Marcellus drilling near Rural Valley

Consol Energy, who has the gas lease to my property, wants to drill marcellus horizontal on my property with 4 parallel legs (6,000 feet each leg) starting in 2012 (earliest date for drilling).  I have an attorney looking into the matter, but want to know several things since I have little knowledge of this drilling.  Aside from the attorney review, what should I be doing before signing the new lease documents?  I have Consol preparing a map of my property to show precise drill location, road locations and pipeline locations.  Has anybody been succussful in negotiating for higher than 12.5% royalty, although Consol says it is not currently negotiable?  Has anybody been successful in negotiating for higher that $25,000 "land damage" payment (drill site is in open field, no trees), and what justification for higher?  In short, what should I be considering if I sign approval papers to drill?  After all, I have to live with my decision to drill with the land damage, etc, and my neighbors who simply have the horizontal legs of the Unit go under their property get the same royalty with no damage or wellheads to see.  Seems like I should be able to negotiate for something more, but don't know what.  One more question I'd like answered before I sign any papers.  Consol estimates 5 million cu/ft/day from one leg.  I own 1/4 of the surface acreage of the marcellus Unit (4 legs).  What would my royalty estimate be?  Thanks! 

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Comment by farmgas on January 24, 2011 at 5:02pm
How is the well plan and negotiations going for you?   Would you be comfortable e-mailing directly to me, and me to you, as we share information about our mutual interests with Consol Gas?  Please let me know and we`ll establish our contact information.  Thanks!
Comment by farmgas on January 19, 2011 at 7:43am

Thanks!  Here are several websites that will provide significant information & insights on O&G drilling in Pennsylvania.  

padepmarcellus.com   click on marcellus...  In left column click on 2011 Permit & Rig Activity,

next click on Permits by County or by Operator to monitor when your well permits are issued to Consol- explore other available information as well.

 

Marcellusgas.org  Requires becoming a paying member but very informative

 

pagaslease.com   Another blog website like go marcellus shale...

 

Good Luck,

Dan

 

Comment by Hunter on January 19, 2011 at 6:38am
You are correct about Consol (and Dominion previously).  They seem to have the landowner interests and concerns near the top of their priorities.  We've had a good experience so far.  When they showed me the proposed drill site, I mildly objected and showed them where I wanted the precise location to be.  They were agreeable to go back to their office to try to determine if they could move their site to my site.  No firm determination yet, but they did say they think their propsed site can be moved toward the site I wanted.  So they are agreeable to make landowners as happy as possible. They did the same with road construction.  Worked with me until we were both satisfied.  Good luck Daniel!  We'll stay in touch through this blog.
Comment by farmgas on January 18, 2011 at 4:26pm
Thank you for your answers and insight into the process you are going through with Consol.   We, too, will contact Mr. Dennison and ask for him to review our old Dominion lease.   Your experience with Consol sounds to be a very good one without pressure to conform to only their demands.   It sounds like they care about you as a land owner and your satisfaction with their drilling plan.  Our experience with Dominion in the past was always a good one and they, too, were concerned about our satisfaction with whatever they planned to do.  I would like to keep in touch with you as this process unfolds and  learn what you think of Consol`s commitment to your lease & addendum(s) agreement.  Please share more information as this process moves forward.   Thank You...
Comment by Hunter on January 18, 2011 at 11:10am
The attorney I am using is John Dennison, associated with the firm Dennison, Dennison & Harper, 293 Main St., Brookville, PA 15825 (office phone 814-849-8316).  I've only talked to him by phone but he has done Marcellus deals so has some experience.  So far, I'm satisfied with him and his work.  John has the addendum right now, so I can't speak to what is in the addendum.  But, I know it does not have the well, roads or pipeline locations detailed in it.  I had Consol come out to my property a 2nd time to negotiate precise well location, precise road construction and precise gasline locations.  The attorney suggested we use a property survey map for marking all locations and attach it to the addendum before I sign it.  I recently had my property surveyed, although Consol will do a survey of your property using their surveyors so you might use that map once it is done.  Or maybe an aerial map if you can get one online.  Something to mark locations and hold Consol to those locations.   There is a  compressor station a few miles from our property so that wasn't a concern for me.  What Consol has proposed for the drilling operation on our property is 1 Marcellus drilling operation with 6 wells (6 wellheads) spaced about 25'-35' apart from one another.  Each well will have 1 leg, with 4 legs drilled about 6,000' to the south and 2 legs drilled about 5,000' to the north, for a 6-leg unit.  The unit total acreage is approximately 540 acres.  Our property lease with Consol is 108 acres, 1/5 of the total unit acreage.  My 1st posting to this blog mentioned only 4 legs in the unit and our portion of the unit at about 1/4.  That was because my neighbor to the north, where the 2 legs are to go was refusing to sign their Consol lease addendum.  They have since signed, so the unit now has 6 total legs and their 96 acres included.  Thanks to James Landrew and searching the internet, I found an easy to use Marcellus Shale Royalty Estimator on www.geology.com.  The site also has some interactive facts about Marcellus drilling operations that I learned a great deal from.  We have not signed any papers with Consol yet, but working toward it.  The attorney is negotiating with Consol for our royalty % (he says 15% is normal for new leases), land damage costs, severance tax payments and post-production costs.  I know nothing about those, so that's why he is negotiating.  Hope this helps.  
Comment by farmgas on January 16, 2011 at 2:54pm

Thank you for your recent reply...are you using a local attorney to review the addendum from Consol Gas and, if so, could you provide his/her name for my consultation, too?  I, too, have a similar situation as you do with Consol Gas.   What is contained in the addendum from Consol?  Do they describe where roads, impoundments, pipelines, etc. will be located?  What about compressor stations?   If you are in a unit, wouldn`t there would be more then 4 wells producing gas?   How many acres will be in your unit?   Thank you...

 

Comment by James Jandrew on January 13, 2011 at 3:55pm
There is also another good link on the web that may help you do some calculations. My spreadsheet does basically the same thing, but this is just an app. The URL is [url]http://www.shalebiz.com/pages.php?page=6[/URL]
Comment by Hunter on January 13, 2011 at 8:59am

James - Thanks for the royalty estimates.  That helps!

Daniel - The original lease was owned by Dominion.  Dominion was bought out by Consol, so the old lease remains unchanged, only the name changed.  Consol has just undergone another company name change to (can't exactly remember, but 3 letters something like CNG, I don't have the papers with me right now) so I just received another replacement addendum to the existing lease with Dominion's new name on the paperwork (no other changes from previous).  Yes, when I was first presented paperwork, it included the old Dominion lease (no changes to it) and a new addendum to that lease for the purpose of drilling Marcellus Shale Gas wells.  Our attorney has the papers so I can't provide details.  Should have made a copy.  Duh!  According to Dominion, the only terms negotiable for the Marcellus addendum lease are the "land damage" fees (suggested at $25,000 since the proposed drill site is open field).  Non-negotiable item, again according to Dominion, is the landowner royalty (12.5%).  By joining this Blog, I thought maybe somebody might have experience to suggest ways to negotiate higher royalty % or land damage fees, maybe other things I'm not thinking about.  BUT, I didn't ask Dominion about any negotiable items on the old lease.  Should I do that, and what item(s) might I try to renegotiate?  I currently have free gas to my home from shallow gas wells on my property, so maybe increase amount of free use of gas to include several buildings instead of just one?  Not sure what. 

Comment by farmgas on January 12, 2011 at 4:48pm

Was your lease previously owned by Dominion and now owned by Consol Gas?  If so, are you saying that Consol Gas is offering a new lease for the purpose of drilling Marcellus Shale Gas wells?  What terms are now negotiable from the old Dominion lease?  I thought you would be "locked in" to those terms in the old Dominion lease.

Comment by James Jandrew on January 12, 2011 at 3:14pm

Well, using the normal calculations, if the going rate is 3.51 per MCF (thousand cubic feet), and your royalty is 12.5% at the wellhead with no fees or costs, and the well produces 5 MMCF (million), and you own 1/4 of the surface acreage of the unit, the numbers would look something like this:

 

Daily total Royalty: $2,193.75

Your Daily Royalty: $548.44

Your Monthly Royalty: $16,681.64

Your Annual Royalty: $200,179.69

 

This is assuming it meets the 5 MMCF production projections, the price at the wellhead remains unchanged, and that production levels remain constant. There will be a drop off in production, but that cannot be determined until after the first year, and then it's anybody's guess.

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