Replies to This Discussion

Permalink Reply by dr j on September 13, 2012 at 3:51pm

Hi Donald,

Have you attended any of the meetings held for Brinker landowners ( held by the landowners, not Columbia) in the past?

Here is my "take".   

1. Hilcorp seems like a nice company.   ( Big deal, whoopee)

2.  Columbia/Nisource is in avoidance mode.

3.  They obviously feel they need to amend the crappy old leases to unitize therefore drill.  ( YEAH for us!) therefore the landowners do have some leverage. 

4.  12.5 %  ( gross or net -hard to tell) royalty without any kind of upfront bonus is the LEAST lucrative lease offered in Columbiana county so far.   The Patriot leases that are being overturned in court are better.  It's the minimum they could offer- any less and they tip their hand as schmucks. 

5.SIGNING THE AMENDMENTS MEANS YOU EMBRACE YOUR MANUFACTURER'S HEAT AND LIGHT/COLUMBIA STORAGE LEASE.  It also adds another party which has control over your deep rights ad infinitum.  As long as Columbia says they are storing gas under your property... Hilcorp is going to hold your deep rights even if they are not drilling and/or you are not included in a unit. 

My take away..... NOT signing an amendment.  Full disclosure- I am a party to a lawsuit charging Columbia with breaching the leases multiple times.   

Permalink Reply by Donald on September 14, 2012 at 7:51am

No I have not attended any of the landowner meetings.

This was my first meeting. I am not a land owner, just a mineral rights owner. my thoughts were 90% hipe. 10% we want everything we don't allready have, but we don't want to give you anything for it. I do not intend to sign the amendment. I do know of the law suits that have been filed- hope they bear fruit. I am leased with chk on small acerage in col. co. also have acerage in an other county that i would lease if i get the right terms.

I fell their will be better offers down the road, for the Brinker storage leases. at some point hope I hope we can get what is rightfully ours.

I am going to make a perdiction, related to the amendent you will be getting, it will give them the   right to all strata to the center of the earth. just my perdiction.  GOOD LUCK TO ALL

Permalink Reply by Inchworm antenna on September 13, 2012 at 6:05pm

Devon Energy has many of the production privilages for Columbia Leases in Knox/Wayne/Asland county area and last I heard they were offering the mineral/land owner 14% royalty,  many there are holding out for better, and have a massive group.   The Utica in Columbiana County is much thicker and has the highly saught wet gas compared to those other counties.  I would think Columbia and Hilcorp could have arranged a better outcome.  NiSource indicates in their investor presentation that their Joint Venture partner, Hilcorp wants to aggressively develop the mineral,  yet when Hilcorp presente made their presentation they said they will only be mailing out the ammendments to only select properties where they want to drill.  Either they are not aggressively developing the Brinker native hydrocarbons, or this is a purposeful attempt to dissuade a group taking a stance for better outcome.  There is no true market fashion to the Brinker leases because they are backed by emminent domain authority.  Least they could do is make a closer attempt to now present production terms commensurate with current market rates.  I think that is the only way to truly make it "right"  

Permalink Reply by Finnbear on September 19, 2012 at 4:25am

My take on the situation is this:

I think by mailing the amendments to select properties, they are trying to cheaply hold the area so THEY can develop it. This protects their interest by holding everything else in the Brinker until they decide to drill it. They can strategically amend some leases and make surrounding properties worthless to any other companies from the outside. Then, if they wells they develop first hit big, they have full access to the surrounding properties and can ante up for them as they need them, only investing what they have to for each drilling unit, at the time they declare the unit. If the wells come up short, they can tell the other landowners, "See, it wasn't worth anything anyway" and not have laid out a bunch of cash for unproductive leases. If they carte blanche release the deep rights back to the landowners for all the properties in the Brinker field, a leasing frenzy would occur and Hilcorp might get outbid on all of it. By amending selected leases, they can say that they are making right for the landowners whose property will be drilled in the immediate future, and they protect their investment. It sucks for the landowners but it is a shrewd business decision for Hilcorp/NiSource/Columbia and it will probably stand.

Just my 2 cents,

Finnbear

Permalink Reply by dr j on September 19, 2012 at 9:11am

For a little more clarification, based on the info relayed at the meeting from Hilcorp, all properties which do not have "strata" leases will be receiving the amendments in the mail.  This includes those properties that were "inadvertently" leased ( and paid) by CHK and other entities ( who flipped to CHK).   Hilcorp has no "power" without those amendments as they cannot unitize without them.  

As you probably realize the Brinker landowners have become a very informed cohesive group.  There are very few large property owners who are unaware of what is happening and most are less than happy.   

Another point to be made again ( and again) is signing an amendment EMBRACES the old leases which isn't in any landowners interest.   We are talking about leases that have provided ZERO income or benefit to the landowners for over half a century.  

This is truly a case in which if the larger landowners have solidarity we have a large degree of control.  

Of course if the courts rule the leases have been breached and they are released, all of this is moot.   ( Columbia has already settled one case out of court with the result being a released lease.....)

Permalink Reply by dr j on September 19, 2012 at 4:35am

As with many of theses situation, if the larger landowners stand their ground, Hilcorp will have trouble siting a pad. The acreage in question is also interspersed with many properties with strata leases, already held by CHK. Many of the larger landowners are also involved in litigation which is progressing well.

Permalink Reply by dr j on September 19, 2012 at 4:39am

FWIW - recent plotting of all the wells so far in Columbiana County shows a distinct pattern- encircling the edge of the storage field. Unless CHK is very off target, it will be hard to convince anyone the storage field isn't prime property.

Permalink Reply by Utica Shale on September 19, 2012 at 1:33am

 

More than 50 years ago, landowners in a 35,000 acre area of Columbiana County, Ohio signed a lease with Columbia Gas that allows Columbia to store natural gas supplies in the Berea Sandstone formation. Known as the Brinker property back then, today it’s referred to as the Brinker Storage Field. The lease that was signed, and passed on to new landowners purchasing “Brinker” property, means landowners won’t see a penny from drilling that’s about to begin on their property by Hilcorp Energy (see this MDN story for more background). Columbia Gas will keep all of the signing bonus and royalty money for itself. Unless…

Some (many?) landowners are suing Columbia claiming the leases are now null and void because Columbia has not lived up to the terms of the lease for years (see this MDN story). Apparently enough landowners have made noise about the inequity of the situation that Columbia and Hilcorp have started having meetings with landowners in the Brinker area. The meetings are private—no press allowed. But we do have a few insights into the discussions:

Although the meetings remained closed to non-landowners, spokesmen for the companies offered a brief insight into what was taking place.

Justin Furnace, corporate manager of external affairs for Hilcorp Energy, verified the bulk of the meetings have focused on the landowners’ concerns regarding already existing land leases owned by Columbia. Hilcorp will be doing the actual drilling for Columbia.

…many of the landowners filed a lawsuit against Columbia, arguing the old leases have expired due to lack of activity on the properties and lack of payment of lease fees.

Under the existing leases, Columbia is permitted to store natural gas under the Brinker property in the Berea Sandstone formation.

Furnace did not offer any information on the status of the leases, but said the company intends to work with the landowners until they are “satisfied.”

He said the most recent meetings had been in the planning stages for months and that landowners stayed long after the hour-and-a-half meeting was over the first night gathering feedback.

Landowners were encouraged to ask company officials questions and air their concerns.*

It would certainly seem to be in Columbia’s best interest to work with (and settle) the lawsuits so drilling can begin. And it would be in Columbia’s best interests to not be seen as taking advantage of a legal situation. Even if the “letter of the law” for these old contracts is kept, the spirit of the law has been been violated (MDN’s opinion). Good luck and best wishes to the landowners in the Brinker Storage Field in their quest for justice and fairness.

*Lisbon (OH) Morning Journal News (Sep 16, 2012)

 

 

Permalink Reply by Utica Shale on September 19, 2012 at 1:38am

 

COLUMBIANA - Two days this past week those who own land in the Brinker Storage Field were invited to meet with Columbia Gas Transmission and Hilcorp Energy officials to discuss what will become of the already existing mineral gas leases there, among other things.

The meetings are only two of other meetings held in private between the landowners and Columbia Gas, but officials had declined to make any information public in the past.

Although the meetings remained closed to non-landowners, spokesmen for the companies offered a brief insight into what was taking place.

Justin Furnace, corporate manager of external affairs for Hilcorp Energy, verified the bulk of the meetings have focused on the landowners' concerns regarding already existing land leases owned by Columbia. Hilcorp will be doing the actual drilling for Columbia.

The mineral rights leases on the 35,000-acre storage field date back to the 1940s, and due to the terms are keeping interested landowners from signing new, more lucrative leases with other oil and gas exploration companies like Chesapeake Energy.

Earlier this year the Cleveland Plain Dealer reported many of the landowners, and even Chesapeake, were unaware of the existing leases until they were in the negotiating stages of a new land lease. Some of the leases paid as low as $4 per acre and offered no royalty percentages, or a lump sum royalty of $200-a stark contrast to the sometimes more than $5,000 an acre and as high as 17 percent royalty offered by Chesapeake. According to a standard Chesapeake lease, royalties are paid continually as long as oil or gas is recovered from the leased property.

The Cleveland newspaper also reported that once Chesapeake learned of the long-standing leases any deals with landowners were off, since the company wanted clear title to the mineral rights.

As a result many of the landowners filed a lawsuit against Columbia, arguing the old leases have expired due to lack of activity on the properties and lack of payment of lease fees.

Under the existing leases, Columbia is permitted to store natural gas under the Brinker property in the Berea Sandstone formation.

Furnace did not offer any information on the status of the leases, but said the company intends to work with the landowners until they are "satisfied."

He said the most recent meetings had been in the planning stages for months and that landowners stayed long after the hour-and-a-half meeting was over the first night gathering feedback.

Landowners were encouraged to ask company officials questions and air their concerns.

One landowner pointed out prior to the meetings that the state needs to work toward implementing a minimum royalty law like Texas, West Virginia, Pennsylvania, and New York, to name a few. Minimum royalty in those states is at 12.5 percent.

He said that without the law, he and other landowners are "nearing unconscionable exploitation of their royalty ownership" through the outdated leases. Unlike others affected by the leases, he has not filed a lawsuit against Columbia.

He has, however, sought out help from government officials regarding a minimum royalty law, including state Rep. Mark D. Okey, D-Carrollton, who in July introduced a bill that would require a minimum royalty payment of 15 percent of gross revenue on active wells.

The bill was assigned to the House Committee on Agriculture and Natural Resources and a hearing date has not been set. However, there is a possibility the law may not affect those in the Brinker Field unless they are grandfathered in if and when a bill is passed.

Jerry James, Ohio Oil and Gas Association president, told the Youngstown Vindicator this summer that the association would not support any law that would create a minimum royalty and that the situation with Columbia and Brinker Storage Field landowners is something that should be worked out among themselves.

Working it out appears to be something Hilcorp is pursuing, as the landowner said the company is proposing an amendment to the existing leases that would include a 12.5 percent royalty. Whether the royalty is on the gross amount was not clear.

The proposal was verified by another landowner affected by the leases, which are on record at the county courthouse in Lisbon.

The properties involved were originally leased by the Manufacturers Light and Heat Co., which eventually transferred the leases to Columbia. On May 18 of this year, Columbia transferred the leases to Texas-based NiSource, its parent company.

NiSource announced in July that it would work with Hilcorp Energy to pool acreage in the Utica Shale for drilling. The shale is largely found about 8,000 feet below the surface of the ground in Ohio, Pennsylvania, West Virginia and New York.

Hilcorp, based in Houston, bills itself as the third-largest, privately-held exploration and production company in the country with more than 1,000 employees.

 

kschwendeman@mojonews.com

 

Permalink Reply by Jamotom on September 20, 2012 at 9:52am

Basic terms offered by Hilcorp: 12.5% gross / $3k acre for parcels greater than  10 acres / $25k pad fee.

 

Just to echo what Dr J mentioned, its important for those people in the Brinker Storage Field to refrain from signing any amendments proferred by Hilcorp or Nisource/Columbia. 

Let the  brinker group work on negotiating more favorable terms while the legal leg is working its furrow.

Permalink Reply by dr j on September 20, 2012 at 1:03pm

Jamotom, 

Thank you for your support.  Just to clarify, the $3K/acre is in addition to the 25K pad fee, ie -if the pad is over 10 acres the payment is 25K plus 3K/acre for each acre over the 10.  There is no offer on the table for a "signing bonus" for any landowner no matter the parcel size.   

I wish it were the other way! 

Permalink Reply by Inchworm antenna on September 20, 2012 at 3:06pm

I like how Hilcorp has mentioned AFTER LAST WEEKS MEETINGS in the Mojo paper they want to work with the property (mineral) owner until they are satisfied.  We will have to see where this goes.  Nobody has reportedly received an ammendment from Hilcorp yet.  Perhaps they sense few would sign, and to save the paper for now.