Existing lease with limits

I have discovered that my families property that already has a well by Atlas on it has stipulations in the lease that limits their depth of rights. The depth stipulated is above the Marcellus and Utica depths.

I am wondering if anyone else out there is in this same situation and if anyone has information on a secondary lease option. I am contemplating approching Atlas/Chevron to renegotiate the lease but wanted some input first.

 

Thanks

Mark

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Permalink Reply by Jim Litwinowicz on August 19, 2012 at 2:03am

While not common, there are leases that limit the depths or the strata that are under lease. This means you have the right to lease the other depths/strata to any company, not just the operator of shallow wells on the property. Depending on where you the property is, you could be in a very good position.

Talk to neighbors, check out groups(if any) in your area, talk to local government people, go to the specific county page on GoMarcellusShale.com....all to see who are the major players in the area and what the current lease offers are.

Learn as much as you can as you get just one shot to do this right. Someone before you was very smart by limiting depths. Now do the right thing for the generations that will follow you.

Good luck!

Permalink Reply by Calla on August 19, 2012 at 6:36am

I have a similar lease with Alliance Petroleum. They are limited to the Clinton Sandstone at 5400 feet. The problem is that they are not the original lease holder. The East Ohio Gas Company held the original lease. When they subleased to the smaller companies, they maintained the deeper rights to the core. Check your lease to see if you are in the same situation.

Permalink Reply by Jim Litwinowicz on August 19, 2012 at 7:02am

Calla; Your lease is a different situation. The original lease was for all depths, then the lessor sold the shallow rights to a shallow operator while keeping the deep rights. In this case a shallow well will keep all the rights HBPd, as far as I know.  I am not an attorney so it may be wise to check with one.

This is different than when the original lease has some sort of depth limitations. Under this second scenario, the deep rights are not HBPd and can be leased to the highest bidder and/or the company that offers the best terms.

Permalink Reply by JR on August 19, 2012 at 7:32am
We were also part of an East Ohio lease, which we learned that Consol bought them out a long time ago. So we are with Consol/Hess and have been all along, even though our Clinton rights are HBP through a small driller. Not sure if your East Ohio scenario is the same, but thought I'd throw my 2 cents in.
Permalink Reply by Mark Winder on August 19, 2012 at 8:01am

The property is located in Mercer County, The lease is the one with Family signatures on it and dates to when the lease was agreed to so I am assuming it is original with my family having the deeper rights. I will look into further though.

 

Thanks for the responses

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 19, 2012 at 2:23pm

What formation is the Atlas well drilled into?

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