Windsor, NY Landowners Receive $2,750 per Acre and 18 Percent Royalties in Lease Deal with Inflection Energy

Earlier this year, a group of 40 Town of Windsor (NY) landowners with a cumulative 3,000 acres signed a gas lease agreement with Denver-based Inflection Energy to allow Marcellus Shale drilling when New York’s moratorium is eventually lifted. The landowners expected their signing bonus checks by March 3rd, but that didn’t happen due to delays by the lawyers (see MDN story here). The delays are now over the the Windsor landowners have started receiving their bonus checks totaling $8.25 million.

After the [legal] details were ironed out, the basic terms of the deal remain the same: Landowners will net $2,750 per acre in bonus payments, and an 18 percent royalty payment on any natural gas extracted from their land.

Landowners signed onto the [amended] deal May 18, and started to receive checks on Tuesday after the conclusion of a wait period.

Elmira-based lawyer Richard Gerard, who represented the group, said the agreement represents a thaw in the leasing environment in the state.

"This is the first market-rate transaction in New York since the moratorium went into effect three years ago," he said. "Finally, after three years, you’ve got an at-market transaction with an excellent lease."

Gerard drew a contrast between the group’s deal and the last major leasing agreement in the Southern Tier, reached between Inflection and 115 landowners in the South Maine Millennium Coalition in early 2010.

In that deal, the $6,000 per acre bonus payments were staggered over six years and landowners received 20 percent royalties "subject to certain deductions."

"This is a traditional oil and gas lease format," Gerard said of the Windsor group’s lease. "The money [from the South Maine deal] is substantially up front."*

The group of Windsor landowners signing the lease are a breakoff group from the larger Windsor & Colesville Oil and Gas Lease Coalition, which includes about 80,000 acres and is one of largest landowner groups in Broome County. The smaller group wanted to move forward with a leasing deal now.

*Binghamton Press & Sun-Bulletin (May 24, 2011) – Windsor group finalizes huge gas lease deal

  • Anonymous

    Ok guys, a newbie asks the question about leases. Are these numbers per year, or for a set number of years, $2500 per acre for the entire lease time or every year of the lease?

  • Jim Willis

    No problem Gary. Almost always this is a one-time payment for the term of the lease. Most times terms are 5 years. So it would be (in your example) $2500 per acre, add it all up, that’s a one-time lump sum payment. If the lease expires after 5 years and the company has not drilled, you can re-lease with them or someone else. Although the lease payment is nice, the “real” money is in royalties. Then you go, potentially, from thousands or tens of thousands of dollars to potentially hundreds of thousands (depending on the acreage, # of wells, etc.). Hope that helps.

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