Continuing lease fee for tank battery

Has anyone negotiated a continuing land rental fee as part of a surface use agreement for a drilling pad? I know that there is the issue of potential royalties for successful wells, but everyone in the unit will share in those. Land owners get a monthly fee for cell towers on their land. How about a rental fee for all that is left behind after the well is put in production? Just wondering.

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Permalink Reply by Keith A Williams on June 21, 2013 at 12:40pm

Kathi,

Many old leases allowed the landowner of the pad/well free gas. Many newer leases provide a payment in lieu of that free gas. Mine signed in 2011 with CHK did.

This yearly payment would in part offset the costs that the landowner of the pad would incur.

Keith

Permalink Reply by Kathi Albertson on June 21, 2013 at 2:58pm
Keith,

You make a good point about the payment in lieu of free gas. However, is that not available to all in the unit if they know to negotiate for it? From what I've been told by those with a pad, the after tax well pad fee hardly pays for all the disruption for however long. And then your heirs are stuck with all the tanks and what ever else goes with them. I'm just trying to think long term.
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 22, 2013 at 4:01am

Your heirs will not mind the tanks when they're getting huge royalty money, I suspect.

Permalink Reply by Kathi Albertson on June 23, 2013 at 7:45am
Marcus,

I can appreciate the fact that heirs might be getting royalty money, but so will the heirs of everyone else in the unit.

Having two existing Clinton wells on the property, we have well tenders driving though the field on a weekly basis. We also have the issue of the smell of gas and the presence of unsightly storage tanks that need to be painted.

My point is that land owners who get well pads that benefit many land owners should get some ongoing financial benefit, such as a land rental fee for a situation that will continue for many years. I think the spud fee only covers the current inconvenience, if even that.

Keith's point about the free gas voucher is a good point that I hope others will try to include in their negotiations.
Permalink Reply by Keith A Williams on June 22, 2013 at 9:02am

Kathi,

       "However, is that not available to all in the unit if they know to negotiate for it?"

In our lease, only the owner of the property that the pad is located on, gets that payment.

You should think long term! This is forever! Or at least the next 50 years.

Keith

Permalink Reply by Mark Dolezal on June 23, 2013 at 12:20pm

Kathi,

I would much rather have a monthly/yearly ground lease for any pad/equipment on my property.Landowners would be paid monthly or annually for as long as pad/tanks remain, or the lease is null and void. If Ohioans had thought enough to demand that 35-40 years ago they would not be fighting the battles today with producers that leave the equipment on site and try to claim production. I am happyy to hear that others are thinking about a ground lease. Good Post !

Permalink Reply by Teri on June 30, 2013 at 3:33pm

This is a very good point to make.  Continuing compensation should be required to the landowner bearing the burden of the pad site.  There is no guarantee of royalty payments, only a guarantee that you are losing the use of several acres for a very long time.  Not to mention the huge time and money drain to ensure the actual lease is followed by the developers. 

Permalink Reply by Mark Dolezal on July 1, 2013 at 12:00am

Landowners will need to demand this in their lease in the future. Lets hear from some attorneys on GMS .

 

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