The most common accusations against shale exploration - and yes, ANSWERS
It seems as though these days people just aren't willing to do any unbiased investigating concerning the issue of natural gas drilling before jumping on the "stop drilling - natural gas companies are evil" bandwagon. It may not seem like it from all the news articles you come across, but the overwhelming majority of people are actually pro-drilling. However, the majority of non-industry people (regular citizens) who are actually voicing their opinions are the anti-drilling groups.
If you google Marcellus drilling, you will get 100's of pages of the fears of fracking, pollution, companies raping the land like coal companies, etc.. The problem is that the industry is painted as not caring about the environment, and going by its own rules. Here are the most common accusations against natural gas drilling. Again, take my comments with a grain of salt and do some real research on your own before believing anything. And by research, I dont mean newspapers, or extreme websites... I mean peer reviewed science literature. Here we go:
Q: Why dont companies tell us what chemicals are in frack fluids?!?
A. This is a claim found everywhere and it's such a misleading question. It's posed as if these companies are hiding something. The chemicals used have never been a secret to the public. I don't understand why this keeps coming up when the info is right there. Example: Go to Chesapeake's website. They put a large link to the "frac facts" right on their homepage. Yes, their homepage. It lists every chemical in a frac fluid. You may not agree with the chemicals involved, but don't say that they're not telling you. Next question.
Q. Why don't companies release how much of each chemical is in their frac fluid?
A. Is that really the question you're looking to get an answer to? If Haliburton said they were putting .0001 ounces of biocide per 100,000 gallons instead of .0002 ounces per 100,000 gallons... Would that change your view of fracking? This question is asked (like the specific chemicals used in frac fluids question) in order to make the industry appear as if it has a dirty little secret. Let's be logical, that small difference is not going to change your opinion, but it gives you the argument they're hiding something.
The exact formulas to the T are not known, but the general amounts are known (down to a hundreth of one percent). That's pretty damn good. Like the specific chemicals involved, this question has an answer - again it's plastered on Chesapeake's home page.
Q. We need to hold companies responsible for the wastewater! We can't let them dump it wherever they want!
A. There are actually incredibly strict sets of regulations for companies to abide by when dealing with their water. If you don't abide by them, you are gone - see ya, no drilling permits are issued. When I hear these claims I say to myself "Yes, you're right, we should be holding them accountable...We do. There should be regulations... and there are". It's like a person saying "We can't let police officers wear neon green dresses to work!"... Well, I don't think anybody is arguing against that. And they don't.
The industry IS held responsible. People need to understand that companies can not drill if they don't get every permit approved by the DEP. If the DEP approves it, then why is the "blame" (used loosely) on the companies? I expect the typical "because the DEP is in the pockets of the industry".. leads me to my next false statement.
Q. The DEP is in the pocket of the industry, that's why there are no regulations!
A. Well, we've discussed the regulations already as being some of the strictest regulations in the country. Now as to the DEP being corrupt. That's a pretty bold statement to make considering nobody has any information as to why they say that (funny word I call "data"). I'm not going to say show me the data because that's a defensive statement. I can say, however, that for every dollar lobbyists bring in for natural gas drilling, 100 are brought in by coal or oil. 1000 for renewables (biomass especially). To say natural gas has a stranglehold is... well.. just wrong. Do you wonder why the US has the most natural gas in the world, yet relies on it the least for electricity and fuel (generally speaking)? Even if lobbyists do get some more support for natural gas drilling - are you against switching from gasoline to a cleaner natural gas fueled vehicle? Are you against America being able to finally use it's own energy source and stop funding foreign corrupt countries?
There are literally hundreds of questions/claims just like this that have answers. I know, it is tough to be able to tell what is factual and what is propoganda when you are new to this industry. Even this post here, don't believe a word I say until you actually do a little digging from both sides. Yes, go check out some of the problems involved with drilling, then check out how companies are addressing it. Let's see if the extremists environmentalists have that type of comment ever (e.g. "go check out Exxon's safety record and come back to me"). They won't ever say that, because they know the truth is there which refutes their argument. I am pro-natural gas, a proud American. Go Marcellus.
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Replies to This Discussion
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Permalink Reply by Patrick Arena on -
James,
I am also in Greene County by Gilmore Twp. I am looking for good adendums and any recent bonus/acre + royalties. I have a few that are battling now. I just need to make sure I am on the right path.
Thanks,
Patrick
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Permalink Reply by drillman on
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You make some pretty bold and potentially slanderous statements regarding landmen. I have been personally acquainted with many landmen over the years and I have found the majority to be honest, hard-working people whose job it is to get the best possible deal for their client/broker/etc. That's how they get paid. Most work on a contract day-rate. Few work on commission (that was the norm 10 year ago but not anymore). Most field landmen work through a broker who provides a host of services to their clients. Many of these landmen are members of the American Association of Professional Landmen and subscribe to a strict code of ethics. There are mechanisms in place to severely punish those who are in violation of the code. In-house landmen are usually employed by the actual company doing the leasing but they usually play an oversight role rather than direct negotiations with the mineral owner. It has been this way in this business for many years. Those on the ground and in the field are the ones who are usually working on a contract for hire basis. This in and of itself should not have any bearing on an individual landman's honesty or integrity.
Additionally, who pays or how the landman is paid is irrelevant. Whether they are contracted or a direct hire, what difference could it possibly make to anyone who cuts their check? I take personal exception to your statement that "Some of these landmen are flat out liars?" What if landmen said that landowners are liars? Truth is, some folks do lie, landowners included. Your statement that "presenting an Energy Company business card" somehow gives them credibility is downright irresponsible. Frankly, your first post was well written but you stoop to disparage "landmen" in a manner that I find despicable and defamatory.
I submit to you: Presenting a business card (license or any other document) does not an honest landman make. People are either honest or dishonest and no business is immune to the degradation caused by lying. I'm encouraging you to stop making allegations based on the business relationship between that of the landman and the company doing the leasing. None of it has anything to do with personal integrity.
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Permalink Reply by Mmmarkkk on -
I believe one of the issues brought up by the earlier post was that they felt "cheated" when a landman paid one person X but then the landowner found out that their neighbor got more than "X". I've seen this before. All of the landowners feel like it is the landman's OBLIGATION to tell them how much they are paying everyone else and to pay each landowner the highest price. That's just not how business is done. Did these folks ever buy a car? I can guarantee you that if you bought a car from most dealers, you paid more than someone else who bought that same car. That's not being a "cheat", that's being a negotiator.
So if I pay Mary Landowner $1000/acre and a 12.5% royalty for her 100 acres, then I go down the road and offer Ralph Landowner $750/acre, am I CHEATING Ralph? Hardly! Ralph should have pressed me harder to get more money. And if I say, "Sorry Ralph, that's what I think its worth and that's my final offer", I am not Cheating good ol' Ralphie Boy. Ralph can always say "NO" and shut the door. I then have a decision to go back to him and offer him more or just give up.
This notion that a landman is a "CHEAT" because he isn't telling everyone what he paid others is BS...Barbara Streisand!!
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Permalink Reply by daniel cohen on
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Dear Roy & others, Finally a call for some honest review of facts, not hype. In this regard may I refer you all to: http://www.gomarcellusshale.com/profiles/blog/list?user=3mp5e7xj14uno
This is a discussion about the facts/concerns/information from a landowner trying to find out what's what. If the link doesn't get you to the site, try to find AQUIFER CONTAMINATION as you do your own research. Briefly, the information from Penn. State University and the actions of N.Y.State in banning fracing technology for an 18 month review because of concern about aquifer contamination speaks to our need to be very careful in what/how we allow our land to be used.
Good discussion all, keep it up.
Dan
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Permalink Reply by daniel cohen on
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Permalink Reply by daniel cohen on
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Dear Shalers,
In a recent exchange with fellow shaler rfs, the following may be of some interest to you.
Dan
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"Dear rfs,
Your clarifications are appreciated. How would you suggest that we, as land owners, protect our holdings? Just leaving it to the company or regulations to look out for us doesn't seem to be the prudent way to proceed. What would you recommend we have written into the lease agreement that could address the potential situation of contamination, whether by accident, poor practice material failure, etc.?"
"Several thousand landowners have been working on this problem for the past two years.
What has come out of this is a list of lease addenda which you must be sure to have included before you sign. Go to w***************** in the and look for the section that addresses addendum."
"Dear rfs,
BINGO! Your reference site was most interesting, and I thank you for it.From it the following was copied:"
Dan
Oil and Gas Lease
“APPROVED ADDENDUM”
List
(For use in negotiations of leases)
1. ADDENDUM PREFERENCES (All Addendums should contain this clause)
1.1 Should there be any inconsistency between the terms and conditions set forth in the main body of this lease, and the terms and conditions specified in the Addendum the provisions of the Addendum shall prevail and supersede the inconsistent provisions of the main body of this lease
2. SURFACE AESTHETICS
2.1 It is agreed and understood that Lessee shall repair and restore the surface of the leased premises, including any damage to existing drainage tile as a result of the Lessee’s operations, to as close as reasonably practical to the condition in which the leased premises existed at the time of the commencement of drilling operations. Weather permitting, this work shall be completed within ninety (90) days after the cessation of the later of drilling, completing or equipping operations upon the leased premises. This work shall be done at the sole expense of the Lessee.
2.2 Any and all damages to Lessor’s crops or Lessor’s tenant’s crops, caused by Lessee’s operations, shall be paid for by Lessee based on the current market value in the area for whatever type of crops were disturbed.
2.3 Following Lessee’s operations on the leased premises, Lessee shall be responsible for restoring the surface of the land that was disturbed by Lessee’s operations to, as close as reasonably practical, its original condition. Weather permitting, restoration shall include but not be limited to leveling and seeding the well location, tank battery and road, removal of all tanks and other associated equipment and the cleanup of product spills that may have occurred.
2.4 If requested in writing by Lessor, within (1) one year of the drilling of a well, Lessee agrees to shield one side of any wellhead and/or tank battery for aesthetic purposes. Such shield shall either be constructed with common fencing materials used in such construction or with the planting of evergreen trees at a minimum height of five (5) feet and spaced every six (6) feet apart; Lessee shall not be responsible for said evergreen trees or fencing materials following the initial planting or installation. At Lessee’s option, Lessee may have Lessor schedule said work and upon receipt of proof of payment for such work, reimburse Lessor for reasonable expenses not to exceed five hundred dollars ($500).
2.5 Lessee agrees to notify Lessor at least twenty (20) days prior to commencing any construction activities on the leased premises to allow for Lessor’s removal of marketable timber in the area(s) identified by Lessee for the proposed operations hereunder. Should Lessor choose not to remove such marketable timber, Lessee may remove said timber from the proposed operations area. Lessor shall then: (a) request Lessee to pay Lessor the value of any such marketable timber as damages at the prevailing stump price for the local area as determined by an independent timber appraiser, said marketable timber shall then become the property of Lessee and removed from the leased premises, OR (b) Lessor may request that Lessee stack the marketable timber on the leased premises at a mutually agreeable location in close proximity to the construction site, said marketable timber shall remain the property of Lessor.”
2.6 Lessee agrees to pay a fair market value for any and all damages resulting to marketable timber and/or forest products caused by its operations under the terms of this lease. Lessee shall submit a valuation of marketable timber damages to Lessor and Lessor shall have thirty (30) days to accept or reject Lessee’s valuation.
3. WELL SALES
3.1 At the time Lessee determines that any well operated by Lessee on the leasehold premises should be plugged or abandoned, Lessee shall first offer in writing to sell such well to Lessor for a fair and reasonable salvage value of the well and appurtenances as determined by Lessee. If Lessor does not accept in writing such offer within ten (10) days after tender of the offer by Lessee, Lessee shall be free to sell or plug and abandon said well.
4. EQUIPMENT/ROADS/PIPELINE/WATER
4.1 Lessee agrees that any necessary pipelines, tank batteries, separators or compressors shall be placed on the leased premises only if they are in conjunction with Lessor’s well(s) and production. No roads from adjacent properties shall be constructed on the leased premises without Lessor’s written consent. Any other equipment or pipelines for other producing wells, desired by Lessee to be installed on the leased premises, shall be approved by Lessor in writing unless provided for under a separate agreement.
4.2 Lessee agrees not to use any water from Lessor’s ponds, springs, or creeks without Lessor’s written consent.
4.3 Any and all pipeline laid by Lessee shall be buried to a minimum depth of thirty-two (32) inches below ground level with the exception of any necessary above ground appurtenances.
4.4 Any access road for drilling operations constructed on the leased premises shall not exceed forty (40) feet in width during Lessee’s drilling, completing, re-completing, deepening and/or equipping operations, unless otherwise mutually agreed upon by Lessor and Lessee. Lessee may require up to sixty (60) feet of frontage on the leased premises to permit access to the leased premises. Lessee agrees to remove top soil from the access road and place the top soil beside said access road for restoration work after operations are completed. In the event of a producing well, the access road shall be reduced to a maximum width of fifteen (15) feet and Lessee shall reasonably maintain said access road to its well(s). If a dry hole is drilled, Lessee agrees to restore, as close as reasonably practicable, the drill site area and access road to the condition that existed prior to the commencement of drilling operations, including replacing top soil over the access road and drill site area and where deemed necessary to bind the soil to prevent substantial erosion, sedimentation and compression of areas disturbed.
5. STORAGE OR DISPOSAL WELLS:
5.1 Lessee and Lessor covenant and agree that Lessee has not acquired and does not acquire the rights for the drilling of an underground gas or oil storage well.
5.2 Lessee and Lessor covenant and agree that Lessee has not acquired and does not acquire the rights for the drilling of a saltwater injection or brine disposal well.
6. NON TRANSIT
6.1 Lessee does not acquire, pursuant to the terms of this lease, the right to transport foreign gas or its constituents across the leased premises. Lessee has acquired only the right to transport and convey oil, gas and their constituents produced from the leased premises and oil and gas produced from premises unitized herewith. Further, Lessee does not acquire, pursuant to this lease, the right to install a meter and/or meter station except a meter to measure oil and gas produced upon the leased premises or any premises unitized herewith unless provided for under a separate agreement.
6.2 Lessee shall have the right at any time during or after the expiration of this lease to remove all property and fixtures placed by Lessee on the leased premises, including the right to draw and remove all casing. If Lessee does not remove such facilities within twelve (12) months from the release of this lease, the facilities shall be considered abandoned by the Lessee and shall become the property of the Lessor.
7. WATER TEST
7.1 Lessee shall have Lessor’s current water supply sampled and tested prior to the drilling of any well on the leased premises. Should Lessor experience a material adverse change in the quality of Lessor’s water supply, during or immediately after the completion of Lessee’s drilling operations; Lessee shall, within forty-eight (48) hours of Lessor’s written request, sample and test Lessor’s water supply at Lessee’s expense. Should such test reflect a material adverse change as the result of Lessee’s drilling operations on the leased premises, Lessee, at Lessee’s expense, agrees to provide Lessor with potable water until such time as Lessor’s water source has been repaired or replaced with a source of substantially similar quality.
7.2 Lessee shall have Lessor’s current water supply sampled and tested prior to the drilling of any well drilled within ______ feet of the leased premises. Should Lessor experience a material adverse change in the quality of Lessor’s water supply, during or immediately after the completion of Lessee’s drilling operations; Lessee shall, within 48 hours of Lessor’s written request, sample and test Lessor’s water supply at Lessee’s expense. Should such test reflect a material adverse change as the result of Lessee’s drilling operations within _______ feet of the leased premises, Lessee agrees to provide Lessor with potable water until such time as Lessor’s water source has been repaired or replaced at Lessee’s expense with a source of substantially similar quality. (Non-surface water clause from Ohio. Can be used in other states with appropriate changes in footage for local or state regs).
(For Ohio leases, use 500’ if the well is to be drilled to a depth greater than 4000’. Use 300’ if the well is to be drilled to a depth less than 4000’
8. NO SURFACE OPERATIONS
8.1 No well shall be drilled on the leased premises, nor shall Lessee enter upon or install any installation of any nature whatsoever on the leased premises. This lease is being granted for the sole purpose of permitting Lessee to unitize the leased premises with other leases or properties which shall bear all the burden of surface development. Lessor understands and gives consent that, due to directional or horizontal drilling originating from surface entry on a parcel not owned by Lessor, the wellbore may pass through or terminate below the surface of the leased premises.
8.2 No well shall be drilled on the leased premises, nor shall Lessee enter upon or install any installation of any nature whatsoever on the leased premises, without the expressed written consent of the Lessor. This lease being granted for the sole purpose of permitting Lessee to unitize the leased premises with other leases or properties which shall bear all the burden of surface development. Lessor understands and gives consent that, due to directional or horizontal drilling originating from surface entry on a parcel not owned by Lessor, the wellbore may pass through or terminate below the surface of the leased premises.
9. WELL LOCATION
9.1 The location of any well(s) to be drilled on the lease premises shall be approved by the Lessor or one of their representatives in writing prior to location thereof. Such approval shall not be unreasonably withheld or delayed. Upon receipt of Lessee’s written location approval form, Lessor shall have fourteen (14) days from the date of receipt to approve and return said form or to advise Lessee in writing of their disapproval of a specific location(s) associated with said form and provide Lessee with an alternate location(s) that Lessee deems to be reasonable, economically feasible and at a legal location pursuant to the rules and regulations of the State/Commonwealth. Lessor’s failure to notify and return Lessee’s written location approval form or to provide Lessee with such alternate location(s) within fourteen (14) days shall constitute Lessor’s approval of the location(s) associated with said form.
9.2 The location of any well(s) to be drilled on the lease premises shall be approved by the Lessor or one of their representatives in writing prior to location thereof. Such approval shall not be unreasonably withheld or delayed. .
10. SHUT-IN
10.1 No well shall be shut-in unless: (a) the shut-in is due to force majeure; (b) the shut-in is due to pipeline or equipment breakage, damage or malfunction; or (c) the shut-in is required because Lessee, in exercise of good faith and reasonable diligence, has been unable to secure a market for the production from such well. The shut-in status of any well shall persist only for so long as it is necessary to correct, through the exercise of good faith and due diligence, the condition giving rise to the shut-in of the well. No well shall be shut-in for the direct or indirect purpose of holding oil and/or gas reserves in place.
11. INDEMNIFICATION
11.1 Lessee agrees to indemnify, protect, save harmless and defend Lessor from and against any loss, claim or expense, including without limitation claims for injury or death to persons or damage to property occurring as a result of Lessee’s use of the leased premises, or as a result of loss, expense, injury, death or damage, which would not have occurred but for Lessee’s use of the leased premises, except to the extent any such damage or injury is caused by Lessor’s negligence.
11.2 Lessee shall indemnify and hold harmless the Lessor, its officers, directors, employees and agents, its successors, successors in title, agricultural lessees and assigns, from any and all claims, damages, costs, liabilities, penalties, punitive damages, expenses, fines (civil or criminal), clean-up and/or disposal costs, injuries, deaths, losses, causes of action, actions, damages, judgments consulting engineers’ fees, attorney’s fees, costs and expenses, to or in connection with persons or property, arising out of or in connection with any construction, exploration or operations pursuant to provisions of this lease, including but not limited to the imposition by any governmental or regulatory authority for any lien or so-called “super lien” upon the leased premises resulting from the construction, exploration or operations of the Lessee.
12. COMMENCEMENT
12.1 Pursuant to paragraph three (3) of the lease, preparation for drilling on the leased premises shall be defined as entering upon the leased premises or premises unitized herewith and initiating activities for the drilling of a well.
12.2 Pursuant to paragraph three (3) of the lease, preparation for drilling on the leased premises or premises unitized herewith shall be defined as the issuance of a drilling permit by the appropriate state regulatory body.
13. LIEN ON LESSOR
13.1 The mechanic’s liens, if any, placed on the leased premises by Lessee, Lessee’s contractors and/or subcontractors shall not extend to the Lessor interest or any surface or other fee interest of the Lessor in the leased premises.
14. WELL SITE PAYMENTS
14.1 Lessee shall tender to Lessor a payment of ___________________ ($______) for each well that is drilled by Lessee on the leased premises (not including wells drilled on lands unitized herewith) pursuant to this Lease. Such payment shall be made within thirty (30) days of a well being drilled to its total depth.
14.2 Lessee shall tender to Lessor a payment of ____________ Dollars ($_________.00) for each well that is drilled by Lessee on the herein leased premises (not including wells drilled on lands unitized herewith) pursuant to this Lease to a target depth that is below the top of the ___________ formation, or _____________ Dollars ($_________.00) for each well that is drilled on the leased premises (not including wells drilled on lands unitized herewith) pursuant to this Lease to a target depth that is between the top of the _______________ formation and the top of the ______________ formation, or ______________ Dollars ($__________.00) for each well that is drilled by Lessee on the leased premises (not including wells drilled on lands unitized herewith) pursuant to this Lease to a target depth that is above the top of the ___________________ formation. Such payment shall be made within thirty (30) days of a well being drilled to its total depth
15. TOP LEASE
15.1 The rights set forth in this lease are subordinate to the rights set forth in any prior valid and subsisting oil and gas lease covering the leased premises herein described. Lessor hereby agrees not to extend, renew, amend, exceed, or modify any such prior lease. The parties agree that this lease covers, Lessor’s reversionary interest and that Lessee’s possessionary interest shall not commence until the expiration, termination, or cancellation of any aforesaid prior lease which may be valid, subsisting and in full force and effect as of the date hereof.
16. RENTAL PAYMENTS
16.1 Lessee agrees to pay in advance all delay rental payments due Lessor for the primary term of this lease; this is a “Paid-Up” Lease.
16.2 In the event an oil and/or gas well is drilled on the leased premises or on lands unitized herewith, Lessee will continue to pay Lessor delay rental payments until production of oil and/or gas has commenced.)
17. ASSIGNMENT
17.1 Lessee agrees that there shall be no full assignment of this lease without Lessor’s prior written consent; however, Lessee shall have the ability to sell partial interests in this lease without Lessor’s written consent, as long as operational authority is not transferred from the Lessee. Lessor’s consent shall not be unreasonably withheld or delayed.
17.2 Lessee agrees that there shall be no full assignment of this lease without Lessor’s prior written consent; Lessor’s consent shall not be unreasonable withheld or delayed.
17.3 Lessee agrees that there shall be no full assignment of this lease without Lessor’s prior written consent. Lessor’s failure to reply to Lessee’s written request for such consent within ten (10) days shall constitute Lessor’s consent to such assignment(s).
18. HOUSE GAS
18.1 At such time as a well drilled on the leased premises commences producing and marketing natural gas, one and only one Lessor owning a residential dwelling located on the leased premises may elect, if not connecting for the use of natural gas as provided for in the lease, to receive “in lieu of” the allotment of natural gas, an annual cash payment of six hundred dollars ($600). The “in lieu of” payment shall be prorated based on the number of months during the calendar year the gas was produced and marketed by Lessee. Such “in lieu of” payment shall be made annually by Lessee on or before the end of the first quarter of each subsequent calendar year. The election of Lessor to receive the “in lieu of” payment must be made to Lessee in writing and the beginning date of the “in lieu of” payment period shall be the first day of the calendar month following Lessee’s receipt of such written notice. Lessor may only change its election to either connect for the use of gas or to receive the “in lieu of” payment herein described once during the term of the lease.
18.2 At such time as a well drilled on the leased premises commences producing and marketing natural gas, one and only one Lessor owning a residential dwelling located on the leased premises may elect, if not connecting, for the use of natural gas as provided for in the lease, to receive “in lieu of” the allotment of natural gas, a “cash equivalency” payment based upon one hundred (100) MCF of natural gas times the annualized wellhead price for the gas sold from a well drilled upon the leased premises. The “in lieu of” payment shall be prorated based on the number of months during the calendar year the gas was produced and marketed by Lessee. Such “in lieu of” payment shall be made annually by Lessee on or before the end of the first quarter of each subsequent calendar year. The election of Lessor to receive the “in lieu of” payment must be made to Lessee in writing and the beginning date of the “in lieu of” payment period shall be the first day of the calendar month following Lessee’s receipt of such written notice. Lessor may only change its election to either connect for the use of gas pursuant or to receive the “in lieu of” payment herein described once during the term of the lease.
18.3 At such time as a well drilled on the leased premises commences producing and marketing natural gas, one and only one Lessor owning a residential dwelling located on the leased premises may elect, if not connecting, for the use of natural gas as provided for in the lease, to receive “in lieu of” the allotment of natural gas, a “cash equivalency” payment based upon the allotment volume of natural gas set forth in the lease times the annualized wellhead price for the gas sold from a well drilled upon the leased premises. The “in lieu of” payment shall be prorated based on the number of months during the calendar year the gas was produced and marketed by Lessee.. Such “in lieu of” payment shall be made annually by Lessee on or before the end of the first quarter of each subsequent calendar year. The election of Lessor to receive the “in lieu of” payment must be made to Lessee in writing and the beginning date of the “in lieu of” payment period shall be the first day of the calendar month following Lessee’s receipt of such written notice. Lessor may only change its election to either connect for the use of gas or to receive the “in lieu of” payment herein described once during the term of the lease.
19. PARTICIPATION
19.1 Lessor reserves the right to participate in the drilling of a well proposed upon the leased premises for up to a ________ percent (___%) working interest. Should the leased premises be unitized in accordance with the terms of this oil and gas lease, then Lessor’s working interest shall be proportionately reduced based on that portion of the leased premises contributed to the unit. Lessor’s participation shall be subject to a mutually agreeable AAPL 1989-610 Model Form Operating Agreement, naming the Lessee as operator. Lessor’s election to participate shall be based upon an Authority for Expenditure (“AFE”) issued for the drilling, completing and equipping of the well, which shall include the normal and customary charges by the operator for drilling and completion supervision and administration of the well. Lessor shall be required to elect to participate (or not participate) in the well in writing, and if electing to participate, prepay all costs associated with the drilling, completing and equipping of a proposed well within ten (10) days of receipt of Lessee’s well proposal, which shall include an AFE and well plat. Failure by Lessor to elect to participate in the proposed well and prepay all costs associated with the drilling completing and equipping of a proposed well within ten (10) days of receipt of Lessee’s well proposal shall be deemed an election not to participate.
20. UNITIZATION
20.1 Lessor shall approve, in writing, the unitization of any portion of the leased premises with other leases, except when Lessee determines that the well, in order to be economically feasible, must be located within the minimum required spacing and/or distance to a property line of the leased premises, as set forth by the rules and regulations of the State/ Commonwealth. Such approval shall not be unreasonably withheld or delayed
20.2 Lessor shall approve, in writing, the unitization of any portion of the leased premises with other leases.
21. EXISTING WELLS/EXCEPT & RESERVATIONS
21.1 Lessor hereby excepts and reserves from this lease (in accordance with State regulations) any existing unplugged, abandoned, and/or non-commercially producing well(s) and the acreage attributable to such wells, located on the leased premises, insofar and only insofar as to the formations(s) completed therein. Lessor will not commercially operate or transfer commercial operation of said well(s) to a third party. Lessee shall not be responsible for the environmental and/or plugging obligations and liabilities associated with said wells.
21.2 Lessor hereby excepts and reserves from this lease any and all existing well(s) located on the leased premises. Lessee shall not be responsible for the environmental and/or plugging obligations and liabilities associated with said wells.
21.3 This lease excepts and reserves to the Lessor _________ (____) acres in the __________ formation for the existing well on the leased premises identified as Permit (API) # ________________, the boundaries of which are identified on the well’s surveyor’s plat.
22. PUGH CLAUSE
22.1 Upon the expiration of the primary term of the lease, the right to explore and drill for oil, gas and other hydrocarbon substances shall terminate, except Lessee may thereafter retain and operate all wells then producing oil, gas and other hydrocarbons. Lessee shall retain an area of __________ (___) acres per well, or that portion of the leased premises unitized with other lands, for any wells drilled on the leased premises during the term of the lease. On any portion of the leased premises that has terminated or been released by Lessee pursuant to this clause, Lessee, for itself, its successors and assigns, hereby reserves the right to use, maintain, operate, replace, remove and relocate any of its facilities, including but not limited to roadways, pipelines, and tank batteries, installed thereon for Lessee’s wells. The rights for such facilities shall remain subject to the terms and conditions of the Lease. Lessor shall grant Lessee the appropriate right of way or easement to cover Lessees continued use of the leased premises for such purpose.
23. (WITH DRILLING COMMITMENT, AND CREDIT FOR OVERDRILLING)
23.1 Lessee shall use its best efforts to commence, or cause to be commenced, the actual drilling of a well (the “Initial Well”) on the leased premises on or before the end of the primary term. Thereafter, Lessee shall endeavor to drill a minimum on one (1) well in each subsequent calendar year. Should Lessee elect not to commence the drilling of the Initial Well or any subsequent well, the lease shall terminate as to all undrilled acreage. However, upon the termination of the lease, the lease shall nevertheless remain in full force and effect as to any and all wells drilled upon the leased premises. Each well drilled on the leased premises shall hold and maintain the lease in effect for ________ (___) acres. Any wells drilled by Lessee and situated on other properties that are unitized with the herein leased premises shall be deemed to be located on the herein leased premises but shall only hold and maintain that portion of the herein leased premises contained in the well’s drilling unit. Any wells drilled over the aforementioned drilling commitment shall be credited toward future drilling commitments. On any portion of the leased premises released by Lessee pursuant to clause herein, Lessee, for itself, its successors and assigns, hereby reserves the right to use, maintain, operate, replace, remove and relocate any of its facilities, including but not limited to roadways, pipelines, and tank batteries, installed thereon for Lessee’s wells. The rights for such facilities shall remain subject to the terms and conditions of the Lease. Lessor shall grant Lessee the appropriate right of way or easement to cover Lessees continued use of the leased premises for such purpose.
24. RENTAL REDUCTION CLAUSE
24.1 The drilling of each well on the leased premises shall reduce the initial delay rental obligation by the amount of the delay rental attributable to the leased premises included in the spacing unit surrounding each well, which reduction shall become effective on the next delay rental due date, provided the well is in production. If such well (or wells) is/are drilled on a unit created by a spacing order or on a unit created by voluntary unitization agreement, each well drilled on such unit shall reduce the delay rental obligation by the amount of the leased premises attributable to the acreage contained in the unit.
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I wouldn't put too much weight on this addendum. Each and every addendum should be negotiated based on the needs, desires, and concerns of both parties. There is no such thing as a boilerplate addendum. I can show you 12 different ways to write a Pugh clause. This addendum does contain typical provisions but they can be written in many different ways. Truth is, a contract is only as good as the parties that agree to it. There has yet to be a contract written that eliminates the potential for litigation. No contract exists that guarantees accidents won't occur. Do your due diligence and stop blaming the landman. They are YOUR mineral rights. You are responsible for getting the best deal you can get with all the protections you need to feel comfortable with leasing.
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Permalink Reply by Robin Fehrenbach Scala on
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drillman,
Not every landowner needs the same addendum. Everyone has a different situation and different needs.
Landmen do not voluntarily (for the most part) give the best deal in their offer. It is for that reason the landowner groups were formed and the list of additional addenda was written.
After two years of dealing with this, and dozens of landmen, I can tell you that boilerplate LEASES are the rule rather than the exception. I have many of them, given to me with the offer. And the standard boilerplate lease gives all the control to the gas company, not the landowner.
We are changing that with additional needs written into the lease.
By the way, ALL LANDOWNERS, it is always a good idea to have an EXPERIENCED gas lawyer go over the lease before you even consider signing. A good lawyer will charge a flat fee, NOT a percentage of the royalties.
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Permalink Reply by Patrick Arena on
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Dan,
Great info and thanks a lot. I understand one size does not fit all, but it is a huge help to make sure I hit all of the key points.
Any other insight is much appreciated. This site as well as others do a great job making the playing field a little more even. If it wasn't for the technology and communication these days we would be living in the industrial revolution uninformed and taken advantage of.
Thanks All,
Patrick
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Permalink Reply by daniel cohen on
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Dear Patrick,
You're most welcome. I've found that although there is much spirit and passion to be found in the differing points of view, at the end of the day we're all looking for facts, not hype, and info that we can base own own decisions upon. The differences help us to clarify our own thinking, and for that we owe all the responders a vote of thanks.
All good thoughts,
Dan
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I think you people are well-meaning, but you are missing the importance of the concerns people have about gas drilling. Re disclosure of frac fluids, please look at http://www.ithacamed.com/, by a NY endocrinologist. This shows why a loose listing of frac ingredients won't do. In any event, people near drilling sites don't get even the listings, so what are they and their health departments to do when they get sick? Let's be clear. A majority of successes, with just a few spills and migrations here and there, is not acceptable. The jury is still out on the health impacts on people who have drunk, bathed in, or washed their food in water suspected of contamination by fracking fluids or other wastes.
And water is only one concern. Families who happen to live nearby and are not "integrated" will get all the downsides of drilling - it will be in their air, their ears, their eyeballs, their soil,and probably their crops, and will be reflected in their property values. If gas is recovered, most of these impacts will arise anew with each successive fracking. On the plus side they will get...nothing. Don't expect to convert these people, who are many.
On the matter of the industry's good faith conduct, there are plenty of instances country-wide of illegal toxic dumping, substandard construction, unreported accidents, and employee deaths (google "Disposable Workers of the Oil and Gas Fields" published in High Country News), most of them treated indifferently by gas operators; the same has been reported of neighbor complaints about the impacts of ongoing drilling on their daily lives.
If Go Marcellus wants to be useful, it should focus on the problems, which are genuine, not on building the pro-drilling hype.
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Permalink Reply by daniel cohen on
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Dear Janice,
You rightly point out some pro's and con's and remind us all that we are talking about jobs. No argument from me, just a request that we protect ourselves and our loved ones from doing anything that we would come to regret later on. The way to insure our best health and long term involvement is to be aware of the concerns of others, and to benefit from their counsel. Have you seen this site? http://www.ithacamed.com/
Well worth the look.
Dan
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