Another Belmont County Landowner Threatened with Forced Pooling
In April MDN told you about a landowner in Belmont County, OH who had questions and objections to phrasing in a proposed lease agreement from XTO Energy that talks about “nuisance oil” (see XTO Threatens Belmont County, OH Landowner with Forced Pooling). NEVER sign a lease without running it by a competent oil & gas attorney, and ALWAYS get the sometimes obscure terminology in a lease explained before you sign it. That’s our advice. We have another story along the same lines as the “nuisance oil” story–language that energy companies can’t or won’t explain to landowners. This one also comes from Belmont County, OH–perhaps the hottest of the hot places for drilling right now in the Utica Shale. A landowner from Martins Ferry, OH says XTO offered him an eye-popping $8,000 per acre signing bonus with 20% royalties, and Aubrey McClendon’s American Energy Partners offered $6,000 per acre with 20% royalties. Both have a “market enhancement clause” in the lease. The landowner didn’t like the clause, fearing it would reduce his royalties. The landowner was told by either XTO or AEP or both (we’re not sure), that they would force pool him if he didn’t sign. By force pooling him he would not get a signing bonus at all and only a 12.5% royalty. These kinds of strong-arm tactics give the industry a black eye in our opinion…
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In February 2015, MDN did a deep dive into the issue of Pennsylvania leasing underneath rivers and streams to allow Marcellus/Utica Shale drilling (see 
Earlier this week we had some fun telling you about Hilcorp’s request to drill under a quarter of an acre of a cemetery in Columbiana County, OH (see 
Belmont County landowner Curtis Wallner doesn’t know what the term “nuisance oil” means in the contract XTO Energy is offering him to lease his 26 acres. The contract says Wallner will receive an eye-popping $8,000 per acre in signing bonus money, plus 20% royalties, MINUS revenue for “non-commercial nuisance oil.” Because XTO can’t or won’t explain it or remove it from the contract, Wallner won’t sign (can’t say that we blame him). So XTO is threatening him that they’ll take his gas anyway via forced pooling… 
A court case decided earlier this week by New York’s Court of Appeals (NY’s highest court), will, in our opinion, have a profoundly negative effect on oil and gas development in the state, forever. Or until another court case overturns it (which seems very unlikely). The case, as its core, is about the question of whether or not state action or inaction constitutes an extraordinary action, in essence an Act of God outside of the control of parties who sign a contract. Years ago landowners signed leases to allow oil and gas drilling, often for a few bucks and acre, long before Marcellus and fracking were common, household words. Then came delay after delay in New York–from the governor–and eventually a more or less semi-permanent ban on fracking. Energy companies argued that the leases they had signed could be extended until the day they are allowed to drill in the Marcellus because of “force majeure”–the concept that due to circumstances beyond our control we could not drill as we intended during the original term of the lease, usually five years. The NY Court of Appeals on Tuesday decided that the state preventing drilling does not qualify as force majeure after the original five-year period of a lease (full copy of the decision below). If the original lease was extended for some reason and then the driller was prevented from drilling during the extended time due to state laws preventing it, it’s not force majeure in the eyes of the “wise” justices in Albany…
The Vikings are Coming! Er, well, at least the Norwegians are. And they’re not coming to conquer but to drill–underneath the Ohio River in West Virginia on the border of Marshall and Wetzel counties. The West Virginia Department of Commerce has cut a deal with Norway-based Statoil which allows the company to drill and frack for oil and natural gas on 474 acres thousands of feet beneath the Ohio River. What are the lease terms? An average price of $8,732 per acre with 20 percent production royalties. That translates into a signing bonus of $4.14 million. And that’s not all. WV is near to signing a deal with Noble Energy and Gastar Exploration on two other Ohio River tracts that will provide lease bonuses of $4.9 million and $749,000 (respectively) along with 20% royalties…
A change in strategy? The Wheeling News Register is reporting an uptick in the purchase of mineral rights in the Upper Ohio Valley area. If a landowner owns both the surface and mineral rights, the typical situation is that the landowner will lease the mineral rights to an energy company for a certain period of time, receiving an up-front signing bonus. If drilled, the landowner will receive ongoing royalties from any gas (or oil) produced. But in some cases, instead of leasing, energy companies are buying the mineral rights. That is, the mineral rights become separated from ownership of the land on the surface. The energy company then owns the mineral rights, along with the right to use a bit of the surface to locate a drill pad and wells. The landowner selling the mineral rights gets a higher initial signing bonus by selling the mineral rights as opposed to leasing. But they also get zero royalties when selling the mineral rights. It becomes a decision between a little more money now, or a lot more money later. What kind of money are we talking about?…