Replies to This Discussion

Permalink Reply by Robert Bond on March 9, 2011 at 8:26am

Tom D,  I see you have replied to two posts about leases.  I have sent you a friend request as I would like to ask a couple of more questions.  Thanks

Permalink Reply by Lowell Todd Armstrong on April 5, 2011 at 7:05am

I am an Exploration Geologist, and have been in the business for over 30 years.  My family owns a farm just across the county line into Geauga County (Parkman Twshp).  I have been involved in situations like the one you described more time than I would like to think about.  This is the way it goes:

When you leased the land to the operator that drilled the Clinton Wells, you leased the acreage for all depths and formations. As long as there is a producing well on your property' or your acreage is put into a producing Clinton Unit (ie You have a very small tract, and they put you together with other small tracts to form a drilling unit. If this was the case you would be getting partial royalties from a Clinton well that you were in the unit for). Then your acreage is Held By Production (ie HBP Acreage). If this is the case, you are already leased.  You will not get any additional signing bonus, however you will get the same percentage royalty from the Utica Shale production, that you are currently getting for the Clinton production.  The Company that holds your lease thru the Clinton production can turn around and sell or sublease the Utica rights to who ever they would like, and for what ever bonus and royalty they would like above and beyond that which you are to recieve. (ie if your are getting 12 1/2 % royalty, the company that holds your lease can sublease your acreage to Chesapeake for $1000/acre and a 25% royalty, of which they get to keep the entire bonus and all of the royalty above and beyond which you are owed). 

I know this sounds harsh, but this all correct.  In Texas and Louisana land owners have become much more aware of future considerations, and a lot of them put things like Depth Dropout Clauses, and Pugh Clauses into their leases. However in Ohio, no Clinton era lease would have contained these clauses.

Permalink Reply by Robert Bond on April 5, 2011 at 10:00am

It seems to me as if the company acquiring the old clinton leases that are HBP would have to obey the terms of the lease executed by the land owner and the leasor as far as acres in a drilling unit and etc.  If they wanted to modify these terms surely they would have to get a modification of the lease signed.

Permalink Reply by Robert Bond on October 9, 2011 at 10:26am

Some of the oldleases havea drilling unit defined as more than 40 and less that 65 acres.  Some have unitization clause of more than 80 but not more than 90 acres.  These leases are not compatable with horizontal drilling.  I would think that they will have to be reworked to be of any benfit for a driller to use to access the Utica Shale.  What do you think?