Anyone have problems with old outdated leases tying up their property?

We have about 900 acres that are tied up with leases on 4 different wells.  These leases date back to the 1960's to 1970's even back to 1915.    The wells have not been producing a great deal for many years.  The royalty payments are very low and come infrequently.  Has anyone run into this problem when trying to work out deals with companies like Chesapeake?

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Permalink Reply by Chris Smith on August 19, 2011 at 7:16am
Did you know about the lease or did an energy company bring it to your attention?  What has chesapeak or whomever the energy company you working with tell you?
Permalink Reply by Susan Johnson on August 19, 2011 at 8:07am
We recently got copies of the leases.  Chesapeake said that one of the parcels at 742 acres was tied by production which has to do with 3 wells.  One of them for one well I believe has been revised to just be down to 40 acres.  The others have not changed at all and still indicate the original larger acreage of over 900 acres.
Permalink Reply by Jim Litwinowicz on August 19, 2011 at 7:57am

If you have 4 wells on 900 acres, check out the lease.  Those old wells often served only 40 aces.  If there is some sort of Pugh clause, you may be able to lease most of that land.  I also just talked to a gentleman that said his lease stated it was for the Medina gas layer so he will probably be able to lease both the Marcellus and the Utica. He is checking with an attorney I recommended.

 

You need to see what the lease says. Many are vague enough to still be enforceable. Where is the land  located? Location may also make a difference. But most old leases are still in effect if they have been making payments according to schedule specified in the lease.

Permalink Reply by Susan Johnson on August 19, 2011 at 8:08am
What is a Pugh Clause
Permalink Reply by Jim Litwinowicz on August 19, 2011 at 8:17am

Pugh clause states that any land not in a declared unit cannot be "held by production" It prevents 500 acres of land from being tied up by a shallow well that only drains 40 acres.

 

Many old leases didn't have these but it is worth checking.  For 900 acres I would definitely have an attorney look over all the leases. Is this all one parcel or different parcels? And does each parcel have its own lease?

Permalink Reply by Susan Johnson on August 19, 2011 at 8:28am
Thanks for the information.  The 900 acres covers various parcels but 3 of the wells in questions are on one parcel that is 742 acres.  I will definitely re-read the leases to see if this clause is around.
Permalink Reply by Jim Litwinowicz on August 19, 2011 at 8:38am

Also see if it specifies what layers or strata of gas that is allowed. If it mentions the Medina, you may be in good shape.

 

 

Good luck

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