Remove free gas clause from lease agreement at a flat dollar amount

Has anyone else been contacted by Chesapeake about removing the " free gas" clause from your lease agreement at a flat cost ?????

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0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on August 18, 2015 at 2:01am

Da Gammie,

       Contact Bruce Buck near Augusta in Carroll County Ohio. When he asked about being paid for the Free Gas that the 2 wells on his property should pay per the lease, he was told "The Price Of Gas has changed so much that we can't calculate what we owe you". That's the kind of "lack of respect" a dairy farmer gets from CHK.

CHK was sending a special Envoy with an addendum for Bruce to sign so they can change his lease. HA!!!

I told Bruce that after CHK sells out, the producer who takes over his lease will more than likely be honest enough to live by the contract CHK signed and pay his annual free gas as required by the lease.

Gammie, it won't be long before a more honest producer owns your lease. You can count on it.

Keep your lease in tact as signed and you'll be better off than if you give away your rights by signing lord knows what.

Permalink Reply by Da Gammie on August 18, 2015 at 8:51am
Thank you for the help !!!
Permalink Reply by Tim Tarr on August 18, 2015 at 2:53am
Be very careful about giving up something like this. Something to consider is in kind payment. If they "can't" give you free gas tell them propane will do. If you have a free gas clause it's probably an old lease paying 1/8 (12.5%) so the another consideration might be higher royalties. Watch their eyes on this last one. Surrender the "shallow" rights!
That free gas clause is valuable to have. Worth more than most think.
Permalink Reply by Frank Walker on August 18, 2015 at 2:25pm

I have no personal experience with this because my lease never had a free gas provision.  However:

A friend living in the general area had such a "free gas" lease with Talisman.  It was an older lease.  Talisman wanted out of the free gas provision and my friend received a visit from a Talisman land man.  In the end Talisman paid my friend $20,000 to eliminate free gas from his lease.  My friend was pleased with this arrangement, found it fair, and he gladly accepted the change to his lease in exchange for $20,000.

Permalink Reply by Joe Bezel on August 18, 2015 at 4:57pm

If you use propane or natural gas to heat your home, add up your bills for the year.  That is what the "free gas" is worth.  It is fairly inexpensive now; it will not always be that way.  Our contract has an upper limit; I forget the exact number but it is about what twice the average homeowner uses in a year.  My father-in-law had this provision from a well drilled back in the 1970's.  He had a gas furnace, range, water heater, etc. and loved it.  This provision is valuable and I would not give it up without getting something of equal or greater value in return. Consider what it is worth not in a year but for decade after decade.  Frank's friend made a nice $20k in the short run, but Talisman made out as that is only about 6 or 7 years worth of gas. It is also a great price booster if you sell your property.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on August 19, 2015 at 1:34am

Joe,

    A relative who owned a farm in WV had free gas and took full advantage of it by having gas heat, stove, H2O heater, refrigerator (ammonia cycle), and a gas freezer.

We once rented a  home with a gas AC from the 80s but it was no longer operable in the 90s with no one to repair it.Those AC could make a comeback with the gas being so plentiful today low prices.

Permalink Reply by Billy Park Whyde on August 19, 2015 at 9:11am

  In some leases the clause is free gas for the primary dwelling. But with the higher pressures of these new wells it is a different game. In the older days hooking up was pretty simple but usual in the clauses it was stated all connections to  be made by the lessor at their own risk.  But here is a twist say you have a 500 acre farm lease it with a nice bonus and decide to turn it into a housing development. Free  gas to you but as the developer you also become the gas utility but not under control as your not interstate . 

Permalink Reply by Janice L. Hancharick on August 19, 2015 at 9:19am

FREE GAS was a fairly standard arrangement in older leases.  In the oldest of leases the free gas was spelled out in rural areas to the tune a landowner gets enough for a stove and 6 lights.  Of course details differed from farmer to farmer.  Those were all conventional wells.

Modern leases should not have a "free gas" clause if the company has any thought of drilling an unconventional well.  Reason: the  force of gas coming out of Marcellus and Utica wells would literally blow up a house!  So what is offered as a substitute?  $$$  Time for some wheelin' and dealin'.  Get everything spelled out to the last detail.  Do the homework.

Landowner groups and their lawyers deal w/this all the time.  And if one moves, what happens to the promised $$?

Permalink Reply by Joe Bezel on August 19, 2015 at 6:18pm

Ron,

Hope you are right.  I'm sure refrigerators, freezers and AC units that run on gas could be a good option with gas as inexpensive as it is.  New technology could make them much more efficient than units bould in the 60's and 70's.

I was told shortly after we signed our lease, back in the early days of the Utica shale development, that we would not actually get a hookup for free gas.  Instead we would get a yearly check for the cash value of the gas at market price.  Given what CHK is selling the gas to its wholly-owned subsidiaries for, it likely will pay enough for me to take the wife out to dinner.  As the pad is built but yet unoccupied with a drilling rig, I don't know how it will work out in practice.  By the way, please keep beating the drum on your experience with the Buck well.  It may annoy some but the majority of us that hate getting ripped off appreciate it.

Permalink Reply by Tim Tarr on August 19, 2015 at 10:20am
Janice,
True but there is a simple solution, not cheep. Any good plumber could explain pressure and flow reduction. Same process they use from those utility gas main lines (high pressure) to the utility Gas in the house (low pressure). Just a question of PRV's (pressure reduction valves) Now wet gas is a different issue. That has a solution too. Just a question of $$$. Cheaper to buy that right and sell the Gas. Than provide that free Gas. Business is business after all.
Permalink Reply by Rick on August 21, 2015 at 9:31am

I've used free gas since 1998... love love love it! I have an old farm house and used to heat it with oil and hated it when oil was a buck/gallon... look how much I saved right there! If they ever drill a horizontal well on my property I will insist on the ability to get the free gas... Don't let them BS you with the pressure is too high or the gas is too hot crap... all pressures can and are safely reduced with a series of pressure regulators!

Permalink Reply by Frank Walker on August 21, 2015 at 10:46am

Rick

Is the gas, which you obtain for free, odorized before it gets near to your home?

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