How we renegotiated our lease

Our story may not apply to anyone else but it might be of interest.

We signed 6 years ago, a typical lease for that time at $10/acre/year.  Our neighbor signed with the same company, and got a vertical Marcellus well, with typically low production--they were just exploring at that time.  The driller permitted additional wells, including one under our property, so I expected to see some activity, or, that they would unitize our lease with our neighbor to hold our lease.

But, the lease expired without anything happening.  Even before the expiration, we had a second company contact us, asking us to sign with them.  We were negotiating with them, when we received a phone call from the first lessee, saying they had mistakenly allowed our lease to expire, and would we, please, consider re-signing with them.  Our attorney asked for the terms that other people were getting, and they agreed with no problem.  The terms included a competitive bonus and royalty, and two other things more important--a non-surface lease, and the guarantee that all our acreage will be in the unit.  We're happy, and drilling has started for our unit.

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Permalink Reply by TFP on December 3, 2012 at 2:08pm

May I ask where?   The county is fine if you dont what to say the town.

Permalink Reply by Gary on December 3, 2012 at 3:21pm

It sounds like you are in a great position..however..not many people are in your position..what companies are you dealing with? Who had your first lease and who were you dealing with?..Really sounds to good to be true in this land grab situation ...please give us the details...Thx

Permalink Reply by Willi West on December 4, 2012 at 1:58am

I'm going to withhold further details other than SW Pa.  While I appreciate the various detailed posts that others have supplied, I'm in a unique situation that does not apply to most members.

Permalink Reply by Jim Litwinowicz on December 4, 2012 at 2:55am

You got very lucky in that the company let the lease expire. Few people will have the same set of circumstances. Congratulations on your good fortune! Nice to see people win one.

I have had several people ask me "My lease expires in xxx months....should I call the company and start negotiating?" The answer is absolutely not! Keep as quiet as possible and hope the lease expires. If you contact them, they will try to do something that will extend the lease like apply for a permit, send out a surveyor and stick a few flags in the ground, or cut in a roadway. Many leases do not define "commencement of operations" and the lease can be extended by just about any activity.

Wait until the lease expires, maybe even a couple of weeks. Then send a letter asking for a release of lease to be recorded at the courthouse. Best to have a qualified attorney handle it.

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