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Done Deal: Chesapeake Drops Leases on 13K Acres in NY

Last week MDN told you that Chesapeake was set to release 12,000 acres of leases in the Southern Tier of New York, abandoning a legal fight to extend those leases (some of which they paid $2-3 per acre for) by using a legal concept called force majeure (see Chesapeake to Release 12K Acres of NY Leases Next Week). Major media outlets from AP to Reuters are reporting Chesapeake, as of Monday, has officially dropped those leases.

One slight update: it was actually 13,000 acres, not 12,000 acres as originally reported…
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Is Chesapeake Robbing Graves in OH Village…or Getting Robbed?

grave robberWe can see the headlines now: Chesapeake Energy is a (Gas) Grave Robber! Wait until the anti-drillers get hold of this story… Chesapeake has struck a deal with the Village of Salineville (Columbiana County), OH to lease and drill under 17 acres at the Woodland Cemetery. The deal stipulates no surface disturbance of any kind (a very good idea).

But who is robbing whom? Listen to the deal the village got: Chesapeake is paying Salineville $44,145 annually for five years, plus 15% royalties. The annual payments add up to $220,725, or if you think of it as a signing bonus stretched over 5 years, it’s $12,984 per acre. Wow!! That’s perhaps the highest per acre signing bonus we’ve heard of in the entire Marcellus or Utica Shale. Kudos to the Salineville board members who suckered negotiated the deal with Chesapeake…
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Chesapeake to Release 12K Acres of NY Leases Next Week

About a month ago, MDN told you that Chesapeake has decided to end their fight with New York landowners over extending their leases (see Chesapeake Energy Throws in the Towel on NY Shale Drilling). Although it’s taken the past month to iron out the paperwork, it seems that Chesapeake (and NY landowners) will finalize and sign an agreement “sometime next week” to release 12,000 acres of leases in Broome and Tioga counties.

Chesapeake walking away from these leases is bittersweet. Sweet because it releases landowners from old leases signed before fracking was even contemplated, allowing them to re-sign a new lease with better terms. Bitter because it indicates Chesapeake is unwilling to put up with Gov. Andrew “Ditherer” Cuomo any longer as he agonizes over whether he will or whether he won’t allow fracking…
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NARO-PA Hosting Two Meetings in NE PA in September

MDN strongly supports the great work of NARO–the National Association of Royalty Owners. The Pennsylvania chapter of NARO will host two meetings for landowners in northeastern PA over the next several weeks. The first meeting will be held in Montrose (Susquehanna County) on Sept. 10. The second meeting will be held in Laceyville (Wyoming County) on Sept. 18.

The details:
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Chesapeake Settles PA Royalty Lawsuit for Pittance: $7.5M

a pittanceIn July, MDN told you about a class action lawsuit by some Pennsylvania landowners against Chesapeake Energy over the issue of deducting certain costs from post-production when calculating royalties–costs that the landowners say are not listed in the original lease and for which Chessy does not have the right to deduct (see Some PA Landowners Mull Decision to Sue Chesapeake over Royalties). A number of landowners joined the class action lawsuit. The lawyers worked feverishly and both sides have now settled.

Chesapeake will pay $7.5 million to settle the lawsuit, to be share with the lawyers (of course) and then amongst the landowners. Apparently the settlement will benefit “several thousand leaseholders” who have the option to either accept the settlement or continue on their own by filing their own lawsuit…
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WVU Prof Says Antero Well will Generate $300K Revenue…Per Day!

pile of moneyThe Yontz 1H well may not produce at these unheard-of levels for an extended period, but heck, if a gas well is bringing in $300,000 per day in revenue, it doesn’t have to last long! That’s the staggering amount of revenue that a West Virginia University professor predicts will be produced by the monster well recently drilled by Antero Resources in Monroe County, WV (see Antero Resources Utica Well Produces Stratospheric 38.9 Mmcf/d). At the rate the gas and gas liquids are flowing from the well right now, it will bring in over $2 million per week in revenue for Antero. If royalties are 20% for the landowner, that’s $400,000 per week for the Yontz family!

With those kinds of numbers, no wonder Antero is willing to “roll the dice” and spend a half billion dollars to build a new water pipeline (see Antero Resources Rolls Dice on 1/2 Billion Dollar Marcellus Pipe)…
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Sierra Buckeye Responds: We Didn’t Default on Carroll County Lease

Last week MDN told you about a kerfuffle in Ohio between Carroll County commissioners and Sierra Buckeye, a driller with whom the county signed a lease in July 2012 for 481 acres of county-owned land (see Carroll County, OH Says Sierra Buckeye in Default on Utica Lease). The county says Sierra was supposed to drill by a certain deadline and did not do so, throwing the lease agreement “in default” and implying Sierra is subject to make extra penalty payments under the lease terms.

Sierra Buckeye contacted MDN to tell their side of the story. They claim that yes, they did ask for an extension of the lease terms until Nov. 1 of this year, but that Carroll County commissioners went silent and did not respond to multiple requests, and that no, they are not in default and don’t owe a penny more. In fact, they have canceled (or “released”) the lease per Carroll County’s request–transmitting the release last week. What miffs Sierra Buckeye is that they had to learn about the commissioners’ intentions by reading about it in the newspaper…
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OH Town Votes to Give Up 1/4 Royalties for Cash Payment Now

Should a municipality that’s leased village-owned land to a shale driller (in this case in Ohio’s Utica Shale) sell some of their future potential royalties for cash now in order to buy a firetruck? It’s not a hypothetical question. Carrollton, OH council members voted this week to do just that. Selling future earnings is nothing new: It happens with lottery winners. They win a lottery with a payout over the next 20-30 years but want (or need) the money now. So they sell their future payments to a third party for a discounted amount of cash now.

It’s one thing for an individual to do it, but quite another (in our opinion) for a municipality to do it…
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Wirt County Landowner Group Close to Deal for Huge 241K Acres

The largest Marcellus/Utica landowner group MDN is aware of is the Wirt County Oil and Gas Group, in WV (see WV Group Largest Landowner Coalition in Marcellus/Utica). The Parkersburg News and Sentinel reports the group is close to a deal to lease their considerable holdings of 241,000 acres. The group has closed its membership–no new landowners are currently allowed to join. They’ve narrowed down lease offers to two companies, although they’re not releasing the names (yet) of which companies they’re negotiating with.

A decision is due by an October 5 membership-wide meeting…
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When Landmen Go Bad: Butler, PA Landman Arrested for Fraud

rotten appleA landman for Penn-Star Energy of Butler, PA, working to secure leases for Range Resources, is accused of a huge scam.

Apparently he used fake companies and forged signatures to steal away mineral rights from some landowners in Washington County, PA–worth more than $1 million…
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Carroll County, OH Says Sierra Buckeye in Default on Utica Lease

In May 2012 Houston-based driller Sierra Buckeye signed a deal with the Muskingum Watershed Conservancy District (in Ohio) to lease 185 acres of District-controlled land for $4,500 per acre plus 20% royalties on all gas produced–really good terms. In October 2012 Sierra Buckeye signed a deal with Carroll County, OH to lease 481 acres of county-owned land for the same terms, receiving a check for over $2 million as the signing bonus. However, built into the Carroll County lease deal are penalties if Sierra Buckeye does not begin drilling by certain deadlines.

The initial deadline came and went and the county extended it. The second deadline is now past and Sierra Buckeye is asking for a third deadline (November). The county has had enough and has told Sierra Buckeye the lease contract is now in default…
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PA Director of Game Commission Double-Dipping with Gas Leases?

An extensive investigative article about the director for the Pennsylvania Game Commission, William A. Capouillez, appears in yesterday’s Philadelphia Inquirer. The article spotlights 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 signs private deals with the same companies that often work with his state agency. For one driller–Range Resources–it’s become a serious (legal) issue.
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Chesapeake Short-Changes PA Landowner on Royalty Checks

MDN has brought you a couple of stories in recent weeks about landowners suing Chesapeake Energy over royalty checks, claiming Chesapeake is playing fast and loose with post-production expenses (see Bradford County, PA Landowners Sue Chesapeake over Royalties). A new Chesapeake royalty story (below) appears on the ProPublica website. It opens with a poignant tale of yet another landowner who was apparently screwed by Chesapeake with respect to royalties. It’s maddening.

However, we have to put the story in proper perspective. ProPublica is anti-drilling through and through. They have an agenda and that agenda is to make all drillers and anyone/anything connected to fossil fuels look bad, so as you read the story below, keep that in mind. Still, if even 10% of what is reported below is true, it’s disturbing. More than ever, it’s vital that landowners have a detailed, well-spelled-out lease that’s been reviewed and tweaked by a lawyer who knows oil and gas contracts inside and out. It’s also important to monitor every royalty statement…
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Bradford County, PA Landowners Sue Chesapeake over Royalties

About a month ago, MDN told you that a couple of Scranton-area lawyers were looking for landowners with Chesapeake Energy leases who believe they’re getting the short end of the royalty stick, to participate in a class action lawsuit against Chessy (see Some PA Landowners Mull Decision to Sue Chesapeake over Royalties). At issue is how royalties are calculated–what is considered to be a post-production cost. Some landowners say Chessy is claiming too many expenses and in the process shorting payments to them.

Some landowners in Bradford County, PA have decided to join the lawsuit:
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Muskingum Watershed District: $77M in Utica Lease Revenue, So Far

There’s no doubt a change has happened at the board of the Muskingum Watershed Conservancy District (MWCD). Last year they self-imposed a moratorium on selling water to Ohio Utica Shale drillers (Muskingum Watershed Reverses Decision to Sell Water to Drillers). This year, they can’t wait to lease MWCD land to Utica Shale drillers and sell them the water to frack it (MWCD to Sell 138M Gallons of Seneca Lake Water for Utica Drilling). Why the change?

An MWCD official talked about the change in thinking for the MWCD board at a meeting last week of the Guernsey (County) Energy Coalition…
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EVEP/EnerVest Cuts Deal to Sell 22.5K OH Utica Acres for $284M

In September last year, EV Energy Partners/EnerVest put more than a half million acres of Ohio Utica Shale acreage on the market. Near the end of last year, a deal for 104,000 of those acres seemed to be almost done, but in April of this year, the deal fell apart (see EV Energy Partners Deal to Sell 104K Utica Acres Dead, What Now?). EVEP then changed gears and said instead of putting big blocks up for sale, they’ll look at selling off smaller chunks (see EV Energy: Changing from Big Deals to Small for Utica Land Sale). Looks like the change in strategy worked.

Today, EVEP announced they’ve made a new deal to sell 22,535 acres in Guernsey, Harrison and Noble counties in Ohio for $284.3 million to an unnamed buyer. According to EVEP, the deal works out to be a very high $12,900 per acre. We ran the math and came up with $12,616 per acre. Either way, EVEP is getting a LOT of money for unloading Utica Shale acreage they don’t want. This deal is scheduled to close in the third quarter–the next few months. Let’s see if this one actually happens.

The announcement from EVEP/EnerVest (with a map of the acreage sold):
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