Get a depth pugh clause.

    I don't know how many of you are watching developments in other parts of this site, but lots of interesting things are going on in the Utica Shale in Ohio.  That play may be an oild play.  There is Utica Shale beneath the Marcellus in Tioga County.  Geologists and the oil companies they work for will probably say that the Utica is too deep in this area to still hold much oil or gas.  Perhaps they are correct.  Personally, I won't believe anything they will ever tell me again.  I will believe inpugh clause in a lease, written by a good oila and gas attorney, and signed by them.  i will believe in cash from them in my hand.  My grim point is, if you have not signed a new lease or get an opportunity for a new lease, get a depth pugh clause.  looking at various maps on the e internet, the Utica is probably shallower than 10,000 feet beneath Tioga County and perhaps as shallow as 8,000 feet.  They have been drilling that deep to the east in Susquahanna county for the Marcellus.  What really matters in the formation of natural gas and oil is probably how deep a given shale was buried eons ago.  I do not have any idea what that condition might have been.  only an impartial geologist could say perhaps. 

    Unfortunately for me and many others signed with East, as near as I can read, my lease does not prevent them from drilling deeper than 7,000 feet.  They simply have to pay more money for the well.  Now, I was told by a friend that once the oil and gas company has drilled Marcellus wells and set up units, they had no more rights to lower depths.  I have never had an attorney tell me this.  Has anyone else heard this?  This would be something worth looking into.

   I have one more thought on current conditions in Tioga County.  I have not seen many new well permits applied for in the county recently, not even permits to expand single, vertical wells into arrays of 3 or 6 horizontals.  now that East/Shell has locked up large chunks of land for the next five years with an aggresive drilling of stategically placed vertical wells, they could sit back and cool their heels for the next five years until leases are about to run out again.  They could run to Ohio and buy up leases, or North Dakota in the Bakken for oil.  Shell has lots of money, they can wait.  I am wondering if a fund shouldn't be started to challenge the "held by production" clause so that, five years from now, we have a good lawyer on retainer, with a case already prepared, to prevent leases from rolling over and over every five years until kingdon come.  Don't expect ANY help from the Pa. legislature.  Only a successful court case will set a precadent. 

    I figure East and its buddies may have cost me hundreds of thousands or even a million or two on my little plot of land already.  Actually, I don't have a problem with leasing to East/Shell - when they pay a fair price at current value.  They have the Marcellus for sure for the next five years.  Why let them have it forever without us enjoying some of the benefits in our lifetime?  Why let them have more bounty beneath the Marcellus for free?  Those of you looking at a new lease, get a pugh clause concerning depth.

 

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Replies to This Discussion

Permalink Reply by Brian Day on May 13, 2011 at 6:17am

It sounds like i have upset you, Ann.  i didn'tt really intend to.  Sorry if i did.  I have spouted off about all that i intended to on this issue.  everbody will go ahead and do their own little individual thing, I guess.

Coincadentally, I just had a conversation with some gentlemen from Glenwood Springs, Colorado.  They told an interesting story of how gas companies had came into their area full force about five years ago.  things were great for about four years, then all of a sudden, work stopped, everybody picked stuff up, and just left.  Food for thought.

Permalink Reply by Ann Ticopa on May 13, 2011 at 10:29am

Brian,
"Upset" is an overstatement, but I wasn't going to let it stand without correction.  . 

Definitely, Garfield County, CO (where Greenwood Springs is located) is "food for thought".  I had a vague recollection of reading something about it, so Googled.  It was the ongoing battle beween residents of the Battlement Mesa development and Antero Resources.   There is no indication that Andero has withdrawn and the Garfield County O&G Dept. webpages lists ten additional O/G companies as also active in the county.

There was a major production slump in 2009 and in 2010,  the Piceance Basin gas price was <$4.  It's now considered to be recovering.  Garfield County taxes oil and gas production and:
"In 2010, Yellico said, oil and gas production was at about $2 million, and accounted for around 60 percent of the county's property tax revenues.

“That number is going to increase to close to 70 percent,” he said about 2011."
http://www.postindependent.com/article/20110513/VALLEYNEWS/11051996...

And, finally,  saving the best for last:
"Lawyers still probing Battlement Mesa for drilling suits - Monday, April 18, 2011
A second high-profile, New York City law firm is speaking with Battlement Mesa residents about possible litigation related to natural gas development there.

Residents recently told lawyers with Weitz & Luxenberg they are concerned about falling property values. They contend the declining values are related to nearby natural gas development and plans by Antero Resources to drill up to 200 wells within the community. ...

Another New York City firm, Napoli Bern Ripka, hosted Garfield County meetings as it considered drilling-related litigation on behalf of residents. The company recently sued on behalf of Bill and Beth Strudley, who claim their family suffered ill effects from gas development by Antero Resources on Silt Mesa. ..."
http://www.gjsentinel.com/news/articles/lawyers_still_probing_battleme

.

Permalink Reply by Brian Day on May 12, 2011 at 5:22am
As for the East leases, they vary from place to place a bit.  My concern is, now that Swepi has Tioga locked up, they will back way off on their activity for years.  The West and South are littered with places waiting for the drilling company to come back and resume what they had started years before.  Lawyers have told me holding large acerages of land with one none producing vertical well is a challengable issue - if you have enough money.  Individuals don't usually have enough money.  Fifty landowners might.   If the "held by production" clause, common to most of these leases is not challenged, Swepi canhold these leases forever.  That won't do the ladowners or the state any good.  The state doen't want to offend their new rich buddies the oil and gas companies by passing ANY legislation.  They would rather debate it safely for years.  If on the other hand, you win a court case as an individual against an oil and gas company, it sets a precadent for other lease interpritation.  Legal suits have to be settled/decided eventually.  The PAlegislatue can dilly-dally forever, while continueing to recieve whatever benifits they might be getting.  A court case like this may have already been fought somewher else in the country.  No, it probablr hasn't been done in Pa, but the groundwork may have already been laid.  An enthusistict lawyer will find this out for an initial fee.   This does not have to be done today.  If Swepi backs down on its efforts over the next year to 18 months, if a group fund was available, a suitable lawyer could begin the research and tell the group if the effort would be worthwhile.  hopefully, Swepi will continue to progress.  They certainly won't notify any land owner if they decide to put things omn hold in Tioga County for ten years because their investers tell them the pickings are better in chechoslovacia.  Another company might still wish to progress in Tioga County if the option to lease became available.
Permalink Reply by Ann Ticopa on May 12, 2011 at 9:43am

If those lawyers were confident there would be a payoff at the end, they would be recruiting Lessors and offering to pursue a law suit (or settlement) on contingency.  The lawyers - not the Lessors - would be providing the up-front money. 

 

Yes, I do wish things were different and there wasn't a glut of natural gas.  But Shell is a major international diversified energy company.  With the price of oil high, it's to be expected that they will concentrate their deveopment effort on oil.

"U.S. Approves Shell Plan to Drill in Gulf of Mexico"

Wall Street Jl

"Shell resurrects Alaska drilling plans"

Financial Times

Note:  The urls I'd posted hit a paywall when I tried to access them from this comment.  So, to view the articles, you will have to access them from Google News.  Search for:  Shell Alaska

 

I still would not be surprised if Shell divested themselves of some (more?) of their TC leases.  Last summer they did transfer some shut-in single horizontal well units to Talisman as the operator. 

Permalink Reply by Brian Day on May 13, 2011 at 10:46am
I don't know why this site didn't let me reply directly at the apace of your last reply, but anyway, glad you are not too offended.  The name of the town is actually Glenwood Springs (The place where Doc Holiday died in a TB sanitarium, for all you history buffs out there.)  That probably is the same town and county that you are talking about.  I am not sure I see all good news in corellation to Tioga County in what you have recounted.  Those guys said a pump station was definitely NOT something you want in your backyard, among other things associated with the whole deal.  Makes you want to get every penny you can out of the people leasing.
Permalink Reply by Ann Ticopa on May 13, 2011 at 11:47am

Oops!  I looked up Glenwood, but typed Greenwood.  Thanks for catching my mistake and mentioning it;  what I wrote does pertain to Glenwood Springs in Garfield Co., CO. 

 

GMS limits the number of indent levels.

 

I didn't intend the comment to be good or bad news,  just factual.  According to the FAQ on the W&L website, all their work is done on contingency.  NBR's FAQ says that contingency is "most" of their clients' preference.

Permalink Reply by Brian Day on May 13, 2011 at 12:41pm
I have stirred this pot about all I dare, Ann.  I have to go buy a new push mower now.  Explain contingency to me and anyone else out there watching quietly.  thanks;   Brian
Permalink Reply by Ann Ticopa on May 13, 2011 at 1:31pm

"Contingency" should now be about the 4th post above this one ... from one day ago.

 

Hope you're not looking for a medium price side-discharge push mower.  Last year there wasn't much between the cheapest one available and a Honda. 

Permalink Reply by Brian Day on May 14, 2011 at 2:32am
Here's that funky indent thing going on again.  I found an old retired gentleman that rebuilds them and bought a decent one for $90.  I gave him the goodies out of my lawn mower bone pile for his refurbishing efforts too, so that little eye sore is gone from behind the tool shed.  If I get a year or two out of it, it is money well spent.  Personally, I refuse to spend hours every weekend hunched over a push mower with a screw driver and a wrench.  Now we are way off topic and my grass is 6 inches high.  I had better try this new baby out!  Simple pleasures for simple minds, you know.

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