How can this be legal?

I just met with an attorney in my area to discuss lease addendum language. He informed me that Chesapeake does not sign, or record any lease addendums that they draft. The company says that is not their "policy".  All that gets signed and recorded is the standard boiler plate lease. I am not really comfortable with this scenario. Can anyone shed some light on how can the lease addendum possibly be a legal document if the lessee does not sign it?

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Permalink Reply by Dan on August 28, 2011 at 2:48pm

The way some of the landowner groups handle this might make you feel better about it, Becca.  For one thing, instead of boilerplate plus addendums, it is just one custom lease document.  Lessor and lessee both sign it.  Then the landowner group holds the signed lease until the gas company has done the title research ("due diligence") and paid the landowner.  After the landowner informs the group that they have been paid their agreed-upon signing bonus, the group releases the signed lease to the gas company, which also includes a signed memorandum of lease that the gas company can now record. They do only record the memorandum, but the landowner and gas company each end up with an original full lease contract signed by both parties.  Maybe that's not the way its usually done in the industry, but perhaps it should be.  And if you can find a good group Becca, it can be for you too.

Permalink Reply by JMS on August 25, 2011 at 4:37pm
What does boiler plate mean?
Permalink Reply by Becca on August 26, 2011 at 5:13am

Just meant the "standard" company lease language.

Permalink Reply by James Kerns on August 27, 2011 at 4:29am
This is a great thread, very important lines of thought, for anyone scanning through, pause here. Just one mans opinion!
Permalink Reply by Andrea Richlin on August 27, 2011 at 8:31am
in my experience , the gas company (Chief) filed the basic lease plus the amendments. only the confirmation of lease page which has the amount paid for the lease was left off for confidentiality.   when  i looked them up later  at courthouse they were on file as such.
Permalink Reply by Becca on August 27, 2011 at 8:49am

Andrea,

 

If you don't mind me asking, what County are you located in? I think this whole process is driving me nuts and is seriously making me consider moving out of the country and back into a subdivision :).

Permalink Reply by Becca on August 27, 2011 at 8:48am

Okay, here's the deal. In Beaver County, the document called "PAID UP OIL AND GAS LEASE" is what is recorded. A part of the lease states, "ENTIRE CONTRACT" which reads as follows: The entire agreement between the Lessor and Lessee is embodied herin and in the associated Order of Payment . No oral warranties, representations, or promises have been made or relied upon by either party as an inducement to or modification of this lease.

So I am no attorney, but man this seems pretty iron clad if it is the only recorded document relating to my agreement with the Company.

Permalink Reply by Andrea Richlin on August 27, 2011 at 8:52am
In all three of my recent leases with chief the adendums were recorded as well as the basic lease.
Permalink Reply by Finnbear on August 27, 2011 at 9:32am
The Belmont County Ohio Recorder has all its recorded documents available online back to about 1992. Most of the leases I've researched there are a lease memorandum with only the bare minimum of information being filed. The meat and potatoes details of the lease are contained in the Addendum which is not public record. Some industry people tell me this is done so that the competition can't easily determine what you are paying the people whose land you are leasing and then outbid you in the future.
Permalink Reply by NY Shale Gas Now on August 27, 2011 at 10:04am
In many cases, an E&P company will first record only the memorandum, quickly, and then later record the whole lease, including addenda -- which are often operational concessions in the landowners' favor. Usually, the later recording is driven by a full or partial assignee, who demands the security of knowing the full text of all leases.

CHK is known for cutting billion-dollar deals with international explorers, while still maintaining primary executive control over what gets drilled.

CHK may be telling you they don't want to record the full lease, together with the addenda, right away, because if they did so, all near-future lessors would demand equal or better terms. If so, I give them points for honesty. Later on, though, after it's all common knowledge, I bet they record it all.

If you had a coalition of local landowners, sharing information, then you eliminate the value of all this cat and mouse secrecy. Such an in-person association would also help smoothe out some of your stress-inducing, but largely conspiratorial, lines of thought.
Permalink Reply by Bill anders on August 27, 2011 at 5:16pm
not true.
Permalink Reply by Jim Litwinowicz on August 28, 2011 at 3:21am

I agree with Becca that landowners should have a counter signed contract including all addendum. If any dispute should arise, one would need a solid contract to refer to to settle the differences.  Additionally, if you decide to sell the property with or without the O & G rights, any potential buyer would want to know exactly what they are buying.

 

I see leasing gas rights more as a partnership be the landowner and the company.  I want the companies to be successful as it will also benefit me. But I also want them to be responsible for what they do and to hold up to their end of any agreements between us. Having a countersigned agreement makes it better for all of us.

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