expiring lease

Four and one/half years ago i signed a five year lease. It was a boiler plate lease provided by Range Resources. My only thought process was the bonus payments were 4 times previous lease and it more than paid my property taxes. When I look at it now I realize the lease includes most everything I wouldn't accept now.

My question is about the expiration clause. It states it continues "as gas or oil or their constituents are produced or are capable of being produced on the Premises in paying quantities, in the judgment of lessee, or as the premises shall be operated by the lessee on the search or oil and gas"

As of today, there has been no activity on my farm. What do they need to do in next 6 months to keep me from becoming a "free agent"? The lease does allow them to put my land with another property to make up a unit. How would I know if this was done? If they put 10 of my 300 acres in a unit, does it tie up all the land?

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Permalink Reply by Robin Fehrenbach Scala on January 30, 2011 at 7:17am
Not sure where you are, but is ANYTHING happening within a mile or two of your land? You should be able to easily see or find out whether any permits were issued for any drilling near you.

They have to actually DO something in the next 6 months or you will be free. Sounds like you are almost there!

By the way, is that a straight five year lease or do they have the extension option in it? If they can extend it by paying the same amount before the end of the lease term, then you may not be so free after all.

Good luck, but read that lease carefully. By the way, I am no lawyer, just another landowner looking out for our rights.
Permalink Reply by matthew h mcsparren on January 30, 2011 at 10:10am
if you have a standard range lease read paragraph 19 (the last sentence) make sure it has been deleted. i know of a lot of landowners that did not get that removed.  
Permalink Reply by MJM on January 30, 2011 at 10:32am

You should get a declaration of pooled unit or division order showing your acerage in the pool. Only the pooled land can be held by production, the rest would be released. Do you have a kicker clause that allows Range to extend your lease by paying the bonus again? The gas companies have been drilling/pooling the expiring leases around us, so you may want to search for well plats that are close by.

Good Luck,

Mike

Permalink Reply by Frank Walker on January 30, 2011 at 11:30am

Mike, I don't understand why you wrote what you did.  Are you already aware that the OP has a Pugh clause?  That would explain why you wrote as you did.  I acknowledge you might know jnm personally and have read his/her lease.  Or you might by some other means be aware of jnm's lease details.

 

But for others, absent a Pugh clause, inclusion into a DU of even a single acre of a 300 acre farm can tie up the other 299 acres without any legal problem whatsoever.  Signing a lease having no Pugh clause is akin to standing before a firing squad.

Permalink Reply by MJM on January 31, 2011 at 6:43am

Sorry,

I assumed a pugh clause.

 

My Bad,

Mike

Permalink Reply by Steve Thornton on February 2, 2011 at 5:34am

But what constitutes "production"? In our area of PA they have drilled many wells, formed many  "pools" and have attempted to tie up 100's of thousands of acres under cheap leases. The problem is there are no pipelines built for them to begin production, even if they wanted too.

 

They have built too many pads, drilled too many unfracked wells for them to be called "exploratory" To me it's "exploitive bad faith drilling" just to tie up the land, under the old lease.  Has anyone explored this line of thinking? And tried to cancel out of or renegotiate a lease thats original term has expired?

Permalink Reply by stratton schaeffer on February 3, 2011 at 3:00am

                                                                                                                                                   Steve: Unfortunately you nailed it .The gas industry has exhibited paradoxical behavior: The best and worse of Man's instincts. What you describe is a perfect example of "legal larceny" and greed.

Periodically I write a column (Lefty's Logic) for several of our Northern Tier papers. The column covers a potpourri of subjects jabbing at career politicians,government bureaucrats,global warming, and my own feeble efforts to raise cattle in Tioga County.Self deprecating humor is good for the soul. On December 16th, the column "Robber Barons-past and present" ran in the Canton-Troy paper and will run in several other local  papers soon. As soon as my 12 year old grand daughter teaches me how to attach documents and set up a blog, I'll share gas related columns .It took Ida Tarbell 19 years to get the Sherman Anti Trust Act passed,via President T.R., to curb the abuses of Western Pennsylvania Oil Barons. Hopefully it won't take that long to bring Pennsylvania's antiquated mineral lease laws (lobbyed  into place in Harrisburg by turn of the century coal Barons) up to 20th century standards.In the mean time there is good signs on the horizon.Sen Yaw is introducing several bills that are land owner friendly.Let him know you're rooting for him. Ironically I'm a conservative capitalist but believe William F. Buckley had it right:

"The trouble with Socialism is Socialism-The trouble with Capitalism is a few Capitalists"

More later,

Lefty 

 

 

Permalink Reply by Sam Douglass on February 3, 2011 at 4:48pm
If you follow Senator Yaw's proposals, you may wonder if they are as landowner oriented as they seem.  I am going to watch what happens to them over time.  I suspect it will be interesting.  Like all politicians, he will work to get elected.  The dilemma is that he needs money to do that.
Permalink Reply by stratton schaeffer on February 3, 2011 at 11:34pm

 

Sam: I hear you loud and clear!                                                                                            Now I"m off to Texas to help with family while my # 3 son is deployed to Gitmo. At least he'll have nice weather. San Antonio was colder than the farm last week. Be back in a week .

Permalink Reply by paleface on February 2, 2011 at 6:01am
 You could call recorder of deeds for your county.
Permalink Reply by Sam Douglass on February 2, 2011 at 4:33pm

Do not spend too much energy hoping until the six months is up.  Chances are the Lessee will do something to save the lease into the future.  How about putting together a unit of 1200 or more acres, drilling a couple of wells and moving on?  Do you want to spend the money to go to court to prove the producer is not acting in good faith?  Will the court say, "so what? they are complying with the document?  Some hope may come from a new case decided by the Superior Court on January 4 - if that case withstands an appeal.

 

These companies need reserves to keep operating into the future.  As production rapidly declines from one well, they need to get another one going.  With millions upon millions of acres to drill how long will it take to get them all drilled.   How many rigs are there?  Do the rigs drill one hole a month?

Suppose you have already gone to the expense of developing a drill pad and have a few Marcellus wells that are slowing down.  Its cheaper to drill to different shale formations like the Utica or Upper Devonian [Ohio} shale or even to take a crack at fracturing the Devonian limestone formation -- than moving on to other reserves.  What would you do?  But be sure that the producers are going to find ways to hold onto those reserves they already have under lease.  The reserves are extraordinarily valuable.

Permalink Reply by paul d. clouser, esquire on February 3, 2011 at 11:56am

JMN -- The Pennsylvania Superior Court decided a case several weeks ago, that may be of interest to you.  The gist of the decision is that a company cannot rely upon "delay rental" payments to extend the lease and hold the land, once the primary term has ended, where there has been little to no effort to develop the land for production.  There is essentially a public policy favoring release of the land at the end of the primary term, where reasonable efforts have not been made to explore or develop the tract.  The Court held that delay rental payments are to be used to compensate the landowner for lack of production during the primary term of the lease -- they should not be interpreted in a way that allows the company to hold the land beyond the primary term, when reasonable exploration and developments efforts have not been made.  The question, of course, is what constitutes "reasonable efforts" to explore and develop a particular tract.  However, if the company does nothing in the next several months, I believe you have an argument to make that you are indeed a "free agent."  Hope this helps!  P

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