Remove free gas clause from lease agreement at a flat dollar amount

Has anyone else been contacted by Chesapeake about removing the " free gas" clause from your lease agreement at a flat cost ?????

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Permalink Reply by Rick on August 21, 2015 at 7:52pm

No Frank, but you can definitely smell it... no mistaking it..

Permalink Reply by Booger on August 24, 2015 at 9:13am

In the event any well is drilled upon the leased premises or any portion thereof, and the lessor is the owner of the surface where the well is located, lessee shall pay annually to lessor in lieu of any right to free gas a sum equal to the value of the first three hundred fifty thousand (350,000) cubic feet of natural gas produced from each such well, up to a maximum of four (4) wells. Said amount shall be paid in quarterly installments, with the value based upon the prior twelve (12) months average price received by lessee for gas sold from the leased premises, as of January 1 of each calendar year in which the payments are made.

Permalink Reply by Janice L. Hancharick on August 24, 2015 at 3:51pm

This type of language in a lease was fairly standard even 8 yrs. ago ... at least in what I would call a solid group lease.  Individuals seldom rec'd such addenda, but Booger has spelled it out correctly here.

I wonder how many are getting this type of compensation now.

Permalink Reply by Booger on August 27, 2015 at 2:22pm

this is straight from a current CHK lease........and yes, it is a solid group lease.

Permalink Reply by Joe Bezel on August 27, 2015 at 4:07pm

That is pretty much my language too.  It is a nice little chunk of change that comes in regularly, regardless of how much or how little the well produces.

Permalink Reply by Rick on September 12, 2015 at 6:40pm

So 350,000 cubic ft would be what .. about $350 to $400 per year? Or do they calculate the price after transportation, and other deductions which would give you about what..  a buck and a half per year? Don't be fooled.. keep the free gas clause.. get the proper equipment, and use it!

Permalink Reply by Booger on September 14, 2015 at 9:39am

 "the value based upon the prior twelve (12) months average price received by lessee for gas sold from the leased premises" .........multiply by 4 wells.......even at one well, it would be hard to use as much free gas as what they would pay you for.

free gas is nice (I have had it at two previous residences)......but I would rather have the money in lieu of.

Permalink Reply by Rick on September 14, 2015 at 4:54pm

Good luck with that Booger... some land owners are having a hard time getting mofre than a few dimes per mcf..., average that for 12 months and it is still a few dimes... my advice is never give up the free gas clause.. even if you dont use it, it is worth more than they will pay you for it.. one option  would be to repace the equal amount of free BTU's with oil, propane, or electricity

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