Lease & Royalty Payments

Lease & Royalty Payments | Pennsylvania | Statewide PA | Utica Shale

NARO-PA Meeting: Marcellus Decline Rates, Utica Shale in PA
March 28, 2014March 28, 2014

Yesterday kicked off the first day of the annual National Association of Royalty Owners (NARO) Pennsylvania chapter annual convention in State College, PA. There were (at least) two major presentations of consequence at the meeting for landowners in PA in particular, but also for NY and other states too. The first was a presentation by Steve Karabin, CEO of the Rhino Group and Jim Ladlee, associate director with Penn State Marcellus Center for Outreach and Research, on the topic of Marcellus well decline rates. You may recall both Steve and Jim co-authored a new section in the most recent Marcellus and Utica Shale Databook (Volume 3 of the 2013 series). They presented their findings on well decline rates at the meeting yesterday, along with unveiling a new royalty calculator that landowners can use. Read below for their rule-of-thumb numbers all landowners with Marcellus wells can use to estimate royalties.

Second was an intriguing talk by Penn State professor and Marcellus Shale expert Dr. Terry Engelder–only this time he was talking about the Utica Shale in PA. Engelder explained where he believes the Utica may or may not be economically drillable in PA–and why. Interesting stuff. See some of his talk below too…
Read More “NARO-PA Meeting: Marcellus Decline Rates, Utica Shale in PA”
Antero Resources | Belmont County | Energy Companies | Guernsey County | Harrison County | Lease & Royalty Payments | Ohio | Utica Shale

MWCD Close to Signing Utica Lease for Piedmont Lake, OH Property
March 26, 2014March 26, 2014

In early January MDN brought you the delicious news that the Muskigum Watershed Conservancy District (MWCD) is planning to lease a large tract of District-owned land in and around Piedmont Lake (in Belmont, Guernsey and Harrison counties) for Utica Shale drilling (see MWCD Open House on Leasing Piedmont Lake Property for Drilling). The original 6,600 acres has now turned into 6,700 acres and the lessor will be Antero Resources, according to an announcement issued by the MWCD last Friday.

According to the MWCD board, they will likely vote on the lease at their next meeting scheduled for April 18. An update on the Piedmont Lake lease from the MWCD is below, along with the draft copy of the lease from Antero. Noticeably missing from the draft lease are the terms…
Read More “MWCD Close to Signing Utica Lease for Piedmont Lake, OH Property”
Belmont County | Carroll County | Columbiana County | Guernsey County | Harrison County | Lease & Royalty Payments | Monroe County | Noble County | Ohio | Utica Shale | Washington County (OH)

Company Targets OH Landowners – Buy Future Royalties for Cash Now
March 26, 2014March 26, 2014

Gateway Royalty is back and has $58.5 million on the bank they can’t wait to give landowners in the Ohio Utica Shale in return for future royalty payments. MDN told you about Gateway last summer. They were the company that the town of Carrollton, OH sold 1/4 of their royalty rights to (see OH Town Votes to Give Up 1/4 Royalties for Cash Payment Now). The way it works, in brief: Gateway pays landowners a lump sum now in return for the right to receive that landowner’s future royalty payments for years to come. You (the landowner) get your money now, they (Gateway) get the money you would have gotten dribbled out over time. Of course the money you receive now is discounted and in all likelihood far less than you would have gotten if you had waited just a few years (the bulk of royalty payments come in the first four years). It’s a bit of a gamble by both parties because no one really knows how much a well will produce.

Still, there are reasons why someone may want to get cash up front–pay off debt, ill health, etc. So in that vein, we bring you the latest press release from Gateway announcing they are ready, willing and waiting to give Ohio Utica Shale landowners money now. Specifically they are targeting landowners in Washington, Noble, Guernsey, Monroe, Belmont, Harrison, Carroll and Columbiana counties…
Read More “Company Targets OH Landowners – Buy Future Royalties for Cash Now”
Allegheny County | Energy Companies | Lease & Royalty Payments | Pennsylvania | Range Resources Corp

Allegheny Co Exec Bests Range on Deer Lakes Park Lease Deal
March 20, 2014March 20, 2014

In December MDN told you that Allegheny County, PA was close to a deal with Range Resources to all drilling under (not on) Deer Lakes Park (see Range’s Big Money Deal to Drill Under Deer Lakes Park in SW PA). The deal at that time called for a $3.5 million signing bonus and a royalty of 17%, meaning over time the county stands to gain something like $70 million.

The final deal has been struck between Range and County Executive Rich Fitzgerald. That old Rich, he’s wily and a tough negotiator. The final deal is a $4.7 million signing bonus and 18% royalties. Now it’s up to the Allegheny County Council to approve it. Let’s see–$70 million+ on one hand with no environmental impacts, or please a few loud-mouthed hippies who watched Gasland and don’t want us to drill. Tough decision…
Read More “Allegheny Co Exec Bests Range on Deer Lakes Park Lease Deal”
Industrywide Issues | Lease & Royalty Payments | Pennsylvania | Regulation | Statewide PA

PA NARO Alert: Tell Your State Rep to Vote YES on HB 1684
March 19, 2014March 19, 2014

The Pennsylvania chapter of the National Association of Royalty Owners (NARO) sent out a flash alert email yesterday asking members to contact their state representatives to encourage a “yes” vote on House Bill (HB) 1684–the Guaranteed Minimum Royalty Act. This bill is partially in response to the apparent gouging Chesapeake Energy has done with respect to royalty payments. A vote may come as early as TODAY.

Here is the text of the email from PA NARO president Jackie Root:
Read More “PA NARO Alert: Tell Your State Rep to Vote YES on HB 1684”
Chesapeake Energy | Energy Companies | Lease & Royalty Payments | Ohio | Statewide OH | Utica Shale

OH Landowners Question Chesapeake’s Royalty Calculations
March 18, 2014March 18, 2014

The bad news for Chesapeake just keeps rolling in. Not only are landowners in Pennsylvania up in arms over minuscule royalty checks (see Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans), so too are Ohio landowners now questioning whether or not they’re getting the shaft from Chessy.

As we mentioned last week, the anti-drilling site ProPublica published an “investigative” article trying to lay the blame for Chesapeake’s current bad behavior on the previous CEO (and founder) Aubrey McClendon (see Chesapeake Shafting Landowners out of Royalties Mess Gets Messier). In Ohio Chessy shows a big, fat zero in the column for post-production expenses deducted from the royalty payment. Some say that’s a lie…
Read More “OH Landowners Question Chesapeake’s Royalty Calculations”
Chesapeake Energy | Energy Companies | Lease & Royalty Payments | Pennsylvania | Statewide PA

Chesapeake Shafting Landowners out of Royalties Mess Gets Messier
March 14, 2014February 19, 2015

Corporate raider Carl Icahn is likely developing a case of heartburn over his investment in Chesapeake Energy. He’s been responsible for cutting thousands of jobs and selling off billions in assets at Chesapeake, but there is a developing situation he can’t control that will definitely affect his pocketbook. Pennsylvania’s landowners are up in arms over what they perceive to be theft of their royalty payments by Chesapeake Energy. We told you about the recent rally in Bradford County, and about Gov. Corbett and others who invited PA’s anti-drilling Attorney General, Kathleen Kane, to get involved (see Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans). It’s now a royal mess and likely to get messier as time goes on.

The sorta short version of the story is this: A few years ago Chesapeake was hammered by bad press (because the media hates Aubrey McClendon, then CEO). Chessy’s stock tanked and with lots of debt, McClendon couldn’t find any more money to borrow at a reasonable rate. So McClendon invented a clever scheme to re-interpret leases that would allow Chessy to deduct certain pipeline fees from landowner royalties. The expenses would be paid to Access Midstream (spun off from Chesapeake) in return for Access giving Chessy a big, fat pile of cash/investment. The inflated pipeline fees paid to Access–now deducted from royalty checks–would generate enough revenue for Access to recoup their investment in Chessy. It was a clever way of extracting money from landowners by doing it through the intermediary of a pipeline company. At least that’s the theory spun by the anti-drilling ProPublica/Daily Beast. Is it true?…
Read More “Chesapeake Shafting Landowners out of Royalties Mess Gets Messier”
Anti-Drilling/Fossil Fuel | Butler County | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Pennsylvania | Rex Energy

Earth to Mars (School District) – Time to Check into Funny Farm?
March 13, 2014March 13, 2014

We wonder what they teach at the Mars Area School District (Butler County, PA). One thing they don’t teach is logic and scientific inquiry. Probably too busy showing American Idol re-runs to the kiddies to bother with heftier education pursuits. How else can you explain a school board, and parents, who turn down $1 million+ to lease 175 acres of school land for shale drilling that would happen more than a mile below solid rock with no adverse affects and with no surface disturbances? We’d call it mass insanity (time to check into the local psychiatric hospital)–but that would be unkind.

Tuesday night the Mars Area School District school board voted 9-0 to reject an offer from Rex Energy to lease the school’s property, which sits next to private property Rex has already leased and will still drill on anyway. The Rex offer was $4,000 per acre up front as a signing bonus, and another $330,000 in advance royalties, for a grand total of $1 million. Drilling will go on all around the school, but those sharp-as-a-tack board members have now denied the children $1 million they could of had. Hey, it’s always for “the children,” right? Heartless board. The anti-drillers present for the vote were positively orgasmic that the school board voted it down unanimously. Go figure…
Read More “Earth to Mars (School District) – Time to Check into Funny Farm?”
Chesapeake Energy | Encana Energy | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Michigan | Statewide MI

Reuters Smiles: MI Criminal Court to Charge Chesapeake & Encana
March 6, 2014March 6, 2014

In June 2012 MDN brought you the story that of possible collusion between Chesapeake Energy and Encana over lease offers in the state of Michigan. At the time we pointed out that the Reuters news service had “obtained” confidential emails that supposedly show such collusion, and we asked the question, how did Reuters come by those emails (see Did Reuters Break the Law with Latest Chesapeake Story?). It was obvious Retuers was trying to take down Aubrey McClendon and by extension Chesapeake Energy. Aubrey is now gone from Chesapeake and Reuters’ favorite corporate raider, Carl Icahn, now pulls the strings of the new CEO, Doug Lawler.

Not long after the whole story burst onto the scene, Encana did their own internal investigation and cleared themselves (see Encana Says Investigation Shows No Collusion with Chesapeake). That was Sept. 2012. Reuters is now back and announcing that the attorney general in Michigan will now file, two years later, criminal charges against both Chesapeake and Encana on March 19 in Michigan state court. We’re sure Reuters is smiling…
Read More “Reuters Smiles: MI Criminal Court to Charge Chesapeake & Encana”
Belmont County | Lease & Royalty Payments | Ohio | Utica Shale

St Clairsville RFP to Lease 195 Utica Acres Comes & Goes, No Bids
March 5, 2014March 5, 2014

St. Clairsville (Belmont County), OH put out a request for bids on 195 acres of city-owned land. They want to lease the land for shale drilling. The RFP sought bids from drillers and contained these minimum terms: $7,300 per acre signing bonus, and 20% royalties. Yikes! Apparently St. Clairsville believes they hold all the cards. The deadline for bids was yesterday. How many bids did they get? Zero. Nada. None. But city leaders aren’t discouraged. Apparently putting it out for bid was a requirement under Ohio state law–a dance that they had to dance, motions they had to go through–and now that the RFP has come and gone, the real negotiations will begin. And make no mistake, drillers are interested in leasing the property. It sits in one of the sweetest sweet spots in the Utica Shale.

Here’s the St. Clairsville RFP story, and a good roundup showing the terms other municipalities have recently gotten for leasing their land…
Read More “St Clairsville RFP to Lease 195 Utica Acres Comes & Goes, No Bids”
Chesapeake Energy | Energy Companies | Greene County (PA) | Lease & Royalty Payments | Pennsylvania

Landowner Discovers Chesapeake has $500M Lien on His Property
February 24, 2014February 24, 2014

This one has to go in the “read your contract carefully before you sign, and never, ever sign without a lawyer” category. A Greene County, PA landowner leased his property to Chesapeake Energy a few years ago. His land hasn’t yet been added to a drilling unit. He recently wanted to refinance his mortgage, but the credit union phoned him up with a “small” problem: Chesapeake has put a $500 MILLION lien against the lease his property. Normally the lien is against the oil and gas rights, but in the case of this landowner, it’s not specified in the contract, meaning the lien is against the property itself. And he’s not able to refinance.

Notice the landowner’s advice to other landowners in the last sentence of this story (and TAKE HEED)…
Read More “Landowner Discovers Chesapeake has $500M Lien on His Property”
Chesapeake Energy | Elexco Land Services | Energy Companies | Energy Services | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania | Statewide PA

Do PA Drillers have Law on Their Side in Royalty Debate?
February 18, 2014February 18, 2014

A sharp MDN reader, John S., emailed MDN to remind us of how PA landowners ended up in the quagmire they are now in with regard to royalties with drillers (like Chesapeake) deducting post-production expenses from what they pay to landowners. We had forgotten about the Kilmer v ElexCo Land Services case from March 2010 in which the PA Supreme Court ruled that drillers could indeed deduct certain post-production expenses without violating the law that says landowners must be paid a 12.5% minimum royalty (see Breaking News: PA Supreme Court Rules Against Landowner Seeking to Invalidate Lease).

PA Gov. Tom Corbett wrote a letter to Doug “the ax” Lawler at Chesapeake telling him the company’s royalty calculations were unfair at best, and perhaps illegal. Doug just has to point to the 2010 PA Supreme Court case. Here’s more information about the 2010 case and what the decision means, and doesn’t mean:
Read More “Do PA Drillers have Law on Their Side in Royalty Debate?”
Anti-Drilling/Fossil Fuel | Cuyahoga County | Industrywide Issues | Lease & Royalty Payments | Ohio | Utica Shale

Cleveland Suburb’s Socialist Model for Restricting Utica Drilling
February 18, 2014February 18, 2014

Is Utica Shale drilling on the way to the Cleveland, OH area? It is if you listen to the mayor of the Cleveland uppity suburb of Gates Mills. Mayor Shawn Reilly wants landowners in Gates Mills to lock themselves into restrictive land trust deals–you know, to “manage” all that nasty, evil drilling if/when it gets there–in an estimated 10-12 years. This is not your typical landowner coalition being suggested. The good mayor wants landowners to sign over their mineral rights (via deed) to a “trust” managed by people appointed by the village (copy of the proposal embedded below). MDN’s advice to landowners in Gates Mills–run! Absolutely do not assign your mineral rights to a socialist organization that will not have your best interests at heart.

Here’s an article full of errors–like it takes 200 acres for a horizontal drill pad, when it actually takes about 20 acres…
Read More “Cleveland Suburb’s Socialist Model for Restricting Utica Drilling”
Bradford County | Chesapeake Energy | Energy Companies | Industrywide Issues | Lease & Royalty Payments | Litigation | Pennsylvania

Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans
February 17, 2014February 17, 2014

Landowners in Bradford County, PA feel like they’re getting screwed by Chesapeake Energy on royalty payments, a complaint they’ve been making for some time now (see Bradford County, PA Landowners Sue Chesapeake over Royalties). PA state law guarantees a minimum 12.5% royalty to landowners, but because Chesapeake keeps deducting post-production expenses (like pipeline costs, processing costs, perhaps marketing costs), landowners end up getting squat–in some cases a 1.5% royalty. The landowners have some righteous anger over the issue. More than 100 landowners and officials gathered at the Bradford County Courthouse in Towanda on Friday in a rally to raise awareness of the issue and to support passage of PA House Bill 1648, which would protect landowners from large deductions from their royalty checks for post-production costs.

We applaud these landowners and their elected representatives for seeking justice in this situation. The problem is, they’ve invited a fox into the hen house to help them out. State Senator Gene Yaw, whose district includes Bradford County, along with PA Gov. Tom Corbett, has asked PA’s anti-drilling Attorney General, Kathleen Kane, to investigate Chesapeake and this matter of landowners getting shorted on royalty payments. She’s only too glad to “help out.” Normally that would be a good thing, except Kane is just as likely to turn around and bite the people she’s supposed to be helping. She hasn’t met a driller yet she wouldn’t rather see behind bars (see PA AG Abuses Her Authority, Files Criminal Charges Against XTO). If it were up to Kathleen Kane, there would be no Marcellus drilling at all and consequently no royalties for landowners to argue about. We think it’s an ill-advised move to involve Kane, but that’s just our humble opinion…
Read More “Bradford PA Landowner Rally over Chesapeake Royalty Shenanigans”
Energy Companies | Lease & Royalty Payments | Ohio | Protege Energy | Utica Shale | Washington County (OH)

Marietta Residents Generally in Favor of Leasing City-Owned Land
February 12, 2014February 12, 2014

Seems to us, from an informal survey around town, that most residents of Marietta, OH are in favor of the city leasing 35 acres of municipal property to Protege Energy for the offered $4,750 per acre signing bonus and 17.5% royalty on any gas produced.

A sampling of reaction “around town”…
Read More “Marietta Residents Generally in Favor of Leasing City-Owned Land”
Belmont County | Energy Companies | Gulfport Energy | Lease & Royalty Payments | Ohio | Utica Shale

Village in Belmont County Signs Lease with Gulfport: $7250/Acre
February 10, 2014February 10, 2014

Bellaire is a small village in Belmont County, OH, near the border with West Virginia. Although Bellaire is small (population 4,300), as the old saying goes, location is everything. It just so happens Bellaire sits atop wet gas Utica Shale deposits and drillers in the area want to lease. So Bellaire officials last week signed a contract with Gulfport Energy for a “piddly” 66 acres of village-owned land scattered throughout the town. Just like another deal recently signed by Gulfport with the Shadyside Local School District, Bellaire is getting $7,250 per acre signing bonus and 20% royalties (see School in Belmont County, OH Gets $7,250/Acre from Gulfport).

The taxpayers of Bellaire will appreciate a $478,500 bonus check coming their way for the village coffers…
Read More “Village in Belmont County Signs Lease with Gulfport: $7250/Acre”