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 daniel cohen on February 4, 2011 at 11:38am

Very interesting Paul,

Does this mean that if a vertical shaft was drilled, but no lateral to your land done, that the production unit  has not been reasonably explored? Or, if the unit itself has not been able to get the product(gas) to market because of a lack of infrastructure (pipes connecting to a major pipeline) that it is still to be considered 'non-producing'?

Thanks for any insights along these lines.

Dan

Permalink Reply by paul d. clouser, esquire on February 6, 2011 at 11:18am
Dan, my read is that the company must be doing something with the land under lease -- probably not enough for the company to have drilled a vertical off the premises.  It is not clear whether the lease at issue was a surface lease or a subsurface lease.  Either way, the company needs to establish that actual production (or at a minimum exploration) has begun on the leased premises.  Even then, the landowner may have a reasonable argument that the lease has expired, and that "delay rental" payments or other vague "hold over" language may not be used to hold the land beyond the primary term.  I suspect that lots of folks could benefit from this case!  P
Permalink Reply by Sam Douglass on February 9, 2011 at 4:49pm
The Superior Court case [if it withstands appeal] is hardly a panacea for every Lessor who does not see the money rolling in.  Ask for a copy and read it and see what you think.
Permalink Reply by Robin Jackson on February 9, 2011 at 4:37pm

I spoke directly to Andarko folks and they told me my Grandmother had no choice in her lease extension ..That all Anadarko had to do was cut her check. She doesn't even have to cash it to warrant her lease extension. Nothing has been done to the property as we are the owners of the  property. They called her and even tried to get her down$ 10 pr. acre but they didn't offer anything add'l pr. acre. Sounds fishy to me..

 

Seismic Testing is going to occur in the spring..

Permalink Reply by Sam Douglass on February 9, 2011 at 4:52pm
It does sound a little fishy.  Get as many facts as you can muster and go see a lawyer with some O&G experience.  Generally, money is not spent on seismic until say a year before the action starts.
Permalink Reply by Robin Jackson on February 25, 2011 at 5:40pm
Our Seismic person told us that a general Seismic test was performed years ago..that they have their "ideas" already..Now it is just more detailed..We were told they'd be there last Tues but we got hit with that storm. They called me and said they were told to 'go west" for a few wks. and they'll be back..I'm thinking I need to get a lawyer but we really can't afford one..I will do my best. UGH
Permalink Reply by Sam Douglass on February 26, 2011 at 12:49pm

You cannot afford not going to a knowledgeable lawyer.  

Often the lawyer will spend a little time with you at an initial meeting without charge to see if he wants to take the case.  At the same time you get to size him up.  The rules of the bar require the layer to have ann engagement letter before the charges start.  That letter will explain the fees etc. and you will be asked to sign a copy to complete the engagement.  The lawyer may be able to work out an arrangement that meets your needs.  

Be careful of cntingent fees where the lawyer takes a percentage of what you get in the future.  Sometimes the percentage may be excessive, but people sign them because it does not involve immediate cost.  The best deal, if you can swing it is to go with an hourly rate.  If the lawyer is willing to take a contingency fee, s/he has determined it is a pretty sure thing that you are going to get money - maybe lots of it.

 

It is possible that you have already signed a lease or other document already giving to Andarko the rights it needs - and the additional money is a king of a good will payment for your time and trouble.  At least some companies do this because theyare interested in maintaining good will.

 

But it is also possible that the company really needs something so it can proceed.

 

Good luck!

Permalink Reply by bill h on February 26, 2011 at 2:27pm

Many of the early boilerplate leases had an extension clause stating that the land could be held an additional five years, just by making a second bonus payment.  If it's in there it should be pretty obvious. 

 

If there's any drilling activity within a mile to the NNW  or SSE of you you, there's a high probability that you are, or will soon be, included in a unit.  Look on the bright side, if you've got a lot of land in the unit, you'll make a lot of money even with a boilerplate lease.

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