When Leases Term & Things Pick Up

Hoping we don't see a lot of Forced Pooling Applications to the ODNR to pool lands / landowners into substandard tailgate leases. That's always been of serious concern to me - and don't know why it doesn't seem so to everyone else.

That's why I think Ohio needs to either revise force pooling rules to provide a modern land / landowner cognizant Leasehold with a minimum $3,000 / acre sign on bonus / paid up front delay rental and at least a 12.5% guaranteed royalty - or repeal force pooling / force unitization laws / rules altogether.

Something like that would need to be applied to all Ohio forced pooling / forced unitization applications for any long horizontal bore in any strata / for all pooled acreage amounts - HBP or whatever.

All as it always is, only IMHO

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Permalink Reply by Tim Tarr on November 1, 2015 at 2:58pm
"Favored nation" rather than fixed amount.
Permalink Reply by Joseph-Ohio on November 1, 2015 at 4:02pm
Do you mean applying the 'Favored Nation' methodology translating to the 'Sign On Bonus / Delay Rental Up Front Payment' and Royalty % no less than the maximum paid to other Lessors in the State (by the offering Lessee or any Lessee offering in the State ?

Interesting application of the MFN method but wonder how practical it is / would be to implement. Has it ever been negotiated in a Leasing Application in any State ?
Permalink Reply by Tim Tarr on November 7, 2015 at 4:01am
Not within whole state but similar geology, say 5 mile radius. Should be required that 75% of land within that 5 miles is leased and 75% of the proposed unit is leased.Another option would be 100% of proportional share of well after 200% recovery of well cost.
1/8 share is not "fair" compensation for someone forced into a unit. My personal opinion is 12.5% (1/8) is too low of a minimum under any circumstance but that's the O&G owner's business.
Permalink Reply by bo boboski on November 7, 2015 at 10:00am

I agree . 25% would be fair. I hear that's the norm in Texas?  from another viewpoint, 12.5% with no post production costs would be better than what a lot of people are getting with their supposedly gross leases, at 20%, then having 10% , or more, deducted for whatever costs they feel like charging for.

Permalink Reply by Joseph-Ohio on November 7, 2015 at 11:14am
Tim Tarr,

Personally, I don't think the producer would ever work toward 200% recovery of the cost of any well.

From what I'm reading on these pages I'm guessing they would probably instead work to show that the well costs are perpetually on-going and therefore impossible to estimate when the 200% recovery cost platform would ever be achieved (or something of that order so as to never have to pay the lessor 100% of the lessor's acreage pro-rated proportional share).

Sneaky this bunch is you know.
Permalink Reply by Joseph-Ohio on November 7, 2015 at 11:50am

Tim, 

How difficult  do you think it would be for a producer to come up with  expenses / costs to show that  the well hasn't paid for itself even once ?

Thinking that it wouldn't be too difficult for the producer at all myself.

Permalink Reply by Joseph-Ohio on November 7, 2015 at 10:30pm

Of course the greater the royalty % the better - if it is paid.  

What I'm reading here on these pages seems to be telling me that the higher the royalty percentage the more likely deductions will be applied (even to leases stipulating no deductions).

Also Tim, I can't agree with the radius idea.  I write this since the Utica geology  appears to follow a southwestern to northeastern  arc across Ohio and the development seems to have stalled in the northeastern corner of our State (due to lack of infrastructure / market conditions / politics and the myriad of interventions affecting them).  To illustrate,  a five mile radius drawn around the northernmost Utica well developed to date in Ohio and not include landowners to the north of that radius but within the arcing 'fairway' would not work in way of addressing the purpose of any  rule change the way I see it.

Permalink Reply by Joe Bezel on November 1, 2015 at 5:24pm

J-O, this is a timely subject.  The Ohio legislature has considered changes to the forced pooling statutes this year.  The problem is, they considered streamlining the process for oil & gas companies, because they were only hearing from them.  I spoke to several members of the Energy and Natural Resources Committee who represent districts in the Utica play, and they have heard almost nothing from constituents on this issue.  I saw one of the proposed bills, and it was really bad for landowners.  Fortunately, it was spiked.  We tend to think of our legislators as knowledgeable and informed, huddling with lobbyists to favor O & G companies.  From my experience, they are dealing with an industry they know little about, but want to work with to create jobs for their constituents.  They know little of what landowners are dealing with.  As landowners, we need to be calling them by the hundreds and thousands, telling them about our experiences and what needs to be done to level the playing field.  That's not happening; they are only hearing from the O & G industry.  That needs to change if we want legislation favorable to landowners.

Permalink Reply by Joseph-Ohio on November 1, 2015 at 11:16pm
Agreed.

I still think we need a petition circulated amongst us that would describe our complaints and remedies.

We need to establish a knowledgeable committee who would draft a petition to circulate among our numbers for signature and then present same to our legislators for their action.

Ideally a legislator landowner sharing our concerns would chair our committee.

WHERE IS THAT PERSON AMONG US ? ?

KINDLY REPLY TO THIS POST / SITE AND IDENTIFY YOURSELF TO US.
Permalink Reply by DA Saltsman on November 10, 2015 at 12:41pm

Mr. Bezel, I agree with you on the legislators knowing very little about the industry. They do seem to want to take all the credit for the development of the play that was/is developing---  say starting about 10 million years ago. Working construction on major industrial jobs for 40 yrs and just happened to be working with some fellas from Pa. back in 05 I knew the play would be coming this way (Ohio). Way before most of them could even spell Marcellus. It`s just pathetic to listen to them take credit. As far as creating jobs for their constituents-- that we all know is not true at all. Go to any job site or pipeline or seismic testing crew and do a ratio comparison of illegals vs Americans. Personally I`ll be glad when the WALL is built. Listening to one particular town hall phone meeting and listening to all the "loaded" questions about the Keystone pipeline and the thousand of jobs it would create --again I wondered what sort of ratio was going on their. Perhaps he should have paid more attention to the electric bill at Ormet in his neck of the woods. As I go on about jobs I also own 90 acres in Jefferson County. I also wondered why  legislators in our area are worried about the Keystone pipeline when they need to have a concerted effort put forth to get rid of the illegals in our area and not give us the BS they can`t find Americans to do the work or pass the drug test. Seriously? You`re talking about people who carried a 50 pound back pack of some sort of drug across the border then went and got a job on a pipeline or tree trimming company-- or build a Walmart.  And yes I agree with letting our legislators know our dissatisfaction. Did I cover some of that here?

Permalink Reply by Joseph-Ohio on November 3, 2015 at 2:35am

Quite a few views but no volunteers yet.

Where are you Chairperson ? ?

Permalink Reply by Joseph-Ohio on November 4, 2015 at 2:13pm

Maybe a Legislator Landowner to Chair the Committee would be viewed by his 'fellows' as having a conflict of interests.

Maybe we could ask Mr. Keith Mauck to chair the committee for us and for him to develop a petition based on member concerns and which we could become signatory to on-line and which he would forward to our Ohio Legislators ?

What do you say Mr. Mauck ? Is something like that possible ?

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