Any barginning power when you have shallow wells under lease?

So if you have old shallow wells (low producing, but still producing), do you have any bargining power with respect to per acre/bonus/royalties?  If a Marcellus is planned on your property, are you stuck with the 12.5% royalty that was the standard for many years? 

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Permalink Reply by philip Hobbs on October 19, 2010 at 11:04pm
What county are you ?... i signed with range and got 17.5 and 2350 per ac.
Permalink Reply by Jim Pollock on October 20, 2010 at 3:28am
I have recently signed a lease for horizontal drilling with a maximum unit size of 640 acres. All the land around me was leased and drilled for shallow wells years ago. I know that the land owners around me will be bound by their old leases but won't they have to sign something new to allow for the 640 acre drilling units? The old units were only 40 acres. Will they have any bargaining power to maybe get their royalties raised or possibly some bonus money?
Permalink Reply by Little Cougar on November 14, 2010 at 6:07am
Hi...I am new here and this is my first query and reply. I have more then 100 acres in Greene and Washington Cty, PA that has an existing well with a lease dated from 1927. The energy company that holds that existing well lease has been after me to sign a modified lease because of the new horizontal well drilling practices and yet tell me that the old lease applies. If the old lease applies, why are they coming after me for a modified lease and offering 1927 bonus payments upfront bonus and rental payments? If the old lease applies, why don't they just go do what they need to do and when the well starts producing pay me my royalties per that old 1927 lease? The gas company, not the landman, told me that the new well is approximately 6000 ft from my existing well and they use one pad and drill spider legs out from this pad for several wells. Also...my existing well suddenly stopped paying royalties last July because of salt water in well...this tells me they are drilling close by and damaged my existing well and need my acrerage for their pool. Gas company never notified me about the royalty payments stopping but I kept calling and finally after weeks they called but it was the leasing dept. The royalty department did too and that is how I found out about the salt water in the well and I told them that is only because of them drilling with this new fracking that would cause that. I do have an attorney who supposedly is good with this kind of thing and I know the landman contacted him...but attorney is not returning my calls. However, since the landman talked to the attorney I have heard nothing. I am so frustrated...have done my homework...and wonder what game the gas company is playing? Also...tend to have a bad feeling about lawyers too...sort of like car salesman...they are all sharks! So any info you can offer would be greatly appreciate. I am not greedy but am tired of being threatened and tired of the scare tactics they use...and I say they have broken the old lease by not paying any royalties because that well is not producing. Its been almost six months since they have paid anything. These gas companies came into Greene County 100 years ago and raped those farmers and they are trying to rape us again. They stand to make billions and billions long term...so I think I must remember this in negotiating. I am not a greedy kind of person but think its time the scale tips a little to the little guys side. So please...someone out there that has gone through this...what do you make of this? Little Cougar
Permalink Reply by Frank Walker on November 14, 2010 at 10:52am
You urgently need to locate another lawyer . . the right lawyer. Put some effort into the search. You will be handsomely rewarded. You must locate, speak with, and understand the explanations of a lawyer you feel you can trust. It's true some lawyers are skunks. But there are good lawyers out there, too. Most important, do not sign anything until a lawyer you trust and respect has explained it to you thoroughly . . to your satisfaction.

Your acreage, if it's in prime Marcellus territory as well it might be, is worth a fortune. This is a serious matter, both for you personally and for your kids and/or heirs as well. Work hard to find the right lawyer. And good luck!
Permalink Reply by Little Cougar on November 14, 2010 at 12:35pm
Thank you Mr. Walker.

Its been a little over a week since the attorney talked to the landman so maybe I am being a little impatient. I am just eager to know what the attorney and the landman discussed and I know I am not the attorney's only client. The day the landman called again and before he called my attorney I asked him many questions which he answered and even admitted I definitely had done my homework. He knows I will do nothing until I have a good attorney draw up an addendum to my liking before I will negotiate. But I just have this feeling that EQT is playing a waiting game with that old well too...I just keep telling them if the old lease still applies then why the Heck are they after me to sign a modified lease which to me is the same thing as a new lease. If they want to modify the old one...then they have opened the door for me to modify it too. And if that drilling pad is only 6000 ft away from my existing well...it tells me I might be smack dab in the middle of one of those spider legs they keep telling me about. I will definitely go shopping for another attorney if he doesn't respond this week...I am not desperate and know that I am right in the middle of the mother lode in Greene County. My mother and I have several wells in another part of Greene Cty that EQT uses to store gas...just waiting for them to come after that land too. I hate big corporations...I have worked for them all my life and know the games they play...and this little cougar is not going to be worked over like they did my grandfather. I think my grandfather is looking out for me now...so I'm going to go with that gut feeling. I am not unreasonable but do know one thing for sure...those acres I have are valuable...because they already have pipeline to take the gas to market and that existing well produced gas for almost 100 years...and I know there is mucho gas in those hills of Greene County...such a beautiful little place.

And BTW...I recognize some of EQT's leasing department project leaders names on this forum...so you just never know who might be advising you...an attorney is definitely the only way I will go.

Thanks again for responding...

Little Cougar (J)
Permalink Reply by Ron Fowler on November 15, 2010 at 2:32am
Lots of good advice here. We are dealing with the same situation as you and with the same company, EQT here is WV. We have met with two of their reps., both contractor employes of Honor Resources. Not to get into details here, but they wanted us to sign a lease modification that pretty much wrote out things in the old lease that benefited us and wrote in a lot that benefited them. We sent them away with no agreement. The first landman did tell us that about 50% of the people he contacts signs EQT's modifications the first visit. I went to the county court house soon after to see what is being put on record, and it appears that is probably true. I have spoken with some people in the gas business that I trust about this. And they tell me EQT is going after the easy pickings, the aged, uneducated, greedy, etc. I think the best advice I have been given is, "If you don't understand what you are being asked to sign, then don't sign". Although we are captive to EQT, and it sounds like you are also, they are the most undesireable gas company to deal with, in my opinion. When their land man threatened that if we didn't sign their lease they would just go around us, implying they would take our gas whether we sign or not, I got in contact with all my neighbors and gave them a heads up on what was going on.
Permalink Reply by Little Cougar on November 15, 2010 at 6:02pm
So Ron...EQT think we are village idiots and they threaten to go around us? Seems to me eventually they will have to deal because the will come full circle and other companies eventually will gobble them up. If I read the law correctly they can't take what is not theirs's legally to take. And I have enough money and backing to beat them at their game. EQT has been chasing me for the last 2 years and EQT seemed eager to talk to my attorney and my attorney told me to tell EQT that the addendum he was preparing was like the many dozens and dozens they have already seen. They came after me...I am not stupid...and I am not signing any modified lease that is beneficial only to EQT....and the lease they presented me is based on the 1927 lease with the modification for them to pool/unitization paragraph plus shut in rights and the expiration is beneficial to them; not me and my heirs...they theaten to go go around me and say they hate for me to lose out...its a scare tactic...no lease is non negotiable and since they want to modify the lease, we are going to use 2010 language and toss out that old 1920's language. If they want to play in this game...they need to play fair. They want to become one of the big players...so they may have to spend some money to make those billions. Also when I mentioned to their people at theadquarters that there was a two fold problem here, they started to respond when I said I had legal counsel...and if they don't respond about the current lease by end of next week, we are going to insist on auditing their books. Something is fishy and my intuition tells me to be patient because they will be back and in a better mood to talk. Like I said, I am not greedy but I am not going to give it away because of their threats too. I realize the royalty is the name of the game and upfront bonus/rental payments are great but its the royalty I am interested in....and I will be damned if they are getting away with a 12.5 royalty. I just don't understand why my attorney has not updated me about his conversation with the landman...either he is negotiating or waiting to see what EQT's counter offer is going to be. But if does not call by Thursday of this week, I am going shopping for a hungry attorney that wants to make some money honestly and do what is best for me. Because if the attorney is smart, I will keep him on with a retainer and send him more clients...time is on my side. 2011 is going to be the year.
Permalink Reply by Bryan D. Huwar on November 16, 2010 at 5:20pm
I apologize if some of this has already been stated, but I'm jumping in midstream. Anyway, I can think of a couple of ways you might have leverage with EQT in negotiating a modification, granted you likely will not have the same leverage you otherwise would if you had no lease at all. First, if EQT has new leases all around you then they really can't go around you in a way they can with a smaller parcel, so they need you if they're going to drill a Marcellus well. With a smaller parcel they could drill up to your property line and capture the gas that migrates off of your shale - which could very well be all of it. With your 100 acres there will be some gas migration, however, probably not enough to make a huge dent into your pool. Second, which pretty much piggy-backs on the first, and as Jim touched upon, if there's no unitization language in your lease then EQT needs you to sign a modification that contains a unitization clause so they can put you into a bigger pool. Of course you should try and get the best bonus payment and royalties that you can, but I would really try to also get at least payment of royalties without any deductions for costs, service fees, et cetera and vertical and horizontal Pugh clauses (and maybe even require them to put - and keep - all of your acreage in the unit so that you maximize your royalty payments). The other leverage you have is obvious, in fact, you said it yourself, you're sitting on an awesome gas field. EQT will likely be willing to give you more than you think because they know your 100 acres are going to make a killing for them. With a great gas field, like you said, you really want to focus on the royalties. . . . . .Oh yeah, and attorneys are better than car salesmen - at least used car salesmen anyway!
Permalink Reply by robert durr on January 28, 2011 at 2:38pm
im wondering if this was settled. my mom is in a similar situation in that eqt came to her last year sometime  and ask if she would sign a lease. only 1 problem my mom had sign a lease with chesapeake in 2009 even though eqt had claimed she could have not done this since they claimed they had a storage lease since 1920. my mom and i was wondering since they say they owe my mom $8000 FROM BACK payments  if my mom cashed those checks how will that effect the other lease and can they come back and get the bonus she was paid from chesapeake. im not sure and it seems the attorney we had checked with really didnt seem to know what he was talking about and my mom and i really cant afford to hire another one at this present moment
Permalink Reply by Little Cougar on January 29, 2011 at 1:43pm

Hi Robert...whatever you do, get an attorney...don't let them scare you. My attorney finally decided that he thought the landmen representing EQT were trying to tie up all the old leases for either EQT or themselves using the same language as used in the 1920's with no real benefit to the mineral right owners and then flip them to the big energy companies for thousands and thousands of dollars.  He told me not to sign anything and advised that the price per acre and royalty was much higher then most I see mentioned on this sight.  He said I was sitting on a major play (the new buzz words).  These landmen will tell you anything to get you to sign those leases...and none of it to your advantage.  So to bring you all up to date, after my attorney talked to the landman representing EQT, I didn't hear anymore from the landman, and we suddenly got a piddlin little royalty check from EQT from the existing 1927 well...just enough to hold by production. Nothing will convince me that EQT is on the up and up.  They were playing with my Mom and I have even more disdain for these sob's. My attorney said they will be back...they were just hoping they were dealing with the uninformed and some little old lady who would be grateful for their generosity of less then 100 per acre and 12.5 % royalty.  Well I have my Mom's power of attorney and I am not buying into their bull.  And I did my homework in conjunction with retaining a good attorney.  The attorney said my land is very valuable and before I sign anything...to contact him or another attorney who specializes in o&g leasing.  Its a jungle out there and these o&g's are not here to make you rich or even do what is best for you.  And now the damn politicians in PA are not even going to help their constituents...the o&g's have them in their back pocket.  So hold tight and don't let any landman from EQT scare you.  My attorney didn't charge me a dime for his advice...but you best believe I will use him when those landmen come back and are serious this time.  Time is on my side...and your's too. You can afford an attorney...you have something very valuable...and it is worth finding a way to pay an attorney.  A good attorney will not take your money for some good common advice.  And only pay by the hour.  Good luck and be smart!

Permalink Reply by Stephen Fox on November 17, 2010 at 11:31am
You may want to contact Malessa Robb, who is an attourney with Smith Butz in Cannonsburg PA. She did an excellent job representing my sister and I in Green county with Atlas and Monongalia county with EQT. Her phone number is 724-745-5121. You may use my name as a referral if you would like.
Steve Fox
Permalink Reply by PI on October 20, 2010 at 5:24am
mike,

You may be able to answer this. Shallow gas was leased. Have received no royalty payment for the past 9+ years. Does this break the lease?

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