Small acreage questions

Forward Twp, Butler County

2000/ Acre offered

15%

Landman said wells around me are getting $10 to $30 per acre / per day average.

 

Small time, only 3-4 acres total in two parcels...  Nothing done on the surface, no pipelines... 

 

Landman sent a letter last year, I contacted him last week (he had changed areas, gave me a different person to call). Gave the above offer and said drilling will occur probably mid 2012. I believe it will because most of the neighbors signed 3 years ago for 1000 12.5%, and they have most of the land locked in for 5 years. I appear to be in a corner and can be easily worked around, so I don't want to lose out.

 

Questions...  Should I get a lawyer to look at the lease? I doubt I can get more money upfront, and I doubt I have much negotiating power. The lease states they will have an independent lab test the water before any drilling takes place, and that was my biggest worry. What would it cost roughly to do a once over on the lease?

 

My taxes show I pay for 3 acres total in school taxes, and the landman said they usually go by that. My rough calculations show the total to be closer to 3.4 to 3.7 acres.  What will they do when the lease is finalized?

 

Happy to see the neighbors getting lots of compensation,  and will still enjoy my little share of the pie.

 

larry

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Replies to This Discussion

Permalink Reply by Paul Mannix on June 22, 2011 at 1:33pm

Tina

 

I am an attorney and have reviewed leases and have also drafted leases for land-owners.  My experience is the producers are normally not willing to accept a lease drafted by a land-owner but rather will consider an addendum to the producers lease.  This is especially true with small acreage.  Therefore, you should focus on the issues that are most important to you and, working with an attorney, develop an appropriate addendum and negotiate from there.

 

Permalink Reply by Brian on June 22, 2011 at 2:17pm
I am a landowner not an attorney, but what Paul is saying is correct.
Permalink Reply by Joe Scipione on June 23, 2011 at 1:53pm
As another Attorney, I can vouch for what Paul's saying.  Also, you have to remember that you don't have the strongest bargaining hand with such a small amount of acreage.  You are going to have to have a piece that they want badly for them to deal with you on major changes to your lease terms.  As opposed to the other posters for this, I'm not sure a horizontal Pugh clause really makes a lot of sense for you to push.  We're seeing units between 230 and 640 acres around here in Clearfield County.  The chances that they're going to just clip off 2 acres out of 4 is probably pretty remote.  I'd save my efforts to try to work on water quality issues or a vertical severance (which is sometimes confusingly called a vertical Pugh clause).  Be careful that your attorney is not only knowledgeable about the legal side of the issues but also about what the market will bear.  Having a lawyer write an ironclad lease or addendum is only worth it if the gas company will accept it at the end of the day.
Permalink Reply by Brian on June 23, 2011 at 3:36pm

My Pugh Clause saved me from not having 2 acres of a 4 acre parcel and 1.5 acres of a 7 acre parcel not included in a unit in Westmoreland County, so I beg to differ. 

The gas company will save money any way they can just like any other business.  If they can get out of paying royalties for a few acres here and there, and still hold the acreage by production, that is money in there pocket.

This happened because I was on the outer edge of the unit, like most small parcels will be.  The lateral ended before it hit my property, and they only have to include acreage within 300' or so of the lateral.  I am not sure about the exact distance.

 

I have a productive acreage and depths Pugh clause in my lease.  I didn't use an attorney, but I researched for literally weeks on my own to make sure I had what I wanted.  It can be done, but if you can afford to pay someone else who is knowledgeable in oil/gas leases then go for it. The only thing I am upset about with my lease is that I did not try to keep the shallow rights.  I asked for a lot having such small parcels, and I didn't want to push my luck.  

 

 

Permalink Reply by Tinamarie S on June 24, 2011 at 9:04am

Brian,

 

Like you I also have researched and have put my own lease together but I am feeling uncomfortable that I am missing something.   If you would not mind, would you send some links you researched for your lease?   I could use a little more help.  I did find an attorney who is willing to look at my lease and help but it is still going to cost me some cash.   Thanks

Permalink Reply by Nancy on June 22, 2011 at 1:45pm

RE:  Water

We are in Derry Twp., Pennsylvania where there is a gas well boom!  Rex drilled several (maybe 5) shallow wells in 2008 and Williams is drilling deep wells here now (They have 4 or 5) with many more to come!  All these wells, shallow and deep, are within a mile of homes.  1 shallow well drilled by Rex Energy is judged by DEP to be defective.  That 1 Pre-drill water test that was required before Rex did the shallow wells in 2008 proves zero methane before gas drilling, however, now DEP says that one time test is not enough history to prove zero methane in the area and area residents are having a tough time proving their case because their problems did not start within the 6 months following installation of the shallow gas wells.   I would say... if possible, see what an attorney can do to protect you from this situation.  Get Several Pre-Drill Water Tests...Specifically testing for gases, etc. and request and keep copies of everything!  Homeowners of Derry Twp. depend on well water for their main water supply and now they have methane.  Aerators and methane detectors have been supplied to affected homes by Rex Energy, but city water is over a mile away and there has been no offer to hook up city water by anyone and local officials say there is no money in budgets to help.
Permalink Reply by Jim Litwinowicz on June 23, 2011 at 4:59pm
Tests for methane in water can be very expensive.  Join in with some neighbors and maybe you can get a group rate.  And make sure you use a third party company that maintains a chain of custody of all samples.
Janice Lanphere HancharickPermalink Reply by Janice Lanphere Hancharick on June 22, 2011 at 6:34pm

Larry,

Landmen stories are seldom anything but stories.  Check in with Butler County groups.  I'll bet there's more than one. Find out what's REALLY going on.  3-4 AC isn't a good hand to play, but it's the only one you have.  How can you maximize anything positive w/such sm. AC?  ANSWER: A GROUP.  Keep doing your homework.  Check GMS for landowner groups in your area.  As for a possible right-of-way lease, get a copy of Penn State's pamphlet on the subject.  It's informative and free!

Permalink Reply by Mary and Ed on June 28, 2011 at 10:40pm
we just had 2 of our properties in Forest lake tested..700.00 per house..but if anything should happen they tested for everything....report will be 200 to 500 pages per house...they are putting up 7 wells behind my house..about 30 acres back..plus a pumping station....there are cheaper water test..just have to make sure they are reliable..all of the neighbors went this company because we are all so close...good luck...
Permalink Reply by Sam Douglass on June 28, 2011 at 10:54pm

Small acreage, even 1/4 of and acre can be critical to the producer and maybe to the neighbors if it should block the path of the horizontal drill.  It is hard, even impossible for the driller to jump around unowned parcels.  By frackng, they collect gas maybe for a distance of 250 feet away from the horizontal well.

Big acreage can be worth more or at least be more marketable in some cases and cam make for more efficient use of lawyers etc.  But the little pieces are important - occasionally critical.  That is the reason for getting a law providing for compulsory pooling on the books - so the little guys can not hold up the operation.

If you know everything you do not need lawyer.  Her or his fee should reflect the amount of work, usually on an hourly basis.  If after having the risks explained, the Lessor really does not care what happens on the surface, that is an area the lawyer does not have to spend much time with.  But there are other things like property decriptions, payments, pooling and many other items that might be of concern.  Savings can be achieved with several people working with the same lawyer, assuming that lawyer agrees to consider that in making the charges.  Percentages of the bonus and royalty are not likely to save money for the landowner and are likely to end up with charges much higher than hourly rates.  One must be careful how much he or she pays for the privilege of not having to pay before the cash comes in.

Another problem with percentage fees is that there is an obvious incentive to get the deal done and get paid.  Maybe that is incentive for not waiting for the best deal for the landowner in some instances.  The lawyer has bills to pay and will not want to wait forever.

A group, not necessarily a very large group, can achieve quite a lot working with a lawyer on an hourly basis and sharing the cost.  And you have to figure out a way to find the lawyers who really know something about the subject.  Fortunately more and more lawyers in the area are becoming more knowledgeable.

Some people like to negotiate their own deals and can accomplish quite a bit without joining a group controlled by a few.

 

just some thoughts.

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