Soon to be expired lease, but in a new production unit
I have a really important issue occuring now with my lease with East Resources this December. I just recieved a packet in the mail stating and drawing up plans for a new production unit in Tioga County, and my acreage is included. I am hearing rumors that once they dig 150 feet that the lease, expired or not, is solidified. East contacted me recently to renew my lease with new terms, royalties, etc. I am mailing the lease to them this week, hoping they except ($2000 per acre/15%).
My main question is, can East suck oil and gas from under my land, in the unit, with an expired lease ($5 per acre/12.5%)? Does this soon to be expired lease just extend once they drill 150 feet? I can't help but feel like I'm getting screwed somehow, or if this is all just rumors. And to add a cherry on top, they want to lay piping through my land.
PLEASE HELP!!!
KG
** I have 64 total acres, with about 37 acres in the unit, and apparently they are beginning drilling "soon" . . Can they drill under my land without having consent and a lease? Can an expired lease be extended against the owner's agreement if East drills just 150 feet down?
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Replies to This Discussion
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Permalink Reply by Carol on
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I believe that if they dig while your lease is still current and you are included in the unit, that will cause your lease to be HBP (held by production.) I hope, for your sake, that I am wrong, but that is how a similar situation was explained to me. Hopefully you'll get more replies by others who know for sure.
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Permalink Reply by K. G. on
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Total of 64, but 37 are included in the unit. I'm thinking that even so, they pay for 64. I looking further into the original lease and researched what Carol described, and no HBP clause or equivelent is mentioned. At this point, anything can happen - I'll keep it updated!
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Permalink Reply by Walt on
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A lease will automatically extend once they get to a certain point in the process of putting in a well and setting the pool. I have never found out online or by talking to any one where this point really is. I know leases often say that once they declare a pool it is set in stone that your lease is extended but what if they adjust that pool? what if the DEP hasn't approved it? Can they declare a pool and then not do anything else for years and keep your lease?
If they have sent you an offer for extension recently (since they decided to put a well in) then I find that a bit odd. Either they are being really kind (very odd but not impossible) or they don't think they can lock your lease in before it expires. A lawyer would be your best bet to find out what is actually happening and what your options are with this.
If your lease is past its expire date, and they haven't created a situation to hold the lease valid past the expire time, than they can not drill on or under your property, or include you in a pool. I think they would also be hard pressed to explain to the DEP / the courts why you where in a pool before the lease expired then taken out after words if nothing else about the pools shape changes.
If you extend your lease and you don't currently have a Pugh Clause then they will be extending the lease for the full 64 acres. It is an all or nothing deal without a Pugh Clause. I would be 99% sure that you don't have one since East has only recently started to offer one and it extends your contract another 5 years if you have any land in a pool but not all of it.
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Permalink Reply by 0l1a6laz7smpf on
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I think you should call a gas company that is drilling in your area (like chief or chesapeake) and see if they are interested in leasing (you might even have a 'right of first refusal' clause in your contract to do a top lease ...read the terms though). They most likely would know the answers to at least some of your questions and who knows...you may end up with more per acre that you were hoping for.
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Permalink Reply by K. G. on
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Thank you all so much for your imput. This is rather a confusing situation. Some recent news, East refused to grant us the lease renewal that they gave us in August. (Our lease expires this December, so they mailed us an updated lease a few months ago to extend the next five years. This new lease offered us $2000 per acre and 15%). We mailed it back to East agreeing to the lease, after learning that we are included in a new unit, set to be started early next year. So now, being denied the lease offer they sent us, what do we do now? Are we stuck in the old lease of $5 per acre and 12.5% forever?
Thank you all so much for ANY advice.
KG
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Permalink Reply by Walt on
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If they can "lock in" your lease before it expires there is nothing you can do since by the terms of the lease once you are in a pool your lease is extended till other terms (such as the well being shut down) happen. I've found that lease renewals are very time sensitive when East approaches you (not sure about the other companies) and if you don't start the process of the renewal within a few weeks they will sometimes take the offer off of the table. You could potentially get somewhere by talking with a natural gas lawyer but since East has already pulled the offer I'm not sure how far they could get.
If your lease doesn't expire then you will stay at the 12.5%. Personally I would contact some one who knows when you can actually be locked into the lease to make sure 100% that the lease isn't expiring. I think (but am not sure) that once they file the paperwork with the DEP for a unit size then you are locked at that point.
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Permalink Reply by Brian Day on
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I am curious. Did your original lease with East have a clause in it that said you must notify East in writing within 90 days of its expiration that you did not wish to continue leasing with East for another five years under the terms of the old lease. If so, and you did not notify them, perhaps they have decided that they could hold you under the old, cheaper lease, instead of paying you more money. My lawyer told me that this letter was really not required, but I don't really trust anyone, so I have sent East such a letter - registered mail.
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Permalink Reply by K. G. on
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I read over the original lease, and there is nothing that states that. Even the coverletter that accompanies the new lease renewal, there is nothing that states that we needed to mail it back or agree in any set amount of time, such as, "Please mail back within 90 days of receiving".
I just think they are greedy (of course) and want to get out of paying any amount they can (of course). And $2000 per acre x 64 is a large expense - they are going to not adhere to the lease which they sent to us. We can't even afford a lawyer because they are now charging astronomical amounts to even speak to them.
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Permalink Reply by Brian Day on
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East and its gaggle of land men wrote a lot o different leases way back when. I don't think that they can hold your land with a 150 foot hole on someone elses property. Hell, a water well would do that. I don't think that they can drill under your land if the lease expires. Do they have a permit for the new well? Where are you located? What township? East wanted to run a pipeline across my land and I also have an old lease due to expire soon that I am not happy with. I told them to up the any a good deal more before they ever get pipeline rights. They are still trying to figure out a way to steal it all without paying.
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Permalink Reply by Frank Walker on
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I customarily advise folks to seek legal counsel. But that goes triple in your muddled and confusing situation. You badly need to speak with a good O&G lawyer . . . if you can find one. The good ones are not all that easy to locate, and you might have to travel some . . . but it could save you a lot of money and you would know for sure where you stand.
One thing the lawyer might be able to negotiate for you is a Pugh clause. It sounds like you might need one. And I doubt either your current lease, or the new one they are offering you, contains a Pugh clause.
No gasco can drill you without a lease. No gasco should frac your land without a lease. And if they don't frac you, they cannot take your Marcellus gas . . . not much of it, anyway.
There is no 150 foot rule, unless it is specifically stated that way in the lease. You want to know the rules you're operating under currently? Read your current lease.
But the most important thing you need to do on a big money deal like this is to seek legal counsel from a good O&G lawyer. And no, I am not a lawyer myself. I just am somebody who wants the best for you. Good luck.
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