A husband and wife in Brooke County, West Virginia are suing to have their 5 year-old lease, which is now expired and up for renewal, nullified so Chesapeake (now the owner of the lease) cannot automatically renew it as they are attempting to do.
Increasingly landowners who signed leases that are now expiring after a customary 5 year period face the same issue—and drillers are trying to lock them in under the terms of lease for a new period of time.
Here’s the story of Ramon and Lois Bowen:
A Brooke County couple who claim they were duped into leasing their land to a gas company for $50 per acre in 2007 wants a judge to declare that the lease expired and punish the operators they say took advantage of them.
Ramon and Lois Bowen sued Oklahoma-based Chesapeake Appalachia, Pennsylvania-based Range Resources and Texas-based Statoil USA Onshore Properties last month in Brooke County Circuit Court.
None of the companies has yet filed a response to the allegations, but on Monday, Chesapeake had the case transferred to U.S. District Court in Wheeling.
The Bowens said that five years before the profit potential of the Marcellus and Utica shale gas reserves was common knowledge, a land man for Range talked them into leasing 53 acres for what they now know is far less than market value.
They signed a deal for $50 per acre, with rental payments of $7 per year and a 14 percent interest in royalties, amounts they say are "so low as to shock the conscience."
Julie Archer of the West Virginia Surface Owners Rights Organization said Tuesday those figures are outrageous.
Some Northern Panhandle residents have gotten as much as $5,000 an acre, she said, and gas companies are required by state law to pay at least 12.5 percent in royalties. Some people have negotiated percentages in the 20s.
"They really got taken advantage of," Archer said of the Bowens.
The Bowens’ complaint said the lease also contains other terms that are "lopsided and oppressive," improperly favoring the operators.*
The deal the Bowens signed was originally with Range Resources. The lease was later sold to Chesapeake Energy and Chesapeake partner Statoil (a Norwegian company).
In 2010, Range signed the lease with the Bowens over to Chesapeake and Statoil. Chesapeake, which controlled 73 percent of the lease, then tried in January to extend the lease another five years.
The Bowens say they didn’t cash the $2,655 bonus check that Chesapeake offered. Nor did they negotiate that amount.
Their attorney, Dan Guida, contends the lease expired Jan. 29, and Chesapeake cannot unilaterally extend it. Guida said the language regarding renewal of the lease is ambiguous and suggests the company is obligated to offer a deal at current market value, not merely renew the old terms.
Any renewal, the lawsuit says, "requires a meeting of the minds … but no such meeting of the minds existed or exists."*
*The Intelligencer/Wheeling News-Register (Jun 13, 2012) – Couple Wants Lease Tossed