Seven Families in Beaver County Fighting Chesapeake Energy - Named In Suit Filed By McRoberts Family

http://www.wtae.com/team4/30774631/detail.html

BEAVER COUNTY, Pa. -- Seven families are  fighting to stop a natural gas company's last-minute drilling plans on their  land before the company's lease expires next month.

The McRoberts family woke up Tuesday morning to find tree-cutters lined  up along their property in Darlington, Beaver County, getting ready to clear a  quarter-mile path to a proposed gas well site.

"Four generations of McRoberts have farmed this land, and we pay the  taxes and they're going to tell us what they're going to do? And they lied from  the beginning," said property owner Susan McRoberts.

When Channel 4 Action News' Jim Parsons went to the McRoberts' property,  the tree-cutters left without cutting any branches.

"Chesapeake (Energy) doesn't even have a permit to drill this well, and  yet they want to come in here and cut these folks' trees down without any  compensation," said McRoberts family attorney Steve Townsend.

Townsend filed a lawsuit Tuesday against O & G Investment of Ohio,  which signed gas leases with the McRoberts and six other families in 2005.

O & G sold those leases last year to Chesapeake Energy, which is also  named in the suit.

The suit accuses O & G of "intentionally and fraudulently  misrepresenting to the plaintiffs that (it) would reasonably develop the mineral  resources underlying their land."

"They promised these people the world and didn't pay a dime, and took  their land and held it hostage for years," said Townsend.

With the leases set to expire next month, the McRoberts are trying to  stop Chesapeake from conducting a last-minute drilling operation.

"It's too late, too late. Listen Jim, I couldn't rent a car for $200 a  month and not pay for it. They've had thousands of acres of land here that  they've not paid one cent for and they've held it seven to 10 years and haven't  paid anybody any money," said Townsend.

Chesapeake Energy has not commented.

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Permalink Reply by Finnbear on April 20, 2012 at 4:42am

Verbal promises mean NOTHING. If it isn't on paper and signed, it isn't real. Until the check is deposited in your account and clears, it isn't yours. Many of those farmers in MI spent the money before they got it - a very dumb idea.

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 20, 2012 at 9:06am

not jesting...  Finnbear...I sure could have used having you as a friend back in 2008..so could my dad.   He did the negotiations over the telephone, hard of hearing as well...I was figuring out how to use a computer and didn't even know how to open the atttachments of the contracts when they sent them...

It was such a lack of knowledge and dealing with about 4 landagents from 4 different companies over 4 months...very confusing and dad was near dying.

So there was a lot of respect for the land agents ..and unfortunately that was't wise.   You see it is that most want to relate land agents to used car salesmen..and it was our first time to greet a landagent over the telephone and we were treating them with respect as they represented huge conglomerate oil companies and it was that we felt that the oil companies would prefer to view their people that represent them as professionals such as when a dental company calls upon a dentist office most dentists would want to know about the new technologies and how much the new equipment is and would respect such a salesman...I would think that is the same with drug companies, scientific products, people that sell to NASA.....related to their front person as being 'professional and knowledgeable'....not thinking of them as a 'used car salesman?" and for 'buyer beware' written in big letters.  I don't think that the doctor that greets the drug salesman to view the new products on the market with Pfsizer is having to tell his office admin.  to make sure that they read every dot and line cause those drug salesmen are like scumbags and carpet baggers...  I don't think most professional businesses could get much done if they had to hire an attorney for every purchase or contract presented and had to consider that the people that they purchase their occupational equipment from will not be around to clarify the equipment and comfort them on the decision they made.

No, most people from the marcellus area believed these land agents...so when the land agent kept telling dad that he could really figure out all of this over time and just renew easily the contract in five years...why wouldn't we believe him? and others like him also believed that...and some didn't have money to hire a prof. gas/oil lawyer and didn't even know any.....it was til many of those early leases were done that others realized that it was worse than dealing with a used car salesman in their trust....yet I tell you there are some used car salespeople that are more honest and decent to deal with then what was sent from the major oil players in the Marcellus to obtain signed gas leases with the rural folk.

There is something wrong with a large corporation that wants great respect in the communities they work in but they will hire a bunch of what some call 'scumbags' or 'worse than a used car salesman".......and then when people complain that the oil company was not professionally represented by 'professional land agents'  then those with the oil company will say, well, you signed it, can't you read before you sign anything? Why are you trusting our land agents verbally?..don't you know that verbal promises mean nothing?.....as if that just solves the entire problem and the oil company got away with using less than scrupulous  tactics and cleverly placed the blame on the lessors who innocently trusted in their 'much less than professional landagent'.

I have to say if a person purchases a house via telephone with a real estate agent...and does all the contract over the telephone and fax and email.    The house was verbally explained that it was 3 bedroom and 2 bath and pictures were sent of each room in the house and outside....   Yet when the contract was consummated and the new owner arrived at their new house they find that the 3rd bedroom was fully open to the kitchen and the closet was the kitchen pantry.   Yet when the pictures were taken they didn't show that from that angle and the contract didn't list 3 bedrooms 2 bath just the legal description.   Do you think that the verbal about the house being 3 bedroom will matter that it really isn't?   You see some think that just because it is said verbally it shouldn't matter...but indeed it mattered to the new buyer who now does not have a 3rd bedroom but a larger kitchen instead.   So I guess the son will sleep on the couch in the living room til the lawyer figures out if the agent should be responsible for verbally making promises that were not true or correct for the application.

Jim ShoosPermalink Reply by Jim Shoos on April 20, 2012 at 9:35am

USA, you sound just like the whiners that invested with Bernie Madoff when they found out that they got ripped off.  Didn't your parents or teachers ever teach you the life lesson that "when it sounds to good to be true, it probably isn't"???  I'll guarantee you a return of 20% per year on your money...really???  Up markets, down markets... always give me 20%, sign me up, notwithstanding the fact that not even the highest rated mutual funds have come anywhere close to yielding those types of returns on investments!!! 

It never occurred to you or your Dad that it made absolutely no sense whatsoever that you would be able to "renew the contract in five years"... you both thought that they were paying you bonus money and never intended to drill on the property so that you could repeat the whole process five years later???

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 20, 2012 at 10:06am

No , the agent said when we were discussing the clauses about extension, shut in, delay, etc. that we really didn't need to be concerned to understand those clauses fully cause if there was no production as in a well installed producing royalties then we could just renew the contract at the end of five years and another bonus payout could be negotiated then.   He heavily relied on the end of the primary term as being a time of a payout again for dad.   He was believeable...and it was a lot money for dad for the bonus...but I didn't get much of that and inherited a contract that automatically extends even without a well producing paying quantities.   There should have been a thorough disclosure of the contract clauses in relationship to the primary term being fully finalized or not at the end of the primary lease term....and yes there should have been a lawyer.   Not a whiner...just realistically realizing that these gas leases were written to do as you say, "Didn't your parents or teachers ever teach you the life lesson that "when it sounds to good to be true, it probably isn't"??? 

It actually would have been best to record the contract negotiations and explanations.  It's easy for others to say, why didn't you read it?   why didn't you understand?    For example when I asked to remove the $5.00 delay rental amount and put exactly the amount that was given for a paid up lease...I was told that it didn't matter and that the amount of the bonus money would not be written in the contract but on a seperate page (of course I wasn't informed that the seperate page about the bonus would have no reference to the contract or be recorded in the public records).   So if the oil company wanted to pay the delay rental fee as if it was the paid in full amount...there was that $5 per acre per year just sitting there but no reference to the actual bonus amount.   These are the examples of why some here feel that the land agents should be required to disclose more and also verbal statements to steer someone from the truth (which is what happened) should be under scrutiny not only by the state but by the oil companies that hire such people.   yet in that land agent book someone in Ohio found...they found that the training manual taught that the landagent was to steer a person from knowing that the contract clauses could extend the contract...

http://archive.org/stream/TalkingPointsForSellingOilAndGasLeaseRigh...

I believe that was the type of training manual that our land agent used...cause he followed the items on it when steering the conversation where he wanted it.

 

especially this one....item #6 on that list:

6. Lease Life - Our leases are for 5 years with small plots of land or 3 years with an option to renew for 2 years on larger land tracts. If the landowner has brought the lease to an attorney they may know that if the well continues to produce that the lease is extended for the lifetime of the well, which can be as high as 40 years. Do not deny if pressed on this issue. This extension does not require their approval. If we have an active well then it is within our legal right to continue development until we turn it off Stress the 5 year lease unless absolutely pushed on the details.

 

you can see that they knew that if no attorney was being utilized then if they kept stressing the 5 year term then most would not know about all the other ways to extend the lease.  Now if you consider this good business tactics for profit...I am sorry, I don't agree.   I think it is a 'fancy' way of cheating.

or look at this tactic in their manual...and oh I believe that manual exists...

1 1. Lease Term - This is another area of concern that you can alleviate with the right wording. The lease is for 5 years. Sometimes landowners will read the lease before signing and realize that the lease renews automatically if any oil/gas are produced from the well. Do not stress this point. Just state that the lease is for 5 years. They don't need to know, or discover through discussions with us, that the lease can extend indefinitely with no further permission from the landowner.
1 2. Get the lease signed!

 

Let me state that again...Jim....does this sound to you like a 'honest way of doing business?"

They don't need to know, or discover through discussions with us, that the lease can extend indefinitely with no further permission from the landowner.

 

I think the GOOD LORD managed to have that land agent drop his book for someone that is honest to find.   And more and more people are finding out about it...and more and more people realize that is why the agent kept 'steering' the conversation from the questions on the clauses and focused on only a five year term with another bonus payout if no production.

Permalink Reply by Betty on April 20, 2012 at 11:47am

Sadly, I've read too many accounts similar to yours.   i.e. a book entitled  The End of Country (author Seamus McGraw?) which makes a sincere attempt to be objective.   Do I think the land men/gas companies should be more honest in their disclosures --YES.  Absolutely!   Many landowners have been dealt a raw deal by unscrupulous land men/gas companies over the years.  Ever read about the carpetbaggers in post-civil war history?  This ain't nothing new.   Unfortunately that is the cost of doing business.   And sometimes it feels like a very high price.  At least now we have the opportunity to educate ourselves and make better choices when future opportunities arise.

Permalink Reply by Finnbear on April 20, 2012 at 12:00pm

The production of oil/gas is what extends ANY lease indefinitely. That is the standard of the oil and gas industry. That is what is known as HBP or Held by Production. The producer has the right to extend the lease as long as there is profit coming from the well. When it costs more to maintain the well than it produces in revenue, the lease will generally be forfeited and the well plugged or sold to the landowner for domestic use because it makes good business sense. You think anyone would spend millions to drill a well if they would have to re-lease after 5 years just to keep producing the well they had already invested so heavily in to drill and put into production? I fail to see what is dishonest about holding a lease by production.


1 1. Lease Term - This is another area of concern that you can alleviate with the right wording. The lease is for 5 years. Sometimes landowners will read the lease before signing and realize that the lease renews automatically if any oil/gas are produced from the well. Do not stress this point. Just state that the lease is for 5 years. They don't need to know, or discover through discussions with us, that the lease can extend indefinitely with no further permission from the landowner.
1 2. Get the lease signed!

 

Let me state that again...Jim....does this sound to you like a 'honest way of doing business?"

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 20, 2012 at 1:11pm

Finnbear,

"I fail to see what is dishonest about holding a lease by production."

When one has a lease that can hold about 1100acres in a unit and the well is NON PRODUCING...that is when it isn't fair and it is dishonest.  And to put in a market enhancement clause on a gross royalty contract holding the Lessor entirely responsible to pay ALL the costs of an unknown amount which they refer to as 'enhancement costs'...knowing that most all their contracts say 'partial costs of enhancement' between Lessor and Lessee which we all know that is a fancy way of making a gross royalty into a net royalty.

http://gomarcellusshale.com/forum/topics/extension-of-term-clause

 

to purposely blame the local area owners that they are not negotiable for a pipeline and then put the units together with ONE vertical well non-producing and then leave the area to go put in pipelines and other drill pads in other counties...is frankly because they got the leases for very little and they quickly put in a min. drill pad to secure the unit and purposely offered very little low ball pipeline contracts in the area so they could use the excuse that they couldn't get the pipelines in because the landowners were soooo unreasonable...so they could use their monies elsewhere...meanwhile they seek to extend the lease and who knows when the pipelines will ever be in place for production.  

 these drill sites were done over two years ago and the leases already have been flipped.   They know what they are doing...and I am glad to read that some are admitting that there are some landagents that did a disservice to perhaps many....then we go forward and no whining...when we as landowners start taking up the slack for those that got cheated and start voicing with those landowners that the oil companies need to clean up the messes.  For they have the cabability to spend the monies outside of litigation and just hand over a new payment for extension of lease rather than the stance 'I am right and you are wrong'....some people were cheated because they did expect professional guidance in disclosure by the land agents.  

I ask how many of you love your neighbor enough to stand against the oil company when they are asking for you to lease and state, 'you clean up that awful mess of a contract you gave my neighbor and then we can talk business'....I doubt there are but a handful that would care enough to state that.   Yet some held out to learn more because they heard of the mistakes of their neighbors and now they are sitting pretty...but meanwhile their neighbors were cheated by the same company that some lift up cause they got a good deal. 

Permalink Reply by Finnbear on April 20, 2012 at 2:10pm

Some landowners have been holding the oil and gas companies accountable for decades. This is not a new concept. I can show you 4 neighboring farms who leased over 60 years ago with the same company in the same year and none of them have the same lease terms. One of those landowners signed the 1 page company lease as presented by the oil and gas co. . One of those landowners has an addendum that is just over 2 pages long that was obviously prepared by an attorney.  One lease has about a 3/4 page addendum that was probably prepared by an attorney. The last has a number of changes made right on the face of the company lease. One of these landowners blindly signed the first thing that was presented to him. The others all put varying amounts of thought and care into their deals. Oil and gas leases are potentially lifetime+ business contracts that encumber your real property and should never be entered into lightly. Signing any long-term contract without understanding every word of it is negligent, foolish, and asking to be abused. No matter how much I love my neighbor, it is not my place (nor is it legal) to insert myself after-the-fact into a deal he willingly made with an oil and gas company to try and change the terms he agreed to.

2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on April 21, 2012 at 3:46am

Hindsight is always 20/20!

Back in '06 I signed with Great Lakes for 50.00/acre and was thrilled to get new carpet in the house. Wasn't long til Range bought them out. Then along comes East Resources in '10. They are paying my neighbors 1500.00/acre.....WOW.....'11 arrives and Shell buys East and now other neighbors are getting 3000/acre!!!

Thankfully , Range let my lease expire and Shell picked me up for 3000/acre. Happier ending for me. (bonuswise)

BUT , had Range drilled I would have been just as happy with the REAL MONEY called ROYALTIES (albeit 12.5%)

Sure , bonus and even royalty % has increased in the last few years , but isn't the ultimate goal to be drilled and receive a steady income from royalties? Or am I just nuts? Just another case of Lessor's Remorse.

The way I see it , there must be something of value beneath this farm or CHK wouldn't be trying to hold on to it. These landowners should just honor the agreement they signed on to and enjoy the forthcoming lemonade (royalties). They should be glad to be getting drilled , for crying out loud! How many of us have been waiting for this opportunity and here you have people crying because it has arrived at their door!

ROYALTIES TRUMP BONUS any day!

Permalink Reply by Justmeinpa on April 21, 2012 at 4:04am

Exactly Glenn!  And from what I heard, they ticked the gas co. off and lost a well (or a few) because of it.

Also, I've had family members actually brag to me about getting double what we received in sign on bonus money.  The reality is we're collecting royalties and I've made their extra sign on bonus money time and time again (but I won't tell them that, none of their business).  Royalties do trump bonus.  :-)

0l1a6laz7smpfPermalink Reply by 0l1a6laz7smpf on April 21, 2012 at 5:55am

good message Glenn......but,

Thankfully , Range let my lease expire

it would have been a different story entirely if you found that your lease did not expire and no production for years to come with no royalties and nothing you could do about it cause of some cleverly stated one sided lease clauses that were not easily understood until you were better educated about the process.

I am glad for you that you have royalties coming in...some do not and some cannot do a thing about it though at the signing they were told that they could.  I am not upset over other people making a better contract and receiving more monies than my dad did....I am happy for all to have adequate compensation.  In fact that is why I and others here come to this forum at no charge for their labor and share about such with others that possibly will help another landowner or lessor before they make the same mistake.   but i tell you as I read some discussions and people want to blame the lessor that signed a bum contract as being worse than the oil company ??? huh...then I wonder why do I bother to spend my time warning those that are unaware?

'but isn't the ultimate goal to be drilled and receive a steady income from royalties'

that is what everyone is expecting with these leases...but if one is in a producing area and a well is placed just to hold the unit and no sign of pipelines or production for many years since the well was put in (and the well is capable of production)...then it is the lease contract clauses that is holding a lease which should be let go so that individual lessor can renegotiate with another company who is willing to produce rather than hold the lease while they take their monies elsewhere to do it again somewhere else.   glenn, they could hold these leases indefinitely with one vertical well with over 1000 acres and not have to produce and pay the owner royalties....unless the owners litigate the contract which some do not know how to ...or have the money to do so.   Why wouldn't these lessors be upset? they want money in royalties like you and others have.....the companies they chose may be different but all said they came to drill and produce...but cleverly left out just when.

I am upset that my dad  was misled and left with even the wrong contract...because these oil companies don't see him or others like him as people they see them as dollar signs in flipping their leases....and look for ways to not pay or have the lessor pay (such as the market enh. clause with Lessor paying ALL enhancement costs which are 'unknown'?)  but for others here to tell the ones who have really been cheated who weren't there to hear the lies, etc....that it is their fault,....???    why not just say we hope that you are able to find representation that will help you as if truly what you say is true then we do hope that you get fair compensation.   

2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on April 21, 2012 at 12:13pm

VG,

Please re-read my post . Where do I say I am receiving royalties?...........Nowhere , because I am not.

Yes , I am thankful for the increased bonus and better contract I got from Shell......BUT I also state I would have been just as happy with the 12.5% royalties from Range IF they had drilled. I have never been the greedy type and accept fully any consequences of my own actions. Shame on me if any have been the result of my own ignorance.

What historical data supports your insistence that these companies are going around tying up land for years by drilling vertical wells when the play isn't even much more than a few years old in the first place? What constitutes "many years"......? Do you mean to tell us that since Range has drilled the first Deep Horizontal Marcellus Well in , what , 2002 or there abouts , No one has yet received any royalties? That the hundreds of wells drilled since just sit idle? The glut of NG that has driven prices into the dirt is the result of hundreds (thousands ?) of multimillion dollar Deep Horizontal Wells drilled to simply tie up land and rip-off the landowner.....? I DON"T THINK SO.

These folks signed a legally binding contract and should be ecstatic that , albeit in the waining weeks of their contract , CHK is finally fulfilling their hoped for action of DRILLING A WELL!!

 

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