Bargaining power: Existing lease on a property I just bought...
I just purchased property with an existing gas lease for shallow well gas. The lease runs out in one year, with an option to renew. It is only for a few dollars per acre. If this lease company wants to renew, do I have any bargaining power?
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Replies to This Discussion
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Permalink Reply by Tyler Courtney on -
Do you have any producing wells on the property? Are you or the previous owner getting royalty checks?
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Permalink Reply by beth hamm on
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May want to check your sales agreement as to who has the rights to neg. another lease. I would not sell any property with the gas rights --- I would have retained them. Did that come up when you bought the property? Most people would sell without gas rights but maybe you were lucky?
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Permalink Reply by Sam Douglass on
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Unfortunately, it is unlikely you have any bargaining power, but it is worth a trip to a knowledgeable lawyer. For example, some very old leases do not include the right to pool different properties together. That right is essential to the Marcellus drillers because their drilling patterns are pretty rigid.
If the producer wants you to sign some kind of lease modification at the time of renewal, its a clue that it needs something.
And there is the possibility that the company might forget to renew; stranger things have happened.
If you do not know a lawyer, the local bar assn might be able to help. Ask for the name of the Chairman of the Real Estate Section and ask him or her to give you a couple of recommendations of lawyers you can interview.
Good luck!
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If it is leased for shallow, what area of the state are you in? Much of the shallow over the Marcellus areas, At least where there was any shallow, has been depleted long ago, or there is not enough infrastructure in place to market the gas that would come out of a shallow well.
But, do you have bargaining power? That all depends on your current Lease - is there an automatic renewal clause in the Lease? If there is, then no you do not have bargaining power - except to refuse to ammend the Lease, and if they want it amended, then you have some power. If they have a renewal clause in it, then they have the right to renew under the same terms and conditions typically.
Make sure you are in an area that has some interest to other players before you just think you can ask for 1500 to 5000 and acre, for there are a lot of people on this website that do not really know and think everywhere in PA should be 5000/ac and it is not.
I run into it all the time - people all around me want 1500 to 1850 an acre and they have called everyone and their uncle (gas companies) and no one is biting. They have formed landowner groups and think they have 20k acres put together, still no takers. Its a joke, frankly.
There is only one way to do it right when people are not biting and most of the landowner groups I have run into don't truly have a clue.
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Permalink Reply by Rob Thompson on
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and what is that "one way to do it right"? for those of us who dont have a clue
Also, why is it a joke that people would be looking for 1500 to 1850 an acre? let alone 5,000???? how do you know what areas are worth what? and how does one find out if there is interest to "players"? I dont see why people should devalue their land because no one is biting right now.
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Did you take the existing lease into consideration when purchasing the property? I would think a property with one or more estates severed (e.g. mineral or formation-specific) would command a lower price than comparables with estates intact.
Has anyone seen an effect on real estate prices for surface properties with mineral or gas rights newly-severed, as a result of Marcellus activity?
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