Shell asking for lease amendments

I've got one of the older leases with Shell.  Recently I was contacted because they want to amend the unit size in the lease from 640 to 1280 acres.  I'm already in a recorded unit and have received the map.  The well pad is completed waiting for the rig to move in.  I can't think of a single reason why I would want to agree to this.  My neighbor thinks that Shell is trying to gerrymander a lot of existing units together so that they can lock in some of these old leases around us to keep them from expiring.  They also want to add a shut-in clause to my lease.  Anybody else getting contacted by Shell to do this or any thoughts?  One question - would the lack of a shut-in clause in the lease prevent them from shutting-in the well?

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Replies to This Discussion

Permalink Reply by Brian Day on July 15, 2011 at 1:46pm
I am going to have to mull your situation over and respond more thoroughly later, but my gut reaction is "Don't do it!"  Whoever ends up drilling for the gas will have to come down in actual Production unit size to extract the gas from the dense Marcellus Shale formation.  Make them pay handsomely for every blessed inch, and cash up front.  I sincerely hope they lay the same offer at my door.  Where are you located?  Make them right you a brand new lease for lots and lots of bonus money, a huge royalty, and lots of protective addendums.  A shut in clause sounds like a new form of thievery to me.
Permalink Reply by Brian Day on July 15, 2011 at 1:55pm
I had another thought.  Is your first unit oriented with the well pad at one end of a long rectangle?  If so, I'd bet that Shell wants to lay claim to the land in the opposite direction for another set of wells from the same pad.  You might be contributing to locking your neighbors in that direction into an old, cheap skate lease with the one vertical well.  The PA government should be preventing this, but they could care less.  If your neighbors are not locked in, they can negotiate for a higher lease.  If you don't care about your neighbors, really,  do what you want.  The precident has already been set in the area many times over and you would not be outside of accepted behavior anymore.  You will gai the profit from maybe six more wells in a bigger unit - if they ever feel the need to Hurry and drill.  Shell has no need to hurry in Tioga county now.  They have control of the county basically forever.  These are ugly truths that i have stated if you choose to get emotional.  that horse has long escaped the barn and nobody shut the door.
Permalink Reply by Lynn Wigglesworth on July 16, 2011 at 12:17am

I can't see why you would want to agree to it, either. How many wells are they planning for this double-sized unit? As far as I know, their plan is for 640 acre long, rectangular units with 6 horizontals and (maybe) a vertical. All the units around me are planned that way, and it seems like a good configuration to best drain the unit.

I wonder, if your lease doesn't say anything about a shut-in well, what would happen? All the recent East/Shell leases have a $5/acre/year shut-in clause. You not having a shut-in clause may leave them in a real pickle.  If you accept one, get more $$ and put a time limit on it...under the current Shell clause, you could be shut-in forever.

Permalink Reply by paleface on July 16, 2011 at 3:21am
 My shut-in is 3-years max and $100 an acre,But when production commences it all has to be paid back,so the gas company is not giving me anything but a delayed or future royalty. WHOOPI
Permalink Reply by Lynn Wigglesworth on July 16, 2011 at 4:17am
Paleface; that's not a Shell/East lease, is it?
Permalink Reply by paleface on July 16, 2011 at 5:30am
 No Lynn its a EQT-Capouillez.
Permalink Reply by scott brion on July 16, 2011 at 2:01am

Doug,

First question is what in signing the amendment would be good for you?  Second is what type of well have they drilled?   If it is a vertical well you are likely in an area where they are operating specifically to hold acreage.  I have seen some amendments and reviewed them with others in specific drilling units and we found no benefit to the land owner.  I would recommend you never sign any oil and gas document without fully understanding it and clearly seeing the benefit to you in signing it.   Barring any benefit to you, why go to the expense of having it reviewed? 

Specific to the two clauses - 1) increasing the pooling size will allow Shell to amend your drilling unit to twice its size and you will get half the royalty that you would get on the well already drilled.   Not a very good deal unless they agree to drill more well than they would have in the first place which they clearly did not.  As to shut-in  I would never change this clause without competent legal review.  Shut-in is difficult to comment on without all the facts and knowing the specific language of your entire lease, but as a well has been drilled I can think of no likely situation where it is in your interest to modify the shut-in at shell's request.   

A good general rule is to know that when you sign a document you give something away and make sure you are getting something in return.   When a gas company drafts an amendment you can be sure they are getting something of value, so you need to know what you are getting and how valuable it is.  

Permalink Reply by Brian Day on July 16, 2011 at 3:02am

On the main page of this forum, under the heading"is shell slowing down in Tioga County," a new item of news has appeared.  Apparently forced pooling is likely to become part of PA's rule book in the near future.  I predict that within that legislation, landowners can be forced into larger pools than their personal leases will allow, even though those leases are binding legal documents. 

if and when that happens, personal leases will be basicly worthless on all rights they were written to protect.

Permalink Reply by paleface on July 16, 2011 at 3:15am
 Brian,we don't know the wording on the commision's forced pooling proposal,next week we will know Corbet said he won't sign any bill with forced pooling on it. " TIME WILL TELL. 
Permalink Reply by Ann Ticopa on July 16, 2011 at 3:40am
Given the composition of the Commission, it was to be expected that forced pooling would be one of their recommendations to the governor.  What remains to be seen is whether Corbett changes his mind about not signing any forced pooling legislation.  If he does, there would still have to be a law passed by the legislature for him to sign.
Permalink Reply by Tom Brian on July 16, 2011 at 2:54pm

  My bet is forced pooling is very close to a vote and signing , looking it over it may be the best for everyone . those that didnot lease for one reason or another would still be colecting roylties even if you get no  lease money your kids will enjoy. the state doesnot want to leave these pockets and patches go untouched and unused forever. well pads are looking to have more than 6 wells and bigger than 6-700 acres.

 

http://citizensvoice.com/news/drilling/shale-panel-recommends-gener...

Permalink Reply by Ann Ticopa on July 16, 2011 at 3:43pm
What is the SB and/or HB number(s) of this supposed forced pooling legislation?

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