HELP- new renewal Range Resource lease offered

We are due for lease renewal NEXT MAY not the current one coming up. 

Our property lies mostly in Beaver County (near airport). 

Went to a meeting maybe a month ago. Range offered all of us $3500/acre signing bonus and 17% royalty. They said they are offering us more than last lease so they could sign us up early as they are attempting to show a pipeline company that they have all the leases so that the pipeline company will put the infrastructure in place.

The kicker is they will only pay the signing bonus spread over the 5 year timeframe (1/5 a year) do to he fact of them being land rich and cash poor right now- can't sell gas till infrastructure in place to transport. ALSO if they drill at year 2 you would not receive the 1/5 of your signing bonus PLUS the royalty, you would only be guaranteed your royalty with a guarantee of $100,000 paid to you within that year. So if I was supposed to receive a $100,000 (1/5 of signing bonus) that year plus $20,000 in royalty for a total of 120,000 that year I would only be paid $100,000! So essentially they would short me for that year alone the $20,000 of signing bonus!  ALOT of us were up in arms but they said they have a ton of people signed so if we don't agree then they will essentially drill around us and not renew a lease...mind you we have well over 100 acres.

The other thing that has happened is Range Resources has contacted a ton of attorneys in the area and Range will be paying them $50 acre to get the paperwork done so now the landowner will not have to pay out of pocket. They presented it as if they were doing everyone a favor! This includes the lawyer many of us used in years past who we really trusted! Can you say CONFLICT OF INTEREST!?

Not sure how to handle this...Range has essentially gotten rid of all the competition since they have virtually all the land locked up.

THOUGHTS?

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Permalink Reply by Philip Brutz on April 13, 2015 at 1:59pm

What happens if Range goes bankrupt?

Permalink Reply by A. Betz on April 13, 2015 at 2:01pm

yes , something my sister said when she heard what they were offering..

Permalink Reply by Paul Butler on April 13, 2015 at 2:44pm

Bob Dylan called it-----you pay for this, but they give you that!

Remember: don't follow leaders, watch the parking meters!

Permalink Reply by Jason on April 13, 2015 at 3:02pm
Sounds like you and your neighbors better stick tight and negotiate as a group on this one. You don't want to be left out. But if enough of you 100 acre landowners were to hold out, you'd have leverage.

A friend from work told me today that Range was wanting to re-lease 18 months early. And the ET Rover doesn't need Range's leasehold position. It's already moving along. How is Consol doing with moving the gas around the airport?

I receive the notices from PA Dep and nothing new has been moving for eastern Hanover Twp. I still hear 2017 as the year they begin drilling here.

Best of luck to you.
Permalink Reply by Todd on April 13, 2015 at 4:35pm
Jason and Terri,
I would imagine that the pipeline company Range is referring to is Mark West in order to feed their Fox Complex natural gas processing plant. However, you drill the wells first then the pipelines are constructed later. Most likely, Range is trying to live up to its contractual obligations to Mark West to feed that facility.
Permalink Reply by Mtneer on April 13, 2015 at 4:52pm
If you get enough of your neighbors with contiguous acreage, depending on your locale, other o&g producers may be interested. Similar groups with expiring Range leases have been approached by other companies. Remember, this a long term negotiation in which you have a valid position @ the table. Good luck.
Permalink Reply by Philip Thackray on April 13, 2015 at 11:36pm

Terri,

The all-paid-up-front bonus is a great thing but what Range is proposing is the way it used to be.  In your case, for a five year lease, paying 1/5 of the agreed to bonus per year with the bonus payments ending when production and royalties begin.

Looks like Range is getting rid of all the lawyer competition as well!

Phil

Permalink Reply by Frank Walker on April 14, 2015 at 12:42am

From a tax standpoint, receiving a spread-out bonus is not such a terrible thing.  However, I would want lease carefully to specify what happens if future bonus payments are not made timely!!!

You will know whether Range is serious, or merely blowing smoke, if they refuse to agree to severely punitive outcomes for themselves should future promised payments not be made when and as promised.  And their agreement to such outcomes in writing is all that matters.  What they say, or promise verbally, is worthless.

Permalink Reply by Brad on April 14, 2015 at 2:39am
Terri, If Range drills in year 2 of your lease there is a very good possibly you might not receive nothing at all for years.Unless something is put in your lease to protect you from that.
Permalink Reply by Robert Allingham on April 14, 2015 at 5:18am

It really seems like Range has hired up all the local attorneys to  deprive you of getting local representation for review of their proposal. Hopefully you can band together with your neighbors and stand firm on what all of you are willing to accept. Also, I wonder if they are trying to lock you up this early in order to keep competition at bay? I smell fish and would tread carefully until more information can be found. This is a heck of a situation to have to make a decision over and I wish you the best of luck.

Permalink Reply by Donna on April 15, 2015 at 4:38am

Range let our lease expire - they said they had no money in the budget to renew it.  And yet they are renewing leases every day that still have a lot of time left on them - sigh.  They pretty much figured out a way to capture a lot of land without paying anything.  In our case, they've re-signed just about everyone surrounding us, so I guess they feel safe enough that no other company would be interested to come in and lease our 100+ acres.  A friend signed a lease with a five-year payout, but no guarantee of anything being paid to her if production work was started.  The landman told her there were no plans to drill on her property for at least four or five years.  She received the first year's payment, then they started work on her unit the second year and she received nothing more until the royalty payments started in what would have been year 4 of her lease.

Permalink Reply by Gary on April 15, 2015 at 6:30am

I don't think they will get to you in 2 yrs (my opinion for what thats worth)..they have a lot of leases in southern Beaver county that need to be held in the next 3 yrs or so (south of the river)... Taxes are brutal if you get it all at once..I had them spread it over 2 yrs..Taxes worked out a little better...at least the positive is they are wanting to lease...3500 is one of the highest numbers I've heard of outside of Washington county for RRC...also have heard they gave some folks 18%...Craig should know more about your area hopefully he will read this....Good luck.

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