraine'/ice sheet (Ice House Bay...) thoughts...what do YOU think of this 'line of potential thought'?... mull it over.
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GG,
What I think of this lopt is that you need some real work to wrestle with. Why don't you go through all the leases, clauses, and discussions we've referenced here and pick out "fairest clauses" in each area, put them together, and post them as a straw man fair lease? I've been trying to get that task to the top of my stack for months, and will now have to defer it til next winter. I think us landowners will have to build it, since the attorneys all want to keep it proprietary and the LOGs won't even do it for their members.
On the investment stuff, I'd bet Bitcoin will outperform 3-D printers, and it's easier to invest and trade.
I'm also going to try to wordsmith a "monopoly penalty" paragraph, where if the lessee is part of a "group" that controls more than 33% of the land in the county of the lease, there's a penalty added to the bonus and royalty. That should wake up the atty's, shouldn't it?
Or we could just (re)post the EMLO/Hess lease and let the forum tweak it up...
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It's funny you mention 'bitcoins' - that was the next 'joke' I was going to play...getting paid 'but, by BITCOIN'...yoo-ho! Here we go!!
***Not a bad idea - Titusville the first successfully drilled Oil Well...Crawford Co. LANDOWNER Assoc. - first G/O lease to receive Bitcoin Payment...OR you could PRINT Bitcoins WITH the 3-D printers! Ha-Ha! Wouldn't THAT take the cake? I'm just foolin'.
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I think that the 'basic format' of any G/O lease would be a 'fine base' & potentially a certain amount of wording. Don't make TOO MUCH 'work' for yourself...KISS it - Keep It Simple, Schweethart. Just 'tweak'. Don't unnecessarily 'beat yourself up' - if/when you don't have to. Be Wise.
When you say 'go through all the leases here'...there are no leases listed here...just some 'options' of addendum's to perhaps have placed in. (unless I'm missin' something)....
Stuck In The Middle With You - Stealers Wheel - YouTube As one light lights another, nor grows less - so nobleness enkindles nobleness.
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Yes, leases have only been referenced here, and not very much of that. If one were to actually be posted to a thread like this, I wonder how long it would last before somebody got it pulled because it violates "their" proprietary interests? If I could be assured that posting a copy of any lease wouldn't get me some unpleasant legal action, I'd do it frequently. If I ever get around to splicing together an "original", I may post that, but perhaps after I invest all the work to do that, I'll choose to keep it proprietary to my LOG:-) Are there any experts (sldouglass?) who would care to comment on the risks of posting lease copies here? As y'all probably know by now, I'm not a lawyer, and the only thing I want to do with one is when my LOG's recommended lawyer hands me a recommended lease.
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