What about people who have current leases (pre-"Shale rush")

My neighbor, unfortunately, signed a lease in 2006.  I haven't seen the lease, but it is with Equity Oil & Gas Funds, Inc., PC Exploration, Inc., and Reserve Energy Exploration Co..  I believe the lease is for 10 years, and they get $5/acre/year (~$700/140+ acres).  There is no well on their property.  Is it possible to "get out" of such a lease?  I feel so bad for them.

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Permalink Reply by landowner on September 12, 2011 at 5:53am

Philip.  Thank you for the link and information.  I agree. We all need to stick together and learn from each other. 

I want to learn more and help others learn (if I can) from my mistakes.  I should not be shamed, along with so many others who signed bad leases.  It will only prevent others from speaking out and we will miss that opprotunity to learn from them.  Most of the blogs on this site are good news and very informational.  It is rare to hear from those with not so good news, and I wanted everyone to learn something. I hope this has helped at least one person.

From my point of view:  The oil and gas industry have used these types of leases for many years. The laws in the indusrty in Ohio and PA, currently, do very little to protect the common folk.    

It's kind of like insider information/trading on Wall Street. That is why there are soo many laws in the stock market to protect the people, prevent corruption, and prevent misleading statements from being made by large companies.  Many of these laws are made to protect the little guy on commonstreet. 

Some oil and gas companies had insider information.  They used that information to go after the unsuspecting ("uninformed participant") landowners for profit, who were not privy to this information.  The uninformed participants do not have access to this insider information and  even the qualified oil and gas lawyers were not privy to this information.   

The laws need to be changed to protect the common folk from this type of conduct. 

Permalink Reply by Nancy LeNau on September 13, 2011 at 4:14pm

Dear Finnbear,  I was surfing the internet and came across a PA.  law....only in the state of PA.   that stated    "Oil and Gas companies, when signing a lease....Can NOT hold you to a second 5 year option,(Even if it is in the lease)   after the first 5 years.  This law was put into effect many...many years ago.   I went back to print it out and I could not find where I saw it.  Do you have any information on this ? I would love to print this out.  Many Thanks, Nancy 

Permalink Reply by Finnbear on September 14, 2011 at 3:25am

Are you talking about the Hite v. Falcon Partners case?

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Permalink Reply by DM on September 13, 2011 at 5:20am

My dad signed with Oxford some time ago, 10-15 years ago probably.  At the time, the mentality was to hope that you got a well drilled so you could get free gas for your farm.  Oxford finally drilled about 5 years ago.  We got free gas for the farm and some royalties to boot - 12.5%.  Nothing like people are getting today though.  Still, the well is only 4,500 ft deep or so, so the utica and marcellus have not been tapped into yet.  Maybe this will happen eventually.  My dad didn't know the potential back then and he is not sour about anything.  He is just happy to get what he got.  Lots of small farms in the area are in the same situation.  Oxford drilled several wells about 5 years ago in the surrounding area.  Sure, it would have been nice to know what was in the works, but none of the landowners knew.

Permalink Reply by Finnbear on September 13, 2011 at 6:04am
If they can rework his lease (and others like his in the area) to accept larger drilling units, he will probably eventually end up in a larger drilling unit on a shale well. He will then enjoy royalties from it. Most of those shallow leases were for small 40 acre (vertical well) drilling units and won't work with today's horizontal wells and huge drilling units they require (typically 640 acres, but I do know of one company who is basing their work on 500 acre units).  Now is the time to talk to whoever currently holds his shallow well lease about reconfiguring to enable the larger drilling units so they can take advantage of the shale rush. You might even ask for some sort of signing bonus in return for allowing a lease modification. Without current shallow well HBP leases being changed to allow for the larger drilling units, those properties are essentially tied up and out of the shale oil and gas market. Those lessors (landowners) will be approached by the lessees to ask for this lease change and landowners should not be bashful about asking to be compensated, considering today's prices. A willingness as a landowner to work with the leaseholders on this issue should be financially beneficial to both parties.
Permalink Reply by Philip Brutz on September 12, 2011 at 6:15am

This is a good place to start reading about gas leases.

http://www.emenswolperlaw.com/wp-content/uploads/2011/04/EW1354_000...

Permalink Reply by Philip Brutz on September 12, 2011 at 7:53am

This is an excellent, easy to understand book on gas and oil law:

http://www.amazon.com/gp/product/031418497X

Permalink Reply by Mike h on September 12, 2011 at 8:40am

Thanks Philip, I just ordered the book.

Permalink Reply by Star Gazer on September 13, 2011 at 9:34am
For those of you with leases in the 5 dollar an acre range,you may want to google Hite v Falcon. It is a case that the PA supreme court has ruled that when the initial term of these leases are up, that they cannot be held by lease payments beyond the initial term nor can they be held by shut in, that is shut in when no money is being made by the sale of gas or oil. This was a recent ruling in January of 2011.
Permalink Reply by Samuel Harvey on September 16, 2011 at 1:49am

Let me defend the oil the company.  A deal is a deal.   In 2006 most acreage was being leased at $5-20 acre.  Remember, there wasn't a single economic shale well in the entire basin at the begining of 2006.  The important thing for you're nieghbor is that they still own the roylety on there gas.  If a well is drilled, they will make lots of money, probaly 7 figures over the next 30 years.  If a well isn't drilled, they can lease again.  2016 will be here before we know it.     

Permalink Reply by Corvette on September 24, 2011 at 2:59am

I have a lease with Range at $90 an acre set to expire in a little over a year. I filled out the enrollment form with the Utica land group and was contacted last night. Exxon will sign me up for the $4950 and %19 just won't get the money until the current lease expires. It's $6000 an acre and %25 in Wyoming county P.A. I might be better to wait this out. Not sure just yet.

Permalink Reply by SA Frank on September 24, 2011 at 3:26am

Ray,

 

Not sure I would commit to anything.  XTO could always back out on you, but if prices get better, then you would be locked in to that lease.

 

cheers,

Scott

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