I am in Liberty township and a few months ago got an offer to buy my royalties for 1500 to 1800 per acre, but they would do a more in-depth look if I was serious which "mite change the numbers" slightly....even tho I am not drilled or receiving any royalties ..talked to a landsman rite b4 I contacted them and he advised caution as there will be "significant" activity in my area in the "near future"....how about it, anybody else get an offer or hear anything or see any activity here in Tioga Co. ?
So $115 per acre for each year of (I assume) a 10 year lease, no bonus (just the first year paid in advance) and a 50% cap on deductions against a basic 15% royalty?
If they try to keep their deductions low, this might still work out to a better net royalty than some of the operators have been paying. I've seen Chesapeake deductions approach 100%, although they were taken to court by the State eventually.
This is probably the new normal, and if folks don't sign up and that knocks out a unit, they and all their neighbors won't get drilled. So I guess we'll just need to see how this works for Seneca. Thanks for the information.
So Jack, the least you could receive is the $115 each acre of the land that are leased, Is that what you are saying? And you might get a few dollars, (or none at all), from royalty depending on what they decide their deductions might be? In our case, The unit , (Painter well unit), we are in, only takes in about 15 acres of our property. The remainder of our property would be in the next declared unit west of us. Granddad Ladd
Until about 2005, nobody in our area used paid-up leases much. You signed for an annual rental, just like a hunting lease, and got paid that amount every year until a well got drilled or the company gave up on the acreage. Seneca is trying to go back to that system - it saves them money up-front, and lowers their overall development costs.
Their royalty language may not be that bad, either - just because they can take up to 50% for deductions doesn't mean they will. And a 50% limit would have been a plus for lots of folks last fall when prices were super low, as many operators were taking more than 50% then.
Seneca probably won't use mega units like the Painter either, and I expect them to drill multiple wells on each pad, since they're trying to make money on development, not just testing the formations. So they should be a better option for folks in Tioga County in the long run than anyone who came along before them.
Jack, thank you for your reply, however, I'm not sure what you mean by 'mega units'. As I recall the Painter unit was extended from the original size after the first well was drilled on that pad. And then the unit was extended to about 3000 total acres to the south easterly direction. Then the second well was drilled. Granddad Ladd
Seneca isn't likely to declare giant units like the Painter just to hold acreage, and then drill only a well or two. Those mega units give people with land on the far side of the unit and contribute no gas to the well a share of the royalty, while the folks who are actually located close to the well get far less than they deserve. If the entire unit is fully drilled one day this will even out eventually, but quite often that never happens and the royalty payments actually made aren't fair to anyone. The Painter was the sort of unit I hate to see - hopefully Seneca won't do anything like that.
This discussion is very interesting and represents changes coming to how gas companies & landowners interact going into the future. The old days of dealing with each other may be in the past now. What additional changes might we experience Jack and others who might know? How has technology changed too that might affect how we will relate to each other, or impact the process of drilling and movement of gas off our properties?
Yesterday I was enjoying the sunshine and All at once I heard what sounded like an air hammer pounding away in the direction of the Painter well pad. But also I heard large gas pipes being dropped against each other. An 18 wheeler passed by our place with what looked like gas pipe a day or two earlier. And many pickup trucks with logo's have been passing by almost constantly for a week now. I cannot drive anymore so I have no way to really check out the well site. Perhaps someone who reads this can add more information. Early on when the ROW for the pipeline connecting to Sabinsville pumping and storage area was installed a few years ago, A large tap, 16 inch in diameter was added to that pipeline a year or so later. Presumably for additional gas well in the next unit west of the Painter well pad unit. Granddad Ladd
Dominion and National Fuel have been slowly picking up leases on their storage field buffer zones for years. Why UGI didn't do the same is beyond me, as it clearly does put them at risk in a situation like this. My understanding is that Utica drilling isn't the same threat to the active storage reservoirs as Marcellus would be, so I'm not sure I understand why these folks couldn't reach a compromise with UGI since the Marcellus there probably isn't that great anyway.
Based on the available data, Meeker doesn't seem that well located for Utica either, but until someone tries a test well in both formations these folks will never know. So I hope they can reach a settlement that will let them try, and thus establish what the rights they're losing under these FERC rulings are actually worth.