Is a 10 year lease too long?
We live in Jefferson county PA.
Eight years ago was the first time anyone was interesterd in the gas under our land. We entered into a 5 year lease for the shellow gas. There was no talk about Marcellus Shale Gas at that time. In the 5 years that passed only 2 wells were drilled close to my land they did not pan out as planed. So all drilling stoped. After that lease expirded we was asked by a different drilling Co. to lease our land again. We opted to only lease it for 3 years. Again no wells were drilled on our land or on adjoning land.
We now have been asked to lease our land for the next 10 years with a one time lump sum payment, but this time they want the rights for oil, gas and coal bed methane by any means.
My question is;
Is 10 years to long for a lease?
Views: 2785
Replies to This Discussion
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Permalink Reply by Monty on
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Property in Clarion County is leasing for $3500 an acre for a 10 year lease.
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Permalink Reply by Buddy on
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What about an old lease that a gas company is sitting on? Do you think that an attorney would be able to get these leases surrendered? I know for a fact that one of the wells on a two well lease has a rotten pipeline so it is hardly producing in paying quantities. This is hard to fight because the wells are not metered and the leases are rentals.
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Permalink Reply by Marty Wittstrom on
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If your question is what to do about an old lease with marginal production, it sort of depends on your objective. If you just want more revenue from the existing wells, then you can pester the operator about the condition of the well, leaks etc., and how it is causing you to lose revenue. If they poo-poo you then tell them that you're going to call the State and get an oil and gas inspector out there. They will want to take remedial action on their own rather than address a laundry list of items that a state inspector might dictate, so some pestering on your part may pay off. It sounds like these old wells are producing from depleted shallow formations or formations that never produced much in the first place though. At any rate, there's not much they can do to get more out of an old well when there isn't much there in the first place though; plus a contract is a contract, so you're kinda stuck as long as the wells are economic.
If your objective is to get out of the lease, or force the company to renegotiate a new one, there are couple of things that you can do. The first is to demand documentation proving that the wells are producing in economic quantities. I believe the burden of proof is on them, not you. If one or more wells are producing economically, that is probably enough to hold the lease, but if no economic well exists there should be a clause in the lease indicating the lease is then surrendered. The lease probably has a clause about paying rentals in the case of shut-in production to keep the lease in effect, but this clause does not protect the lease if a shut-in well wouldn't economic if it were returned to production. If you like making a pest of yourself you might get all this done without a lawyer, but its always best to get professional help, especially if there is a lot of land tied up in the lease.
If new wells are being drilled nearby, whether in shallow formations or in the deeper Marcellus, you can file a mineral owner demand. In such a demand you request that the company drill a well(s) on your land because you believe nearby production is draining oil and gas from your land and as a result you are suffering economic loss. Should they refuse, the demand requests the court render a decision validating the drainage and to to nullify the lease. This sort of thing involves lawyers and professional witnesses if you take it to court. But the company may wish to stay out of court and thus act in your favor simply as a result of filing the demand, so there's nothing to prevent you from just having a lawyer send them a letter to scare them a bit.
Companies in PA, WV and NY, particularly ones chasing the Marcellus, are sitting on a lot of old leases. They will operate uneconomic wells just to keep a lease in effect because it is cheaper to do than pay for a new lease, especially with bonus prices having been driven up by the Marcellus play. Companies have limited budgets, so they spend their money acquiring and drilling and new leases before the Marcellus acreage is all leased up. Where an old lease is held by production, they'll come back to that lease in due time to drill a deeper Marcellus well, or sooner if new drilling in the area indicates the old lease has great Marcellus potential . It makes perfect economic sense to the company and you would do the same thing, but if you're the one suffering a delay in economic benefit because of their actions, then you will have a different opinion on the matter and have ways to take action.
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Permalink Reply by Buddy on
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This answer was extremely helpful and will give me something to work on. What I want is for the lease to be surrendered and the wells plugged, as they should have been years ago, but you have also given me some other ideas to think about.
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Permalink Reply by DP on
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If a person does their research they will find that it will take about 25 years for the Marcellus formation to be fully develpoped and in production. It is unreasonable to expect eveyone can lease right now and have wells producing without limitations in 5 years. There just are not enough rigs and gas lines available. So unless you are in a hot spot, or area where a company is ready to drill and ants your acreage to add to their unit, you are probably not in a postion to demand a big bonus payment or short term. If you are in a fringe area and cant wait for them to come to you, you may need to consider a 10 year lease.
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Permalink Reply by David Spencer on
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I believe that 10 years is way too long. We're in the process of negotiating leases on 5 properties. We are looking at a drilling commitment within 1 to 2 years, on a 5 year lease payout above $3000. That lease should only include the Marcellus Shell. You should look at a separate lease for the levels above the Marcellus which would include any old wells that may be out of or under-producing. The levels below the Marcellus should be held for the future. Who knows when they may find another "Marcellus" down their in the future.
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Permalink Reply by Buddy on
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I agree about only leasing the Marcellus gas. The shallow well leases that are old or under production are tied up in my case, and laws protect these old leases. You wouldn't believe the loopholes given to the gas companies to keep the old leases! For example, what is the definition of "paying quantities" of gas to keep the lease? Those are the leases I would like to get surrendered but I heard the gas company is looking to sell. Of course, since these leases are old to begin with, the gas company leased all gas back in the 20's and CAN sell my Marcellus gas too. These are mineral rights we inherited from the family that were changed to rental leases way back. VERY HARD to fight. Does anyone know a GOOD gas lawyer?
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Permalink Reply by Monty on
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You only want to sign a lease for the Marcellus Shale, 4000-8000 ft. The Utica Shale which is below the Marcellus is rumored to have more gas than the Marcellus. They have drilled two wells in the Utica Shale.
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Permalink Reply by 0l1a6laz7smpf on
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Utica Shale?/ just learned that from Monty above....I am trying to keep up with what the marcellus is doing....now a new shale to learn of...hmmm.
As far as a good 'gas lawyer' ...I just contacted one. I will let you know if that works out well when the pipeline contract is completed.
Thanks everyone for participating in these forums and I am glad to be a new member here!
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Permalink Reply by Monty on
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From the research I have done, they are leasing the Utica Shale in Michigan for $5500 an acre. There are also 2 more shale formations that we have been researching.
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Permalink Reply by Tom F on
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WOW!!! What a lot of good information can be gleaned from all of the responses. There are things I never considered. My family has not been contacted at this date with any serious offers but time will tell. In the meantime I will continue to monitor this web site for additional ideas that could/should be incorporated into a lease agreement. I have had some ideas before but as of today I will begin a Word Document noting all the issues that I think are relevent to the lease process. There are several items I have found in the responses in this discussion.
Tom F.
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Permalink Reply by William Ladd on
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FOR GOODNESS SAKES DO NOT LEASE FOR MORE THEN 5 YEARS AT MOST.
Folks cannot see into the future even for a year, let alone 10 years. How do you think the economy gotinto such a mess? The common people are never made aware of what is coming down the road by their leaders.
Bill L.
aka Bummy
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