East Resources Lease- What would you do?

We own a 2 acre parcel in Rutland approx 1700 feet from an existing well which started construction around November.  We were never approached about a lease, but contacted East once construction began and were offered a nonsurface lease about a month ago for $1500/ acre and 12% royalties.  We had the main gas lease attorney review the contract and make some small addendums, none of which had to do with the dollar amounts.  East still has never been able to tell us if we are in the unit for the current well, but the neighbor advised they also plan to drill 3 wells in our direction from the same pad.  We got the paperwork notarized last week and sent it in. 

 

Tonight my wife got a call from the East guy who said the addendums were not acceptable, and she asked which one and they said they "don't really need our 2 acres to do what they want to do" and that all of our neighbors signed the lease as presented so we should also.  To my knowledge all of the addendums were cookie cutter and is only cost $150 for the attorney to review the lease and print out the addendums.  Something does not seem right here.

 

2 questions- Can they just drill under land anyway and take the gas?, and should we sign the lease as is or are we better off to stay unleased.  We honestly could care less about the 3k as we live completely debt free and don't need the money and would rather have the peace and quiet, but now that the well is there we want to get what we are entitled to based on the market.  Even the royalties would be nice, but they really don't matter.

 

Also if I remain unleased what recourse to I have about the noise we are hearing daily at our house or from the damage to the dirt road we live on?  Should we just sign the lease as is as they will do what they want anyway?  Any advise is appreciated and we will be contacting the attorney tomorrow as the addendums all seem very routine and for them to make the blanket statement that none are acceptable seems to be bordering on unfair business practices when I am sure others have submitted the same addendums or the attorney would not have included them.  Seem like as the owner of a small lot surround on all sides for a 1/2 mile by East leases I really don't have any control over what happens underneath my property either way.    

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Replies to This Discussion

Permalink Reply by Lynn Wigglesworth on March 16, 2010 at 12:46am
They can't drill under your land if you aren't leased, but as the East guy said, they don't need your land, either. With such a small parcel, they can probably get a lot of your gas from wells off your property. It's typical of East not to accept certain addendums; they are difficult to negotiate with (I've tried twice and they won't budge). They cut different deals with different people (my neighbor got $2300/acre; they won't offer me more than $1500). It isn't fair, but it's legal. If it were me, I'd ask for 15% royalty and take the no-surface lease as written. The non-surface clause will protect your property from a lot of things. You are going to have to put up with the noise, etc, so you may as well get something out of it.
Permalink Reply by Ann Ticopa on March 16, 2010 at 4:19am
That's a tough call. According to Penn State info, horizontal drilling and fracking along a property line captures gas from about approx. 100 yards into the adjoining property. Also, the minimum roayalty allowed is 12.5% (1/8}, not 12%. The exploration company is required to offer to lease all property within a drilling unit, but the terms aren't specified.

Given the Nov. start date, It sounds like the initial well from the pad is already done; it may be a while until they possibly do more. You can check efacts at the PADEP website to see how many permits for that site have been applied for {1H, 2H, etc.}. Either way you decide, if you have a private will it might be worthwhile to have the water tested before there is drilling in your direction.

I am curious what East has offered you (and others) in the way of a non-surface lease. The only one I'm aware of is an addendum that prohibits surface drilling but does allow seismic testing, pipelines (with written permission), and other surface activities (with permission).
Permalink Reply by Brian Day on March 16, 2010 at 4:37am
East ultimately has to pay you 12.5% royalty, leased or not. If you can find out that you are not in a unit yet, and can find another company to lease you at a higher rate and better terms, East will be forced to negotiate with that other company before they can unitize at all, I think. East will have to at least satisfy the terms of that other company to you according to your lease with the other company. Two acres in the middleof feverybody else leased with East might be a bit dificult to find another company for, but you really don't seem to have a lot to loose if you wait a while to see what happens with unit set ups in your area. Maybe units will be forced to be smaller. Maybe your neighbors' leases will run out.
Permalink Reply by Ann Ticopa on March 16, 2010 at 9:57am
Double check about the requirement to pay a royalty, leased or not. That is true in New York, but I don't think it is in PA.
Permalink Reply by Lynn Wigglesworth on March 16, 2010 at 11:37am
Brian; I don't believe that's true. Unleased property doesn't get anything. East isn't forced to deal with anyone. They can just "drill around" anyone not leased.
Permalink Reply by Andy Ritter on March 16, 2010 at 12:27pm
Thanks for the replies. The Lease is actually for $1500/acre and 15%. (it was late when I posted this last night) We are waiting on a call from the attorney, but are worried if we don't lease with somebody that when the time comes they will just drill around us like the guy said. I would much rather have no lease and no well nearby, but now that it is nearby and loud we have to figure out what is our best route to go.

Looks like the fracking is about to start. The good news is even though we are outside the unit and unleased for now the noise is LOUDER at my house than it is 500 feet from the well pad due to the lay of the land as the well pad is at the bottom of a hollow or canyon of sorts and we are up higher on the slope so everything echoes upward. Gotta love it.

Did anyone hear that the companies are pulling out of the Troy area due to a layer of mud in the shale which keeps collapsing?
Permalink Reply by Wm. Robert Blackwell on March 17, 2010 at 1:37am
With two acres I would just bite the bullet and sign if you have a no surface addendum added. Once they run the horizontals around your land I doubt they would come back and include you in the unit later. What other addendums did you have written into your lease?
Permalink Reply by Michael Karpiak on March 18, 2010 at 8:57am
With only two acres, I seriously doubt anyone else would want to lease you so i would just sign it BUT I would check and see what the addendums are before you sign . You will be putting up with the noise anyway so may as well get something for it and 2 acres is easy enough to drill around.........Best of luck!

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