Lease & Royalty Payments

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    2nd Wayne Natl Forest Lease Sale Hauls in $5.2M, Double Expectations

    After 10 loooooong years of waiting, the Bureau of Land Management (BLM) finally auctioned its first round of property leases for shale drilling in Wayne National Forest (WNF)–located in Ohio (see BLM Auction Leases 17 Parcels, 719 Acres in OH Wayne Natl Forest). The BLM plan was to auction 33 parcels totaling 1,600 acres. As it turns out, only 17 parcels totally 719 acres actually got auctioned. At the last minute the BLM withdrew 881 acres (16 parcels) because there are remaining issues with ownership title of the mineral rights. The 719 acres was all leased by noon and brought bids ranging from $2,000 to $5,000 per acre. Yesterday the second round of properties in WNF were auctioned–an additional 1,180 acres. BLM was hoping to to get at least $2 million from the auction. They got $5.2 million! The lowest price was for a 5-acre plot that sold for $1,002 per acre (total $5,010). The highest price was an eye-popping $10,001/acre for 39.68 acres (total $396,840). Yikes! Between the first and second auctions, 1,840 acres have been auctioned for a total of $6.9 million. Up to 40,000 acres total may, at some point, be auctioned. The next auction is scheduled for June 22. Here’s what we know about the auction that closed yesterday (we have a list of the properties auctioned and the winning bids)…
    Read More “2nd Wayne Natl Forest Lease Sale Hauls in $5.2M, Double Expectations”

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    OH Court Says Grandkids Can Claim Mineral Ownership Under DMA

    MDN has previously highlighted the importance of last year’s Ohio Supreme Court decision with regard to the Ohio Dormant Mineral Act (DMA). In September 2016 the OH Supreme Court ruled in three DMA cases, saying all of the other cases come under those three (see Important: OH Supreme Court Finally Rules on Dormant Mineral Act). Following that ruling, we brought you insights on what it means from international law firm Jones Day (see One More Look at Important OH Supreme Court DMA Decision). We later ran a copy of an analysis done by attorney David Wigham, who said, “[T]he landscape regarding title and ownership to mineral interests in Ohio has significantly changed” (see Expert Says OH DMA Decision “Significantly Changed” Mineral Rights). The ramifications of the Supreme Court’s decision continues–and various aspects of the now-settled law are still, well, getting settled. Under the DMA if a surface landowner advertises his or her intent to reclaim mineral rights (when the rights have been dormant for period of years), the rights owners have a certain amount of time to respond to reassert their ownership. But what if the original rights owners are now dead. Can their heirs, as in grandchildren, claim those rights? Under a case just decided in Ohio’s Seventh District Court of Appeals, the answer to that would be, “Yes”…
    Read More “OH Court Says Grandkids Can Claim Mineral Ownership Under DMA”

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    WV Hare Krishnas Settle with Rover Pipeline, Crossing Commune

    Here’s an interesting story. A religious commune of Hare Krishnas in Marshall County, WV steadfastly refused to sign an easement with Rover Pipeline to allow the pipeline across ~3,000 feet of commune-owned property. Rover had offered the Krishnas $7,000 for the easement, but no dice. You may recall that the Krishnas have no problem accepting oil and gas money, and have done so by leasing their land for shale drilling–even though the official view of the Krishnas is that “gas drilling is exploitative, that it is unsustainable and ‘contributes to the culture of death and toxicity’” (see WV Hare Krishnas “Purify” Gas Money to Benefit Commune). Apparently when there’s enough money involved, official Krishna doctrine changes. Back to Rover. On Tuesday, the Krishnas filed a lawsuit in federal court to block Rover from using eminent domain to enter the property to cut trees–a lawsuit based on religious grounds. A hearing was held on Thursday in federal court in Wheeling. The Krishnas loaded a bunch of followers into a fossil fuel-belching van to cart them to the court house to protest and make a scene. Lots of publicity. The judge granted a brief recess to allow the two sides to talk, and following the recess the Krishnas and Rover announced they had signed a deal. The official line is that Rover is changing the route of the pipeline to avoid certain holy places on Krishna property. The pipeline will now traverse MORE Krishna property–nearly twice as much more (5,300 feet). So much for objecting to the pipeline based on “religious” grounds, right? What is not mentioned, conspicuously so, is how much more money the Krishnas were able to get out of Rover, so Rover could make the bad publicity go away…
    Read More “WV Hare Krishnas Settle with Rover Pipeline, Crossing Commune”

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    PA Expects $80M in Royalties from Drilling on State Land in 2017

    One of the big success stories about Marcellus drilling in Pennsylvania is the money generated from state land leased for oil and gas drilling. You may recall two governors ago Democrat Gov. Ed Rendell was hell bent for leather in leasing state-owned land for drilling ON said land. After his voracious appetite for money was sated and his Democrat cronies in the legislature spent (“blew”) all $444 million of it, Rendell tried to pretend that he’s an environmentalist by slapping an executive order–a moratorium–on any more leasing of state-owned land. Hypocrite. The next Governor, Tom Corbett, lifted that moratorium with an executive order of his own so that another $75 million of badly needed revenue could be raised by leases for drilling under (not on) state land. Then along came the disastrous Tom Wolf. He immediately signed a new executive order banning any new leases on state-owned land (see PA Gov Wolf Signs Exec Order to Ban Drilling Under State Land), cutting off an important new revenue stream. However, a lot of state-owned is, as we said, already leased. And some of it has been drilled on/under–and it produces a prodigious amount of royalties. The PA Dept. of Conservation and Natural Resources (DCNR), which oversees PA’s state land, says they expect to see around $80 million in royalty payments this year. They also report still having issues with some drillers over shorting royalty checks. DCNR says they are owed “hundreds of thousands of dollars” in shorted royalty money…
    Read More “PA Expects $80M in Royalties from Drilling on State Land in 2017”

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    Rice Energy Spending $1.5B in M-U, Leasing 15K Acres in 2017

    Rice Energy turned in it’s 2016 update this week, along with a look at what’s coming in 2017. As for top line financial numbers, Rice lost about the same in 2016 as they did in 2015: A loss off $298 million in 2016 vs. a loss of $291 million in 2015. Although Rice owns and drills on a small acreage position in the Texas Barnett Shale, the vast majority of their focus continues to be in the Marcellus/Utica. The company plans to spend $1.5 billion in 2017, broken out as follows: $1.035 billion for drilling and completion activity in the Marcellus/Utica shale plays; $225 million for land purchases; and $315 million spent by Rice Midstream ($255 million for gas gathering and compression and $60 million on water services). With that money, Rice expects to drill 75 new wells and complete another 55 wells in the Marcellus in 2017. In the Utica, Rice plans to drill 20 new wells and complete 20 wells in 2017. Land acquisition will happen in three counties: Greene and Washington Counties (in PA), and Belmont County (in OH). How much will they pay, on average, to lease new acreage? We have an answer for that…
    Read More “Rice Energy Spending $1.5B in M-U, Leasing 15K Acres in 2017”

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    PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time

    Third time’s the charm? The Pennsylvania General Assembly convenes for two-year sessions. Almost six years ago during the 2013-2014 session of the General Assembly, PA Rep. Garth Everett introduced “minimum royalty” legislation that would guarantee PA landowners would get minimum royalty payments of 12.5%–regardless of any kind of post-production expenses. It was called House Bill (HB) 1684 and it failed to even come to the floor for a vote (see PA Royalty Bill 1684 Off the Agenda, Likely for Rest of 2014). Everett re-introduced it during the 2015-2016 session, renamed HB 1391. Once again, near the end of the term, it failed to get a full vote (see PA Royalty Bill Dead for Another Year – Supporters Vow to Fight On). Everett is not giving up. Last Friday he re-introduced the bill for the third time, this time called HB 557. Does it stand a chance?…
    Read More “PA Rep. Garth Everett Reintroduces Minimum Royalty Bill, 3rd Time”

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    PA Landowner Wins Case Against Chesapeake re Royalty Deductions

    Paul Sidorek, an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling, is also a landowner himself. In 2009 Sidorek leased 145 acres, a lease that was eventually sold to Chesapeake Energy. Because of the troubles encountered by others, Sidorek wrote into his lease a 20% royalty and made sure the lease explicitly stated that no expenses could be deducted from the sale of the gas produced on his property. That is, NO post-production expenses could be deducted. And yet, Chesapeake disregarded the lease and deducted as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year (see Chesapeake Short-Changes PA Landowner on Royalty Checks). Sidorek fought Chesapeake in court, and ended up in arbitration. The arbitrator has just ruled–in Sidorek’s favor. The good news is that a PA landowner has gotten some justice against Chesapeake’s sleazy practice. The bad news is that it’s not a precedent and can’t be used in other court cases…
    Read More “PA Landowner Wins Case Against Chesapeake re Royalty Deductions”

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    PA Case Highlights Risk in Using Non-Lawyer to Negotiate Lease

    In August 2013 an extensive investigative article about a then-director for the Pennsylvania Game Commission, William A. Capouillez, appeared in the Philadelphia Inquirer (see PA Director of Game Commission Double-Dipping with Gas Leases?). The article spotlighted a potential conflict of interest between Capouillez’s day job and his moonlighting side job as an agent for property owners who lease their land for oil and gas development. The issue? He was signing private deals with the same companies that often work with his state agency. The State Ethics Commission did a lengthy investigation and three years later, the Commission levied a $75,000 fine, which Capouillez agreed to pay (see Former PA Game Commissioner Fined $75K for Lease Moonlighting). Although he paid the fine, Capouillez remained defiant and said the fine is a tiny fraction of the original fine sought–an indication of his vindication. There is new litigation involving Capouillez. One of the leases he negotiated was on behalf of the Laurel Hill Game and Forestry Club with Range Resources. The way Capouillez constructed his leases was that he would get a cut, a percentage, of any lease signing bonus and ongoing royalty payments, in return for the leases he brokered. Range never drilled on Laurel Hill’s property, but they did start to push dirt around a few hours before the lease expired as a way of holding the acreage (some would call their action a less-than-honorable practice). Laurel Hill sued Range and the lawsuit was later settled by drafting up a new lease with new terms. The new lease/terms were not brokered by Capouillez and he was cut out of the deal–so Capouillez sued both Laurel Hill and Range. The moral of the story, according to lawyers writing about the case, is to never use non-lawyers to represent you in lease negotiations…
    Read More “PA Case Highlights Risk in Using Non-Lawyer to Negotiate Lease”

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    EQT Snaps Up Another 14K ‘Core’ Acres in WV for $130M

    EQT, one of the biggest and best drillers in the Marcellus/Utica, issued their fourth quarter and full year 2016 update yesterday. As is typical when issuing the updates, EQT’s top brass held a conference call with analysts to discuss results and take questions. In reading through a transcript of the call, one of the most interesting passages (for us) was in the prepared comments by incoming EQT CEO (currently president) Steve Schlotterbeck. In a brief passage excerpted below, Steve provides a quick update on several items: the Mountain Valley Pipeline project, EQT’s Utica drilling program, and the fact that “this week” EQT has purchased an additional 14,000 “core” West Virginia acres in Marion and Monongalia counties for $130 million, which works out to be $9,286 per acre…
    Read More “EQT Snaps Up Another 14K ‘Core’ Acres in WV for $130M”

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    EQT Catches Big Break in WV Supreme Court re Royalty Deductions

    In December MDN reported on the huge West Virginia Supreme Court decision against driller EQT that disallows EQT from deducting post-production expenses from royalty checks, even with signed contracts in place (see WV Supreme Court Rules EQT Can’t Deduct P-P Costs from Royalties). Specifically, the justices in their ruling said that drillers can “not deduct from that (royalty) amount any expenses that have been incurred in gathering, transporting or treating the oil or gas after it has been initially extracted, any sums attributable to a loss or beneficial use of volume beyond that initially measured or any other costs that may be characterized as post-production.” We can’t stress just how big a deal this is. So the following news is equally as big: In a rare and unusual move, the same WV Supreme Court has agreed to rehear the case…
    Read More “EQT Catches Big Break in WV Supreme Court re Royalty Deductions”

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    PA Royalty Bills Approved by Senate Panel, Sponsor Chides House

    Yesterday a Pennsylvania State Senate panel met to discuss two bills that would help landowners in their quest for more visibility into how royalties are calculated–and what kinds of expenses are deducted (see 2 Royalty Bills Focus of PA Senate Hearing Today). As we said yesterday, Senate Bill (SB) 138 will allow landowners the right to review drilling company records to verify proper royalty payment. It also requires drillers to pay royalties within 90 days of production. SB 139 prohibits drillers from “retaliating” against a landowner who questions royalty payments by canceling the lease or stopping drilling activity. Both bills were unanimously approved by the Senate panel and will go to the full Senate for a vote. However, as the bill’s prime sponsor Sen. Gene Yaw indicated, the Senate is not the problem. Last session the same thing happened–speedy passage by the Senate. Then the bills got bogged down in the PA House because they were attached to another bill that guarantees a minimum royalty of 12.5% regardless of post-production costs. That bill has proven toxic–vigorously opposed by the drilling industry. Sen. Yaw’s not-so-subtle message to the House: Don’t repeat the same mistake this year. Let these bills stand on their own…
    Read More “PA Royalty Bills Approved by Senate Panel, Sponsor Chides House”

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    2 Royalty Bills Focus of PA Senate Hearing Today

    PA Sen. Gene Yaw

    Last week MDN brought you the news that several northeastern Pennsylvania counties are investigating an alliance to push for passage of a bill like last session’s House Bill (HB) 1391 to guarantee landowners receive a minimum 12.5% royalty regardless of post-production costs (see Northeastern PA Counties Explore Alliance to Pass Royalty Reform). However, landowners and those who support them in the PA legislature are not pinning all hopes on a guaranteed minimum royalty bill. Also proposed in the last session (2015/2016) were two bills meant to greatly assist landowners in their quest to monitor royalty payments and how they are calculated. In January 2015 (almost exactly two years ago) PA Senator Gene Yaw, who represents several counties in northeast PA, re-introduced Senate Bills (SB) 147 & 148 (see PA Senate Reintroduces Two Marcellus Royalty Bills, SB 147 & 148). “Re-introduced” in 2015 means both bills were introduced in the previous session (in 2013/2014). SB 147 would have allowed landowners the right to review drilling company records to verify proper royalty payment. It would also have required drillers to pay royalties within 90 days of production. SB 148 prohibits drillers from “retaliating” against a landowner who questions royalty payments by canceling the lease or stopping drilling activity. Both bills were embraced by the Pennsylvania chapter of the National Association of Royalty Owners (NARO). They both passed the Senate and stalled in the House. Now, for the third time (going on the sixth year) Sen. Yaw has re-introduced both bills again. This time they are called SB 138 & 139 (full copies below). Sen. Yaw isn’t wasting any time–he’s holding a hearing today to discuss both bills. Will this time be successful?…
    Read More “2 Royalty Bills Focus of PA Senate Hearing Today”

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    Northeastern PA Counties Explore Alliance to Pass Royalty Reform

    One of the issues that isn’t going away is the demand by landowners in some Pennsylvania counties, like Bradford, for lawmakers in the state to pass a bill that guarantees them what they believe they are already guaranteed–a 12.5% minimum royalty, based on a 1979 law that states they should get such a royalty. We’ve extensively covered what we call a civil war between two parties who are otherwise friendly toward each other–landowners and shale drillers. Last year the issue came to a head with House Bill (HB) 1391 (see our list of stories here). In a nutshell, landowners say Chesapeake Energy and some other drillers are taking post-production deductions out of landowners’ royalty checks, resulting in royalty payments far below 12.5%. In some cases landowners are receiving bills for money owed to the driller–after the driller pulled the gas out of the ground! Who in their right minds leases land for drilling so they can PAY the driller! It is an outrage and landowners want it stopped. Drillers, on the other hand, say you can’t just change contracts after they’ve been signed, punishing the entire industry for the bad actions of a few. Drillers say the proper response is for landowners to sue the bad apples. Frankly, it’s all a mess. The new news is that landowners from Bradford and several other northeastern PA counties, tired of being outmaneuvered by drillers, are actively talking about forming an alliance to try and garner enough support in Harrisburg to get a bill like HB 1391 passed this year…
    Read More “Northeastern PA Counties Explore Alliance to Pass Royalty Reform”

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    Cabot Offers Lowball $1K Signing Bonus in Heart of Marcellus

    Cabot Oil & Gas has a major presence in Susquehanna County, PA, not far from where MDN is written (just across the border). In fact, Susquehanna County, located in the northeastern tip of PA, is the only county in PA where Cabot drills. It is a “dry gas” zone–and extremely productive. By our reckoning, Cabot alone produces something like 3% of the entire natural gas supply for the entire country. One driller, in one county. It is an astonishing feat! Susquehanna County is rural. The entire county has 43,000 residents (11,700 families). The largest “city” in Susquehanna County is the county seat of Montrose, population 1,600 (750 households). Until now, there has been drilling all around the edges of Montrose, but no drilling directly under the city. That may soon change. Cabot has made an offer on 10.76 acres of land located within city limits. Cabot is offering a lowball $1,000 per acre as a signing bonus, plus 15% royalties. Not long ago Cabot cut deals for $3,500 per acre and 18.75% royalties. It appears this is just an opening negotiating tactic…
    Read More “Cabot Offers Lowball $1K Signing Bonus in Heart of Marcellus”

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    Thai Company Banpu Makes 2nd Investment in Northeast Marcellus

    1/18/17 Update: The seller has now been identified as Chief Oil & Gas. See the appended press release below from Banpu’s U.S. partner Kalnin Ventures.

    Last May, Range Resources sold its portion of a joint venture in northeast Pennsylvania (see Thai Company Buys Out Range Resources’ JV in NEPA for $112M). Banpu Pcl, Thailand’s largest coal producer, invested $112 million to purchase Range’s Marcellus non-operated JV operations in Bradford County, PA. The “Chaffee Corners Joint Exploration Agreement” gave Banpu an ownership share in 62 producing wells and another 14 wells waiting on completion, and a share in 170+ more drilling locations. Talisman is the operator of the wells and the company that does the drilling in the JV. Banpu liked it so much, they’re back. The company announced today it has acquired a 10.24% stake in more Marcellus leases in northeastern PA for $63 million. The information we’re able to locate does not specify who the driller is in which Banpu is sinking money, but the acreage is located near the first deal–presumably also in Bradford County…
    Read More “Thai Company Banpu Makes 2nd Investment in Northeast Marcellus”

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    Gas Leases Expiring “Daily” in Columbiana County, OH

    Click for larger version

    An attorney who actively represents leaseholders in Columbiana County, OH says “lease expirations are happening daily” in the county. Leases that were signed five years ago (or longer) are coming due in Columbiana, one of the first counties to be targeted in the Utica Shale. Some of those leases are getting renewed–typically leases with Chesapeake Energy. Others, especially in the northern part of the county, are not getting renewed. Here is a rundown on what is happening with lease renewals in Columbiana…
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