Replies to This Discussion

Permalink Reply by Ann Ticopa on September 25, 2010 at 7:58am

Give it a month or so, Bill, and we should have the answer.

Permalink Reply by William Ladd on September 25, 2010 at 11:39am

Thank you Ann. I appreciate your taking time to reply.

Bill L.
aka Bummy

Permalink Reply by N Bohl on September 25, 2010 at 5:45pm

Hi,
I often read on the Tioga Co. threads about East and pugh clauses. There are two types of pugh clauses - which of the two are folks asking about? Vertical or horizontal?

Permalink Reply by Ann Ticopa on September 26, 2010 at 1:44am

Both, at one time or another. But horizontal most frequently.

Permalink Reply by William Ladd on September 26, 2010 at 1:59am

Hey there Mr Bohl.

In certain areas of Westfield township Dominion has leases for storage. Most of these leases go way back to the 1970's. Other of these storage leases go back even farther. East and other O&G drillers came along and want to lease the Marcellus. It was suggested that these other outfits might make a deal with Dominion to seal off the storage areas as they drill thru the leased storage areas claimed by Dominion. As I understand it, Dominion says NO DRILLING THRU AND SEALING THEIR BOREHOLES AS THEY PASS THRU DOMINION'S STORAGE AREAS! I have a pretty good idea of why they are reluctant to allow this.

Dominion only pays $2.00 per acre for their leases as compared to $2500.00 per acre now being offered by genuine gas drilling companies. There seems to be confusion as to just where Dominion's so called "STORAGE AREAS" are located. Is this storage area above the Marcellus Shale deposit or is it below? We have not been able to ascertain the answer to this question as yet.

So! having explained this situation to you, I guess I'd have to say mainly the verticle PUGH but perhaps the Horizontal PUGH too.

To be honest. I think that Dominion needs an attitude adjustment! Dominion is mainly a transportation and storage facility, Not a drilling and exploration outfit. Dominion is doing a great and unconsiousable disservice to the landowners of Westfield township. The Dominion pumping station at Sabinsville has increased in size to at least double what it was a couple of years ago.

Bill L.
aka Bummy

Permalink Reply by N Bohl on September 26, 2010 at 3:40am

Thanks guys,
That was a great explanation Bill. I can only say that I know of one lease with East - signed mid-year - that had a pugh clause. However this was strictly horizontal and not vertical. It basically says that after the terms/ time frame of the lease are up, whatever acreage is not in a unit or units is released and no longer a part of the lease. So if the whole acreage becomes part of a unit it becomes meaningless I think. If East is giving vertical pugh's at this point that would really, really surprise me. The main reason for not doing this is that I think they want to leave the door open for going deeper for either other layers with gas or possibly even deeper for oil when possible. Actually - does anyone know if other companies in Tioga Co. give vertical pugh clauses?

Permalink Reply by Lynn Wigglesworth on September 26, 2010 at 5:12am

That was my understanding of the PUGH clause most people are looking for: to release any acreage not included in a unit when the lease term expired. I know people who have been fighting with East for years to get that clause included. I'm starting to worry less about that because East is more likely to put my property in a unit for a shut-in well. No royalties and no way out...could be years before they finish the well.

Permalink Reply by Ann Ticopa on September 26, 2010 at 5:13am

Bill, there is something fishy about East's explanation on this. Iirc, you have said your land is in a Dominion storage area buffer zone. They are regulated by FERC and the boundaries are certainly defined. Some federal agencies went overboard after 9/11 and pulled maps from their public websites, but the information is available.

Of course Dominion is going to do what they can to protect the integrity of their storage areas. From what I've read, it is correct that there are procedures for drilling through buffer zones. But gas does migrate, stray gas explodes, casings fail, and accidents happen. The gas in the water wells near Middlebury Center was determined (by its signature) to be stored rather than native gas. Drilling in their buffer area is not without risk to Dominion ... or to the landowners.

Imo a more credible explanation than the one East has given is that it's not a priority for them right now. And if they are encouraging the idea that Dominion ripped you off, shame on them. East has Marcellus Shale wells on land that was leased for $5/$2/12.5% - PKB.

Have you and your neighbors considered pooling some $$ and consulting a lawyer who knows his/her way around FERC? For now, just to get an objective assessment of where you stand? It wouldn't have to cost you an arm and a leg because it's likely the firm's paralegal would look up the FERC records. And anything that needed to be done at the TC courthouse, you could do yourself.

Permalink Reply by William Ladd on September 26, 2010 at 9:17am

Your INFO is interesting Ann, very interesting! Can you tell me who the leased land you were speaking of belongs to? and where it is located?

We have had three different landmen all from east come to talk to us about leasing our 70 acres. For some reason East decided to lock up certain areas of our township. We have been trying to make some kind of sense as to why. Several of us landowners are in the same position. Is it possible that there is a very large bubble underneath us that Dominion and East both know about and are having a "TUG O' WAR" over? But neither Dominion or East want the landowners to become aware of?

It has also been said that landmen tend to shy away from landowners who tend to ask questions!

The last time I made contact with the landman, he wanted to know what the status was with Dominion. I understood that he had been assigned to a different area for the time being. Anyway he did say that the up front payment was $2000.00.

The acreage in limbo is said to be between 1000 and 2000 acres. No small piece of ground!

Bill L.
aka Bummy

Permalink Reply by Ann Ticopa on September 26, 2010 at 1:14pm

That was the standard offer in the NE part of the county when companies first started coming down into PA leasing for Trenton/Black River. I don't remember the name of the company for sure, but quite a few people signed up; Fortuna, then East ended up with those leases. I have a copy of the lease somewhere, but couldn't find it when I looked about a month ago. I did find (1) a May, 2005 offer from Fortuna for $20/acre initial bonus and (2) a 1982 ten year lease from an outfit in Ohio that was offering $2/acre for the first 5 years and $3 for the second 5.

If you ever do figure out why landmen do what they do, let me know. [vbg] (very big grin)