Replies to This Discussion

Permalink Reply by William Ladd on June 18, 2010 at 10:16am

Seems that no one cares to answer this one. The reason probably is then we can figure out just what drilling companies are making in profits and just how badly landowners are being skinned.

Bill L.
aka Bummy

Permalink Reply by Lynn Wigglesworth on June 18, 2010 at 11:22am

Landowners get the % of royalties that they agree too. I don't think there's anything unfair, except that a lot of landowners are uneducated. There are some dubious practices, like at what point the royalty is calculated, selling gas cheap to a 'sister' company to keep the royalties down, etc. A good addendum protects you from these things. So many people just see the $$$ and sign the boilerplate lease, when they could have gotten themselves a much better deal by spending a couple hundred dollars having a lawyer review the lease.

Permalink Reply by William Ladd on June 18, 2010 at 1:12pm

Well Lynn, not everyone has a couple of hundred dollars extra. Some folks are just hanging on by a mighty thin thread. They are hoping to hang on until things are looking better. I wonder if Berny Madoff understands this feeling now and how about John Rigas?

I am trying to educate myself by going many places on the internet to see if I can get a more accurate picture of how all this works. But supposing the lawyer has an interest that no one knows about and kinda tweaks your lease or any others he may be working on. Maybe not in his favor directly but maybe not really in your favor either. How can you really know? How can I really know?

Now how about the practice of landowners having pay the expenses of production from his royalities? Those expenses should be all taken off before any profit is realized by both sides from royality. Any comments?

Bill L.
aka Bummy

Permalink Reply by Lynn Wigglesworth on June 18, 2010 at 1:43pm

I've done a lot of research and looked at all the addendum available on the internet and decided which points were important to me. I just had the lawyer write it up in the proper legal language. I, of course, read it and made sure it was what I wanted. I think the $250 it cost me is a worthwhile investment when we are talking about potentially millions of dollars over many many years. I will be locking my children, and possibly grandchildren into whatever lease I sign, so I want to get it right. My lawyer is willing to wait until I get the bonus check to get paid.

The arrangement you are talking about is part of the forced pooling plan. The landowner becomes an 'operator', and receives 1/8th royalty, while the other 7/8th goes to the drilling company until the landowner's share of the drilling cost is paid off. After that, they get 100% of the royalty from the gas from their property. A normal lease doesn't work that way; the landowner gets whatever percentage they signed for for the whole life of the well.

Permalink Reply by William Ladd on June 19, 2010 at 1:11am

So what you are suggesting Lynn is that a normal lease is a better way to go as opposed to a pooling arrangement, right?

Actually I suspected that.

Bill L.
aka Bummy

Permalink Reply by Lynn Wigglesworth on June 19, 2010 at 1:39am

I think that the landowner would make more money over the life of the well with the 'operator' option. But I don't like the idea of forcing landowners to participate. I also don't know if any liability would come with being part owner of the well...I'd rather just have a normal lease, sign it, collect my bonus and wait for my checks, with no responsibility for the well.

Permalink Reply by William Ladd on June 19, 2010 at 2:04am

ME TOO Lynn. If it turned out to be a poor choice with a small area of gas to be found, the expense might be more then you could ever get out of it.

It is really great to see there is interest enough from a few of the members here and that they are willing to take time to share the information with others.

Thank you Lynn

Bill L.
aka Bummy

Permalink Reply by Frank Walker on June 26, 2010 at 7:02am

Forced pooling is unlikely to become law in PA. It is simply too difficult for the gascos to swallow. If it does become law, this will not happen for a long time. They will take their sweet time first to bleed every landowner they can convince to sign up. Even a so called "good" lease (good for the landowner, that is) contains many more positive provisions for the gascos than they would have with forced pooling. It'll be a last resort for them, if they resort to it at all.

For example, forced pooling even gives the landowner horizon protection. No gasco signs leases that offer that, even though of course they should. Almost all leases signed so far in PA turn over drilling rights to all horizons at once!! This includes extra deep formations where nobody knows, or could know, the value of the hydrocarbons present. But landowners just sign it all over anyway. And of course the gascos are happy to take the entire package for one money. Who wouldn't be. You might ask how it is that landowners can lease gratis a formation of unknowable value. I sure don't have that answer. But I do know if they ever force pool me I will be doing the Snoopy dance all around my yard!!

Permalink Reply by Ann Ticopa on June 19, 2010 at 6:22am

"expenses of production" ...

If a deduction is in the lease the landowner signed, then he/she is generally bound by it. In March, the PA Supreme Court made a decision in a case where the deductions reduced the landowner's royaly to less that the 1/8 legal minimum. The Court decided that (essentially) since the law didn't specify the 1/8 be "net", the leases couldn't be invalidated.

The gas companies have a lot of years experience developing leases that serve their interests and are "legal". So it's going to be very hard to break one once signed.

I'd like to see the PA Attorney General look into some of the questionable landman tactics, like the AG's office in NYS has done. Back in the TBR days, a landman made me a last, best offer ($60). But only if I signed right away and didn't take the lease to a lawyer. This was after his company had signed an agreement with the NY AG that their landmen wouldn't do that in NYS. (The $60 was fair at the time, so I don't fault them on that part of it.)

Permalink Reply by William Ladd on June 19, 2010 at 7:16am

Certainly does not seem very fair for the landowner, at least during this stage of the game, to have to take less then the legal 1/8 royalty because of deductions. Deductions should come off of the top before profits are shared.

At this point any money from drilling would be a help for me and probably a whole lot of other folks too.

Somewhere long ago I read that any country, that taxed its citizens more then 33% of their income, has always failed! Has anyone else heard this?

Bill L.
aka bummy

Permalink Reply by Ann Ticopa on June 18, 2010 at 4:08pm

The reason nobody answered your question is that nobody knows. Until a new law was passed this year, producers did have to report production figures for their wells to the DEP, but those numbers weren't made public for 5 years. Now, beginning in November, the blackout period goes away and they will be available online every 6 months.

Something to be aware of when comparing numbers is the rapid production decline of hydrofraced shale wells. According to Chesapeake, their Barnett wells have declined on average 75% by the end of the first year and their Haynesville wells a whopping 85%. So far, their Marcellus wells are more like Barnett.

Permalink Reply by Justin McCartney on June 19, 2010 at 4:50am

Pa horizontals are puttin out an average of 3mmcf per 24hrs initially

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