Unwanted Checks!

Having just read on another site about a oil/gas company check being returned, I realized a few folks throughout the PA Marcellus have adopted this action.  This has happened when a lease has expired or is near its expiration date, and the O/G company wants to maintain its hold with little if any improvement upon the first numbers and/or clauses agreed upon.  Figuring the person receiving the check will cash it without much fore-thought, the stage is set for another 5 yrs. or longer.

Folks are catching on! They don't have to cash these checks. They can send them back, and request a Letter of Surrender ... documentation from the O/G company that proves the lease is no longer valid. It's likely at this point that a company landman will appear on your doorstep --- again!  However those choosing not to open that door can open another one for a better leasing experience ...  allowing better clauses, higher numbers, and more protections than anyone knew were needed a few years ago.  We're understanding more and learning to take our time.

I've read and heard of this company ploy(an unasked-for-check) being used in Tioga, Potter, and Westmoreland counties. That's a good spread of territory so it's likely happening elsewhere. 

Anyone who can validate this scenario happening in your county, please give the rest of the GMS readers a heads-up!

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Permalink Reply by Marion R Schaeffer on March 7, 2013 at 7:53am

I agree but I DID sign the contract for 5 years with the company having the option for another 5 years.  It is silly to think that the gas company with go away if we ignore them.  Just feel my pain when people talk about $3500 an acre when I am getting $5.  However, it was my choice no matter how badly it turned out.

 

Permalink Reply by Gregory J Adams on March 8, 2013 at 2:54am

Janice,

(reply to OP)

It is not a matter of catching on. You have to know what you are signing in the first place. We took a little time with the first one and paid a atty for a hour of his time to help decipher the leaglese. Other than that, these things are not rocket surgery. Everyone should have their lease checked by a lawyer if they have any kind of a question about what the ramifications down the road are. AND everyone should have gotten a copy of their lease back from whomever they signed with, Put that in a addendum if there is any question. Ex.  Copy of lease, Lessee shall provide Lessor with a certified copy of the lease and all addendums and attachments within 45 days of signing.

If you start telling everyone that they are not obligated to accept the renewal, you are going to cost people money with lawyers. You need to tell them to read their contract, and not agree with things that are unacceptable to them. My experiances with contracts made it so I just didnt like the open ended provision. As far as I was concerned, five years is enough time to decide to do it or get out of the outhouse.

Had the Marcellus not happened to this area, where large money can be involved, I would have let the option go through because that would have been the smart thing to do. Since Marcellus DID happen, and they need my land, I have the ability to make my deal a little better.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 10, 2013 at 5:05am

Janice,

            Sending a check to a landowner to extend a lease after no payments over the past 5 years is the standard operating procedure of the O&G companies. You'll notice their leases have a paragraph that states: "If we the Leasee fail to meet any requirement of the lease (such as annual payments), you the Lessor must tell us in writing what part of the lease we failed to meet, then allow us 60 days to decide if we are going to make good on the lease or terminate the lease. Failure to meet the terms of the lease on our part does not terminate the lease." 

When you enter into a lease with and O&G company using their contract, you are entering into a one sided agreement that only you are required to follow the terms of. If you read and understand the lease you signed then you will be writing letters to the O&G company to get your annual payments and keep them in line with the lease, its a given. 

Pick up one of the leases you recived in the mail and take a look. Why would anyone enter into an agreement with someone who does business like this?

Permalink Reply by Janice L. Hancharick on March 11, 2013 at 4:34pm

You are correct about that being Standard Operating Procedure(SOP), and that's why landowner groups began.  Too many people failed to seek a lawyer's advice, or join a group to learn what could happen when one signs something that "looks" good!.  Representatives from PSU Marcellus Center for Outreach and Research are going back and forth across PA presenting fact-filled seminars about Lease Extensions and Renewals ... also ROW Leasing and Seismic Contracts.  The landmen are sweeping across regions where renewals are coming up, where more study and infrastructure are coming into the picture.

And you're right about considering an agreement that comes in the mail.  They spell big trouble!

Permalink Reply by LERRET on March 11, 2013 at 8:00am

If your lease has a renewal clause the lease is still in effect...I'm just saying...

Permalink Reply by Gail Wypasek on March 13, 2013 at 7:14am

It is very true that you must be very sure what your prior terms and conditions were in your prior contract were before you take any steps of denial on any renewal or extension offer for a new term.  What I am talking about is on the flipped contracts between companies where the new company is interpreting the conditions differently from what was presented to you by the company who originally wrote the contract in the first place ie. paragraph 19 between Range Resources and Chesapeake.  Range Resources presented the contract one way and Chesapeake is interpreting it another and is forcing an extension at renewal time. There are those of us who refused Chesapeake's money and filed suit.  Then there are those who were told they have no legal choice by Chesapeake, wrongly so, and were forced into accepting the checks under Chesapeake's lies and duress and are now possibly illegally under a renewal extension because they were lied to by Chesapeake.  That's why I am saying band together all you $15 an acre people, why should they be able to pay you $15 an acre and your neighbor $3500.  It is never fair or right.  Talk to a lawyer.  Go to court.  There is such a thing as a fair equitable fee.  They lied to everyone to begin with.  We all know they formed a monopoly to keep prices down in the first place and I'm very surprised that the Attorney General hasn't become involve by now.  We also know that there has been across the board price fixing and why hasn't the Attorney General been involve about this!  Where is our government???? 

Permalink Reply by LERRET on March 13, 2013 at 8:46am

Well - if it is Chesapeake ...go for it. As far as I can see their legal department is inept and companies who buy their properties are withholding 10% just because they know that at least 10% of their leases are defective in the first place.

Permalink Reply by Robin Hood on March 14, 2013 at 12:34am

Where did you get that "companies are withholding 10% information". I'm building a case and am gathering ammo.

Permalink Reply by shawnalee pettinger on March 18, 2013 at 7:46pm

Can a landowner return a check that when the 5 years are up and energy company has MAYBE another 5 year option to extend the oil/natural gas lease?  What I mean can I opt out of the possible extension of 5 more years of a terrible, rip-off oil/natural gas lease? 

Permalink Reply by Keith A Williams on March 19, 2013 at 12:00am

Shawnalee,

The language in your lease determines what options you have and what options the energy company has. If you are not absolutely certain what it says then have a lawyer look it over for you.

That said, if the energy company has an option for an additional 5 year term, holding or returning the check will NOT stop that from happening. Again it all depends on the lease that was signed.

IMHO

Keith

Permalink Reply by donna elliott on April 4, 2013 at 9:46am

So if I have a first right of refusal on my lease and it expires January 2014 what can I expect ?

Permalink Reply by Mark McGrail on April 4, 2013 at 4:13pm

donna,

 If there is a first right of refusal clause in your lease it doesn't apply to you as the Lessor. It usually is an option for the Lessee to match or outbid any offers you may receive from other companies.

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