New here on GMS

New to this site and new to marcellus shale and gas. Bought my property in Jan. 2010. 3.45 acres on Ridge Rd. Middlebury Twp. in Tioga County. Retained lease and OGM's from previous owner. Very large well pad put in 1/4 mile away back in 2011. Chappell well site. 1 well has been fracked thus far. Researched and found out my property is not in the unit. Missed it by about 200 yards to the east. Just recieved a letter from Shell Appalachia SWEPI that lease is eligible for renewal and that they remain interested in this area for oil/gas development and hereby offer to renew our lease for 5/10 years at $300 per net acre as a bonus consideration for a paid up primary term renewal lease, and 1/8th roayaly on all gas and oil produced.  

Knowing that the "boom" has come and gone and hearing that land owners were being offered up to $3k per acre a couple of years ago, my question is, should I accept this offer, thinking that something is better than nothing, or tell them to go pound sand? If I decide not to accept their offer, should I call them and tell them so, or just keep quiet and wait for another offer? I got the letter 2 weeks ago. Is there a time limit to respond?

Thanks in advance for any answers to my questions. As I stated, this is all new to my wife and I. I'm sure I will have many more questions later on.

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Permalink Reply by David Perotto on August 26, 2013 at 11:06am

Hi David,

Welcome to this site, you will find it very informative. Did you read through the initial lease? It should have renewel terms listed in that original agreement.

Permalink Reply by David.M.Fackleman on August 26, 2013 at 12:03pm

This is what I have found in a copy of the initial lease Dave. #34 of the addendum..."No Option to Extend/right of First Refusal: The Leasee shall be granted no option to extend this lease upon like terms; instead the Leasee shall have a right of first refusal to meet any legitimate lease offers made within six months of the termination of this lease". Initial lease was $2,300 per acre plus 15% royalty.

Permalink Reply by David Perotto on August 26, 2013 at 12:47pm

Based upon that, don't re-sign for $300 per acre. You can re-lease with another company or force Shell to pay a higher amount. If you re-negotiate a new lease, be careful of what strata is included in the lease. Remember that you have the Burkett, Marcellus, Utica & Trenton Black River all possessing potential. Good luck.

Permalink Reply by David.M.Fackleman on August 29, 2013 at 5:20am

Thanks Dave. One question for you....what do you mean by "strata"? I'm calling Ron Kline next week to discuss possibly increasing his offer of $300 per acre. Not sure if that will go anywhere. I'm pretty sure that Shell has all the leases locked up in my area with virtually no competition, therefor offering the low $ ammount per acre. Sort of a "take it or leave it" approach. I just might have to take it...and leave it...for 5 years. I'm also going to tell him I would like a non-surface lease.

Permalink Reply by gary SWF on August 29, 2013 at 6:22am

David, All IMHO you need an Oil and Gas Attornry to represent you ASAP. It should/could be the best money you ever spent The Utica is a strata.......there can be several stratas that they can harvest(remove oi and gas) from in certain Counties. If you are thinking as leasing the Utica strata, you need to say "Utica strata only" and depth allowed ie: between "7000 and 7300 feet ONLY"  .......David, this is only one of many areas a O&G attorney should help you with....there are just to many to list on here. DO NOT use the Oil/Gas company's lease.  Get your own lease perpared by your attorny, please....ALL IMHO.....Gary

Permalink Reply by David.M.Fackleman on August 29, 2013 at 7:59am

Never ever dealt with any type of attorney. What would fees be for an oil/gas attorney?

Permalink Reply by gary SWF on August 29, 2013 at 8:10am

Not at all sure.....maybe a few $100 per hour call around and inquire. Talk to your knowledgeable neighbors....I'll bet one one them can help you. Good Luck................

Permalink Reply by Craig Cooper on August 29, 2013 at 6:27am
I'm pretty sure Dave was referring to (geologic) formation names when he wrote 'strata'. In many instances a mineral owner can parse or segregate leases vertically or per depth / formation.

Best to talk to an attorney experienced in O&G leasing.
Permalink Reply by Kathleen on August 29, 2013 at 11:26am
Hi David,

Of course the thought of paying an attorney is troublesome, since there's no guarantee of money for you and your wife, but here's something to consider.
If this attorney, for the cost of let's say $300-400 (I believe it would be lower) can get you no other changes, except net to gross percentage, it would be worth every dime, times ten.
Do some reading on this site by using the search box above in the right hand corner, on Net verses Gross royalty percentage.
People are reporting losing 50%, 60% of their royalty payments from the gas co., on Net leases. Some news reports have mineral owners only getting 2% to 4% of their royalties after deductions taken by the oil/gas co., since they had a Net lease.
A recent news report stated, the way the laws are written in PA chesapeak is finding ways to take even more deductions out of people's royalty payments.
If an attorney can also get you a strata release, lease, in time you could get another bonus and lease for a different area below your land that the oil and gas co., wants to drill into.
When asking for a non surface lease remember this usually will reduce your bonus or royalty more. There are laws that say all pipes, drill operations and such need to be so far away from a house and well. An attorney would know those laws in your area and know if your property already is covered by laws in place.
This lease you might sign could be forever and anything that's forever needs to have someone knowledge making sure it was written to your benefit as much as possible.
When looking for an attorney take a minute and make 100% sure they really know about this area of business, since many attorney's not qualified in this field are passing themselves off as knowledgable for a quick buck. Ask neighbors who they used and if they were happy.
Remember the oil and gas co., has more than one high priced attorney looking out for their benefit so you should at least have a knowledgable attorney too.
Good luck to you and your wife.
Permalink Reply by Janice L. Hancharick on August 30, 2013 at 5:39am

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