Ethics in the Oil and Gas Industry

Most leasing contracts are deceiving, pretending to be Gross when in Fact they are Net contracts due to the Market Enhancement Clause.

Open ended where they claim you're held by production and you get little or no profit.

Shut in terms that make it impossible to get paid even the very meager sums they offer

Though I'm informed enough to avoid bad contracts, when I come across a contract like this it makes me totally mistrustful of the company and reluctant to so much as lease with them.

So far the companies I'm familiar with generally attempt to deceive landowners and cheat them if possible.

Does anyone know of any companies that actually have Ethics?

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Permalink Reply by Ragnars Repo on August 18, 2013 at 7:26am
No companies, only individuals.
Permalink Reply by Nancy Mosley on August 18, 2013 at 7:44am
I have been told that Key Oil Company, a company that has operations in Ritchie and other counties in West Virginia, is a good company to be leased with. No direct experience but my source is reliable. I have found Postrock to be good, but they and I both "inherited" an old lease.
Permalink Reply by wyalusing jim on August 18, 2013 at 7:51am

in my opinion, the market enhancement clause is very clear. when I first saw that clause in a chk lease, I had no doubt that in pa. any royalties under a lease with that clause would incur deductions.

the only confusion which could arise in that clause would come about through unfamiliarity with industry terminology and practices.

it is a 2 part clause, stating 2 different sets of circumstances with 2 sets of results.

all leases have an hbp clause. there are some minor differences in what it takes to hold the lease from company to company, and in the timeframes.

I would not argue that deceptive practices occurred during leasing in pa for the Marcellus. in some cases there were outright lies told to landowners by landmen. I would stop short of making accusations of cheating though. cheating would involve under reporting of royalties or over deductions of costs. so far, I haven't personally seen any evidence of either, though I do wonder how chk can be deducting over 80% of royalties in some areas in Bradford county.

but until I see the evidence, i'm not going to jump to conclusions there either.

one thing I will say, is that some companies do not communicate well at all with mineral owners. that's unfortunate, but typical from what I understand.

another issue I've seen, is that even though some companies know exactly what a lease says, they will make you call discrepancies to their attention before addressing them.

but this stuff is just business. it's not always gonna go our way, and it's certainly not always gonna be easy.

one thing being a royalty recipient will be is profitable. in fact, it's 100% profitable for those of us who bought our land with no thoughts about the value of the minerals beneath our feet.

another thing that i'm afraid it will be unfortunately, is nerve wracking. many folks are gonna believe that they're being cheated. many will lose sleep over it, and many families have already suffered from these effects. that's the saddest part of all to me. here we have a huge asset that we never knew we had, we have an industry developing it at no cost to us, and still it will ruin many lives.

some folks will receive thousands of dollars, some millions and a few, many millions, and in the end, there will be people suffering because of it.

but I suppose it's human nature.

as to your question, "Does anyone know of any companies that actually have Ethics?"

under most peoples' current definition, especially if they've been involved with the o&g industry, I would have to say no. there will be at least one aspect of subjectively defined "unethical behavior"  in any company operating anywhere in the world. otherwise, many companies wouldn't be in business for very long.

wj

Permalink Reply by Trapper on August 25, 2013 at 4:30am

wj,

When I see another discussion like this posted , I cringe. More fodder for those who wish to divide us and trash the industry that we are tripping over ourselves to become a part of for the gains.

I look forward to your views on these subjects. A voice of reason among the mob , so to speak. Judging from the state of our society today , I question if anyone has any sense of ethics these days. Thanks wj!

Permalink Reply by Corvette on August 18, 2013 at 1:40pm

Gar, what contract are you talking about?  I have  two that I'm looking over now. Jefferson landgroup and the Paloma.

Permalink Reply by Garfield on August 19, 2013 at 5:16am

Paloma's "Surface and Subsurface agreement has limited liability to $3000 per acre/cleverly disguised.. be SURE to read the last line in that section. "However under absolutely no circumstances will liability exceed $3000 per acre" ...close quote/without referring to the contract.. k

If they can't even fix back what tear up without limiting their liability.. what good are they!

It only takes one vile deception in a contract to make me mistrustful of the company it belongs to!

Why the word games? ...........to baffle and disguise!

Permalink Reply by Ed on August 18, 2013 at 9:59pm

Unethical?  Hardly.  The problem is that the contracts that these companies throw in front of you are readily signed without YOU knowing what you are signing.  I was scolded before for calling people stupid so I will just call them lazy uneducated.  Too lazy to educate themselves as to what they are reading and what they are signing.  This lazy uneducated behavior hurts all of us more energetic educated individuals.

 

So now you say "no fair, that's not what I thought it said".  Just like a child.  So grow up everybody. If you can't figure out what a Market Enhancement Clause says, find someone more educated that can tell you exactly what the paragragh means.  This is high school english.  You know...what is the meaning of that paragraph boys & girls?

 

So I have to agree with wyalusing jim.  Nothing unethical, nothing deceptive.  Slanted?  You bet. But you don't have to sign, now do you?

 

Educate yourself.  Or find someone who is already educated to help you understand the meaning of words & sentences & paragraphs.  That's were the money is (or isn't).  In the words, the sentences, the paragraphs. And after all.  We don't sign those contracts just so our neighbors can have cheaper gas to heat their homes.  We sign them to make money.  Just like the gas companies do.  You can't beat them if you are too lazy and too uneducated to understand the rules of the game.

Permalink Reply by FairMktValue on August 24, 2013 at 12:42pm

Ed,

Pretty much agree w/above post but I would throw another word in there....

GREED !  "I am gonna get something for nothing - woo hoo !!"

We all should know there ain't no free lunch in this world but when that sparkly $$$$ worm is dangled a lot of people take that bait instantly!  No need to look beyond the sparkle at that grey boring mass of term and conditions. Free money, I am goin to Disney World !! The landman  knows how to bait a hook now don't he? 

Unethical, or just a good eye for a honey hole ?????

I am not stickin up for the O&G companies, but they are in business to make money.

Have they taken advantage of the general public and lawmakers lack of knowledge on this new fracking technology and its full potential ?

Absolutely!!!  Unethical, or just answering "opportunity" knocking ?? 

Sadly, most folks do not realize that this is a business transaction. The lease is a binding legal document, you will be held to those "boring" term and conditions . You are trading something for that cash.

Slowly, slowly, I do see more people taking the time to at least ask the questions. Unfortunately, tooo many just see the shiny sparkle. 

Permalink Reply by Ed on August 24, 2013 at 10:56pm

GREED you say...well I could believe it if my neighbors were munching on that big golden carrot like jackasses, but I've downloaded and reviewed their leases through Landex.com and I certainly don't see one single carrot.  Now we are talking some big leases on some big pieces of property here...hundreds of acres.  And not one single carrot.  They have all signed on the dotted line for $1.00 and you should see what they have agreed to.

 

Give up all future rights to allow pipelines, compressors, roads, etc........full deductions.....only 1/8 royalties....shut in forever.....full control of everthing to the gas company....&200 for property damage maximum.....general warranty of deed....the list goes on and on!!

 

So GREED you say?  We aren't talking jackasses here.  Jackasses are way smarter.  They won't even start to pull the wagon unless you dangle a carrot.  And I haven't come across one single carrot.

 

This just hurts all of us, but look back in history.  Pull up old leases from 1920s, 30s, 40s, and you will see the same exact thing.   OH!...I almost forgot.  They all boast to me, "well, we're gettin free gas, that's worff somefin."

 

Good Grief!  Are the gas companies unethical?  Not hardly!  Just shootin fish in a barrel!  Jackasses are way smarter than fish.

Permalink Reply by Silver Dollar on August 25, 2013 at 6:06am

Ok Mr. Ed(ucated).  Please describe "Market Enhancement"  for all that are "Lazy Uneducated"

Permalink Reply by Kevin in Belmont County on October 6, 2013 at 11:30pm

I am sorry but I disagree with you whole hardily . I signed one of those lease's and I have a lot of experience negotiating contracts. The land man came out with a standard contract that stated in it that there would be cost deductions for production. I looked over the contract and told him absolutely not that I would bare no expense of the production of gas and oil off of my lease. He said he would have to talk to the powers to be and would get back to me. The next afternoon he called and said that the clause's I wanted in the contract would be fine, being a Pugh Clause, and the no production cost clause. He made an appointment the next afternoon and we met with witness's of course, and he showed me the new lease. When I looked at it I was fine with the Pugh Clause but I had questions about the market enhancement clause. I told him that one part takes the cost away, but that the second half of it brought it right back into the lease. He assured me that was not the case, " oh no that's not the case, all that means is that if we would advertise the product produced from the well to get a better price there would be a small charge to you for the advertising, but you and the company will make more on the gas and oil". He blatantly lied, Period!  I have pulled up cases of this all over the web where this exact thing has happened to other people hundred's of times all over. Did I sign the contract yes. Was I mislead by a representative of the company, absolutely. In my eyes this is no different than the old, go to the car dealer to buy a car and try and get a better price. " Oh let me go talk to my manager and see what I can do". These guys are already taught, when somebody ask for a no deduction clause to put the market enhancement clause in front of them and get them to sign it. I am currently waiting for the copies of the signed lease's to arrive and I will then be bringing suit against this particular oil and gas company. Will I win, who knows, will I hopefully be making it harder for them to do this to other lease holder's, I certainly hope so. I guess giving the O&G companies 80% of the money from your minerals isn't enough, they also want you to pay so they can line their pockets. Don't sign any lease with a Market Enhancement Clause, you can only lose from it!

Permalink Reply by Joseph-Ohio on October 8, 2013 at 3:39am

For what it may be worth to anyone, we're on your bus Kevin in Belmont County.  We agree.

We (speaking here of myself and my wife as landowners) may be called cynics or cynical by the O & G industry.  

In fact we also agree that it is most descriptive and correct for them to stereotype / label / call us cynics and / or cynical. 

Also as a matter of fact, we prefer to be called cynics and / or cynical as opposed to the O & G industry calling us stupid or naïve.

Also, we believe that to be our only choice in these matters.

 

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