Snyder Brothers Marcellus Lease

Has anyone signed a marcullus lease with Synder Brothers? How did you make out? Are they paying the upfront payment fairly quickly ?

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Permalink Reply by Sam Douglass on October 11, 2010 at 3:52pm
Maybe I will get a chance to see the current proposed documentation. It is an understatement to say what I last saw could stand some improvement. And Snyder was not worse than a lot of others on that score. A good lease to compare with is the Wyoming County, PA Chesapeake lease which was posted on the Internet the last time I looked. Some of its clauses like insurance may be overkill. Every company has its own lease prepared with the astute help of company lawyers. They are all different and must be read word for word notwithstanding the usual fine print to keep them "short."

Most lessees are so ashamed of their leases they will not even sign them. Any embarrassing changes are buried in an addendum that the Lessee does not sign and return a copy of to Lessor. Hopefully the addenda will get lost over time. If Snyder does not follow these practices, it is commendable. Range attaches a statement to its leases that Lessor must sign saying about 7 different ways that it is not bound - until it is good and ready if at all.

And all leases have the "do not believe a word I told you" clause near the end of the lease. I doubt of Snyder is an exception. The company cannot be bound by what people say they heard from the landman.
Permalink Reply by Sam Douglass on October 12, 2010 at 4:49pm
Sounds like your doing some things right. Leases and the practice of leasing changes over time, hopefully for the better. I wish that companies basic leases and practices were the same, but they are not - and the devil is in th detail.

You are quite correct that almost all forms from every company are different. Some companies have different forms for different people. I do not disagree that what I call the "do not believe a word I told you clause" [lawyers call it the integration clause] is essential for the Lessee. As to that clause, my quarrel is with the Lessors who want to believe everything they hear [and even dream that they heard]. I recently worked with a party that had 750 acres and was in a strong bargaining position for other reasons and just wanted to believe what he thought he heard and simply did not care about the carefully drafted Lessee's lease. I cannot blame landmen if lessors are foolish. But I do like to remind landowners of the importance of the clause when I have the opportunity and I am hoping some of them are reading our give and take.

Most lessors have no idea of the sophistication of the leases or the reason for some of the clauses. They tend to concentrate on what they think are the money clauses.

I do not own a lot of land, but if I did, I would disclose to my neighbors friends and even enemies the full scope of my deal and most of the details if not all. There is more to be gained from that than being secretive about supposedly special thins I might want. Typically lessors care about different things. They are not the same.

Most landment are hardworking good guys just trying to do their job. They are as honest as policemen, firemen, indian chiefs and lawyers - with some that do not measure up.
Permalink Reply by E Bilgus on October 13, 2010 at 4:01am
Mr Knapp,
Does your lease provide for all or none of the acreage you have be included or can a prospective buyer pick and choose the best properties?

Thanks
Permalink Reply by E Bilgus on October 13, 2010 at 5:30am
Thanks for your honesty.
Permalink Reply by Jerry Fedell on October 15, 2010 at 9:15am
I was contacted by MDS and told that everyone would sign the same lease. Curiously, I have now read four different versions of that lease. The bonus provision has changed several times. It is absolutely not true that there exists a single uniform lease. When I asked to have certain provisions added to protect my surface value, I was told it was not possible. Again, back to the single uniform lease.

The MDS lease provides unfettered use of the surface, including the right to transmission lines. Location approval is meaningless if your property has multiple transmission lines. You need to have both eyes open to this “special marketing lease” as it is. I wasn’t born yesterday, there is no way Snyder Brother’s is signing off on a 15% royalty minus post production costs with a set-off against royalty for road and pipeline payments.

I will warn you that in paragraph 3 (iv) the term can be extended merely by filing a drilling application and the additional 5 year extension is for $1,000.00 per acre per year.

While some leases have a Pugh clause, others do not. It appears that MDS is doing what gas companies do. They attract the landowner with the promise of high bonus payments and give away your royalty.

To Sam's point about sharing information, it pays to be on a friendly basis with your neighbors!
Permalink Reply by Jerry Fedell on October 17, 2010 at 2:44pm
I feel compelled to follow up to your last entry Mr Knapp. Snyder Brothers owns thousands of acres of gas rights to which they are not the surface owners. They are more than happy to market away surface activity on property they don't own and do not live on. Many of these owners not only reside on the property and call it home but the property has been in the family for generations. You say your lease is not for me if I don't want the surface disturbed. Who are you kidding? Your lease allows the gas company to place buildings on the property, compression stations and conditioning stations. There are no, and I repeat NO restrictions on the nature of pipelines. Nor are there restrictions on the number of pipelines. This is not having your property disturbed, this is permitting the drilling company complete and unfettered use of the surface. Ask any one that has a compressor station on their property if they believe it is a “little” disruption. Ask anyone with gas lines crisscrossing their property.

Your response is truly indicative of someone without regard to the surface value of the landowners property. Sure we would like the bonus money but not at the expense of losing the value of our surface and the ability to control its use. Many people who signed a shallow well lease without restricting the broad surface grants such as in your lease will tell you how they have been run over with pipelines, roadways and infrastructure. It is painful having to "approve the location" of the compressor station knowing it will be with you for twenty years. I can imagine companies picking properties just to build infrastructure on it. Mr. Knapp I’m not a lawyer but I can read a contract. I have written and negotiated them for years (albeit not in this industry). You give the company wide use of the property and the company can then deduct funds required to remediate surface damage against royalty. This is what I would expect of a company that owns the gas rights below many landowners properties.

People please understand: Snyder Brothers is a gas company! Sure they call it a little disturbance to your land.

Please tell me how sharing information with neighbors is being obnoxious? Mr. Knapp, trust me on this, if I decide to get obnoxious, it will be apparent to you very quickly. I just wasn't born yesterday.
Permalink Reply by Sam Douglass on October 18, 2010 at 4:33pm
I recently ran across a politician's site [2 sites?] that seems to have some interesting material:

http://www.pahouse.com/PR/039-Leasing_NL.pdf

http://www.docstoc.com/docs/40432945/Oil-anD-GaS-leaSeS

I have nothing for or against the publisher of the site; it's just an interesting site.

You may have to cut and paste the addresses into your URL to get them. I have not read and do not warrant everything that is there but it may be of interest.

I was surprised by the reference to "scrap" attorneys. I have been a lawyer for many years and have never heard the term.

I have some great landmen as friends. It is just not their job to tell everything they know; it is the landman's job to get leases signed on as favorable basis as possible for a particular client. Landmen do their job and lawyers do theirs.

Hopefully, we both try to do our best.

Have you ever asked for the right to audit records to determine if your royalty is correct? Have you ever wondered how complicated it would be to figure out if you are being paid the right amount?
Permalink Reply by Interested Party on October 17, 2010 at 2:59pm
I just went over a lease copy I have in hand from this past summer and then noticed the NEWEST version -- where item #22 was added titled "RENEWAL" that permits the lessee to renew for FIVE ADDITIONAL YEARS for only $1,000 per acre. This pretty much makes the lease a 15 year term now! Shouldn't renewal be at the same price as the original term/sale or at least half based on being a 5 instead of 10 year term? For the sake of argument, if the sale goes at $8,000 per acre, the bonus on 100 acres would be $800,000 minus commissions/ admin fees (15% and up to 5% respectively) for TEN years. Shouldn't the lessee need to renew at $4,000 per acre for a FIVE year term? The new lease does NOT say $1,000 per acre, per year....it only says $1,000 per acre. It also states that the lessee can do this at any time, so they could just merely use two transactions to pay you $9,000 per acre for a 15 year lease vs $8,000 per acre for a 10 year lease as described in my example above.
Permalink Reply by Interested Party on October 18, 2010 at 4:37am
OK. That makes sense. I see the lease on your website is an initial five year term (not ten years like MDS). Assumed both were the same word for word. Thanks.
Permalink Reply by Interested Party on October 18, 2010 at 9:49am
Sounds like the KAP offer is better -- same money for 5 years vs the MDS 10 year deal + if they want five more years, you get $1K more per acre? Am I missing something. Shouldn't everyone interested in the flip lease go through KAP since it is a better deal? Mr. Knapp -- are you leasing in all counties or certain ones?
Permalink Reply by Interested Party on October 18, 2010 at 10:12am
DId MDS add the Pugh Clause (item H) to their addendum like you did? The only other difference I can see is that the MDS lease says payment will be made to the Lessor within 15 days of consummation of the deal provided the lessee has received payment in full from the third party purchaser. I can't find that in your addendum. Thanks.
Permalink Reply by Interested Party on October 19, 2010 at 5:35am
very nice

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