New Gas Leases Filed in Luzerne County, PA – Exploratory Drilling Set to Begin in Next Two Weeks
Carrizo Oil & Gas has filed 41 records of gas leases in three Luzerne County municipalities:
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Chesapeake Backs Down, Will Not Make PA Landowners Near Pittsburgh Return Royalty Checks
Late last year, Chesapeake Energy asked landowners in Donora and Carroll, PA (near Pittsburgh) who had received royalty checks from Chesapeake, to give the money back.
Read More “Chesapeake Backs Down, Will Not Make PA Landowners Near Pittsburgh Return Royalty Checks” -
Some Landowners in Tioga, PA Area Receive Six-Figure Royalty Checks – Each Month
An article discussing the potential impacts of shale gas drilling in the area around Erie, PA does a good job in exploring the benefits of shale gas drilling that have already occurred in Tioga County, PA. Tioga County is one of the most densely populated drilling regions in the entire Marcellus Shale play. A few facts from the article:
Read More “Some Landowners in Tioga, PA Area Receive Six-Figure Royalty Checks – Each Month” -
Broome County, NY May Sign a Deal to Lease County-Owned Land for $15.9M
Lately it’s not been often MDN has reported on lease deals in New York State, due to the ongoing opposition of New York politicians to drilling in the state. So it’s with some surprise, and pleasure, that we noticed an article in today’s paper that Broome County, New York may soon sign a deal with Inflection Energy:
Read More “Broome County, NY May Sign a Deal to Lease County-Owned Land for $15.9M” -
Chesapeake Energy | Citrus | Energy Companies | Lease & Royalty Payments | Pennsylvania | Unit Petroleum | Wyoming County (PA)
Two-Thirds of Wyoming County, PA Land Now Leased, More Land being Sought by Drillers
Nearly two-thirds of the land in Wyoming County, Pennsylvania is leased by natural gas drilling companies, and recent strong gas production from wells in the northern part of the county have sparked a competition to lease even more Wyoming County land.
Read More “Two-Thirds of Wyoming County, PA Land Now Leased, More Land being Sought by Drillers” -
Energy Companies | Harrison County | Jefferson County (OH) | Lease & Royalty Payments | Ohio | Western Reserve Petroleum
Western Reserve Petroleum Leases 4,500 Marcellus Shale Acres in Eastern Ohio in Last Two Weeks
Western Reserve Petroleum has just snapped up lease rights to 4,500 acres in the past few weeks in Jefferson and Harrison Counties in eastern Ohio, located close to the border of West Virginia and not far from Pittsburgh, a prime Marcellus Shale region.
With one company locking up about 4,500 acres for oil and natural gas exploration over the past two weeks, Jefferson County property owners appear to be getting their own taste of the Marcellus Shale rush.
While companies such as Chesapeake Appalachia, A B Resources, CNX Gas Corp., Dominion Exploration and others are gobbling up property rights in West Virginia, Western Reserve Petroleum is quickly staking its claim to the oil and gas rights in eastern Ohio.
“It has taken us less than two weeks to acquire 4,500 acres in Jefferson and Harrison counties,” said Molly Johnson Phillips, lease acquisition manager for Western Reserve. “We are glad to give some smaller landowners a chance to get in on this.”
Western Reserve is not disclosing how much they are paying for the leases. Recent deals just across the border in West Virginia have seen a signing bonus of $3,600 per acre and royalty payments between 12 and 19 percent.
*The Intelligencer/Wheeling News-Register (May 30) – Gas Rush On In Jefferson
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Members of Landowner Group in Broome County, NY Receive First Payment for Lease Deal
Stop the press: There’s actually been some GOOD news from New York State on the drilling front. Inflection Energy has just issued payments to some 130 residents in the Town of Maine (Broome County, NY) to secure drilling rights to their land, when/if drilling ever begins in New York State.
The deal, announced in February, calls for $6,000 per acre over eight years. About 130 residents with more than 3,000 acres have begun receiving checks for the first year’s payment of $1,000 per acre, said Robert Wedlake, a lawyer with Hinman, Howard & Kattell representing the group, called the South Maine Millennium Coalition.
The Inflection deal calls for 20 percent royalties “subject to certain deductions,” according to a press release from Wedlake and Inflection.*
*Binghamton Press & Sun-Bulletin (May 9) – Town of Maine residents getting $3 million for gas rights
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Armstrong County | Atlas Energy | Clarion County | Energy Companies | Fayette County | Indiana County | Lease & Royalty Payments | Pennsylvania | Reliance Industries | Washington County | Westmoreland County
Atlas Energy/Reliance Industries Pay $192 Million for Leases on 42K Acres in PA Marcellus Shale
The recently announced joint venture between Atlas Energy and Indian energy giant Reliance Industries (a deal worth $3.5 billion over 10 years) is already bearing fruit. Together they’ve just forked over $192 million to secure leases for more land in Pennsylvania.
Independent oil and gas company Atlas Energy will buy 42,344 acres in the gas-rich Marcellus shale along with Reliance Industries Ltd (RIL), weeks after the two announced a joint venture.
The companies will buy the acreage in Fayette, Washington, Indiana, Westmoreland, Armstrong and Clarion Counties of Pennsylvania at an average price of $4,532 per acre.
Following Wednesday’s deal, the Atlas-RIL joint venture will control about 343,000 Marcellus Shale acres, of which about 206,000 acres are net to Atlas.*
According to the Atlas Energy website:
Substantially all of the acreage to be acquired is held by production and is either contiguous with the joint venture’s existing acreage or is in concentrated blocks of acreage. [Atlas] believes that it will be able to drill over 450 horizontal wells on this acquired acreage assuming 1,000 foot spacing between lateral wells.**
*Hindustan Times/Reuters (Apr 22) – Atlas, RIL to buy more shale acreage for $4,532 per acre
**Atlas Energy Press Release (Apr 21) – Atlas Energy, Inc. and Reliance Industries Jointly Acquire over 42,000 Additional Acres within Their Core Marcellus Shale Position
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Binghamton Natural Gas Summit: National Association of Royalty Owners Executive Director Jerry Simmons
Jerry Simons was the final presenter at the March 18 Binghamton Natural Gas Development Summit. He is the executive director of the National Association of Royalty Owners (NARO). According to Mr. Simmons, NARO is the only organization to represent landowners that is completely independent and not attached to energy companies in any way.NARO was founded in 1980 after the “windfall profits tax” was passed by the 96th Congress, a 35 percent tax on oil royalties. NARO fought against the tax, and it was eventually repealed in 1988.
NARO is an educational and advocacy group, chartered as a 501(c)3 and 501(c)6 non-profit organization. There are state chapters of NARO. New York and Pennsylvania fall under the Appalachia Chapter which covers the Mid-Atlantic and Northeast areas of the country.
As an example of what NARO does for royalty owners: Mr. Simmons said the Depletion Tax Allowance, part of federal law since the 1920s, is under assault by the Obama Administration. They tried to take the allowance away last year but were unsuccessful. They are trying again this year, as part of the 2011 budget. NARO is fighting against it. [MDN Comment: The Depletion Tax Allowance treats royalty owners as part owners of an asset, allowing them to “write down” the value of the asset as it is used up, in this case mineral deposits being the asset. Bottom line—if this allowance is taken away, taxes to the federal government go way up for royalty owners.]
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Elexco Land Services | Energy Companies | Lease & Royalty Payments | Pennsylvania | Southwestern Energy | Statewide PA | Susquehanna County
Breaking News: PA Supreme Court Rules Against Landowner Seeking to Invalidate Lease
Last year, Susquehanna County landowner Herbert Kilmer sued ElexCo Land Services Inc. and Southwestern Energy Production to invalidate his lease. The reason? He said that by deducting drilling costs from his royalty payments, his payments fell below Pennsylvania’s law that a minimum one-eighth share of royalties are guaranteed to the landowner. A Susquehanna County judge ruled against the landowner and in favor of the energy companies. Other people started filing lawsuits, so the energy companies asked the PA Supreme Court to take up the matter. The Supremes did, and today they also ruled in favor of the energy companies:
Pennsylvania’s high court sided Wednesday with the natural gas industry in a dispute with landowners who had sought to invalidate the leases they signed before the Marcellus Shale rush intensified and drove up land values.
In a 6-0 decision, the Supreme Court upheld a Susquehanna County judge’s ruling that validated lease agreements that subtract drilling costs from the calculation of landowners’ natural gas royalties.
Justice Max Baer, who wrote the court’s decision, noted that the term “royalty” and the method of calculating a one-eighth share is not defined by the state’s Guaranteed Minimum Royalty Act. However, he cited various texts on the industry that say a royalty is paid from the net amount remaining after deduction of certain production and well development costs.*
This case will now force similar pending cases to be settled or dismissed. Landowners beware: (1) There is no such thing as a “standard” contract, and (2) Always have an attorney review a lease agreement first.
*BND.com (Mar 24) – Pa. justices side with gas industry over landowner
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A Novel Approach to Signing New Landowners by Chesapeake Energy in Bradford County, PA
Forget the landmen, Chesapeake Energy wants to talk directly to landowners and is throwing a “signing party” hoping to convince landowners in Bradford County to show up and sign up at the Wysox Fire Hall on March 20th.
Chesapeake sent letters to unsigned landowners in Towanda, North Towanda, Wysox, Standing Stone, Monroeton, Asylum, Wyalusing and Herrick, inviting them to the event.
Chesapeake tells landowners in the letter:
“Our records indicate that you own certain oil and gas rights that Chesapeake is interested in leasing,” the copy of the letter states. “We will have personnel on hand to discuss with you an offer to lease [the oil and gas rights on] your property that will potentially allow you to share in the royalty pool to be established for wells to be drilled in your area.”*
The letter offers unsigned landowners a 10-year lease for $5,000 per acre and 20% royalties. By comparison, just last September Chesapeake signed a deal with the Wyoming County Landowners group for $5,750 per acre and 20% royalties. Chesapeake has made an offer to Wysox Township to lease town land for the same terms ($5,750 per acre, 20% royalties). However, in January 2010, Northern Tier Career Center in North Towanda approved a five-year lease with Chesapeake for $6,500 per acre and 20% royalties on the school’s 73 acres.
MDN has not seen a copy of the full letter, but a commenter on The Daily Review website states the Chesapeake letter was sent to landowners with less than 3 acres of land. Landowners with small parcels do not have as much negotiating clout as larger landowners or groups. Even so, MDN cautions landowners about just showing up and signing up. While it may be a good deal, the devil is in the details of a contract. There is no substitute for having a contract reviewed by legal counsel before signing. Landowner groups (who retain legal counsel) are often the best way to ensure your interests as a landowner are protected. If you cannot find a landowner group to join, make sure you retain a good lawyer with experience in mineral rights leases.
Go enjoy the free coffee and donuts, but be careful about signing anything on the spot.
*Towanda The Daily Review (Mar 17) – Chesapeake to hold lease-signing event for Towanda-area landholders
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Energy Companies in PA Must Now Disclose Gas Well Production Numbers Every Six Months
Faster disclosure of gas well production data is coming to Pennsylvania. On Tuesday, March 16 the PA Senate passed a bill already passed by the PA House that would force drilling companies to disclose gas well production data every six months. The existing law, passed 25 years ago, allows drillers to keep production numbers secret for five years. No more. Gov. Ed Rendell has said he will sign the new measure into law.
What does it mean for landowners in PA? You’ll now have access to the numbers to ensure your royalty payments are timely—and accurate.
For more, see: Binghamton Press & Sun-Bulletin (Mar 16) – Pa. to reveal drillers’ secrets in gas shale rush
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New Directory of Marcellus Landowner Groups
Marcellus Drilling News has just posted an online directory of landowner groups. One of the best ways for landowners to protect themselves and obtain favorable terms for leasing their land, and protecting their land environmentally, is to collectively negotiate with energy companies. Many landowner groups have sprung up in the Marcellus Shale region over the past 2-3 years for just that purpose. This new directory aims to provide the most up-to-date listing of these groups.
If you belong to a landowner group and do not see your group listed, please email us! And if your group is listed but the entry needs updating, send along the changes.
If you have suggestions for how to make the Directory better, or if there are other resources you would like to see added to the MDN website, drop us a line at: jim@marcellusdrilling.com.
The address for the new MDN Directory of Marcellus Landowner Groups is:
//marcellusdrilling.com/landowner-groups/ -
Columbia Natural Resources | Elexco Land Services | Energy Companies | Lease & Royalty Payments | Pennsylvania | Statewide PA | Statewide WV | West Virginia
Landowners Beware of Post-Production Expenses Deducted from Your Royalty Checks
An informative article with a lot of background on the issue of gas royalty payments and the practice of deducting post-production expenses from those payments is published in today’s The State Journal. The article covers in detail the case of Tawney v. Columbia Natural Resources that was settled by the West Virginia Supreme Court in 2006. That decision said, in essence:
[G]as producers cannot deduct “post-production” expenses — those incurred between the wellhead and market, such as dehydration, compression and transportation — from royalty payments unless explicitly spelled out in the lease.*
West Virginia is in the minority of states that have ruled against post-production expenses. Other states disallowing post-production expenses (unless specifically spelled out in the lease) include Arkansas, Colorado, Kansas and Oklahoma.
However, because gas “at the wellhead” is not in “marketable condition,” a number of other states do allow deduction of post-production expenses from royalty payments in cases where it’s not specifically enumerated in the lease. Those states include Louisiana, Mississippi, Texas, California, Montana, New Mexico and some others.
Kentucky and Pennsylvania have not yet ruled on the matter, although the Pennsylvania Supreme Court is due to rule soon in Kilmer v. Elexco Land Services Inc.
The lesson for landowners: Make sure the language in your lease is spelled out in detail about what kinds of post-production expenses can and cannot be deducted from your royalty checks. And if you have a contract that is not specific, get legal advice and be sure you’re receiving the money you’re owed.
*The State Journal (Mar 11) – State Courts Continue to Evaluate Gas Royalties
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AB Resources | Chesapeake Energy | Energy Companies | Lease & Royalty Payments | Marion County | Marshall County | Ohio County | Trans Energy | West Virginia | Wetzel County
Marcellus Leasing & Drilling in the West Virginia Panhandle Heats Up
West Virginia Marcellus Shale is getting hot. From an article* in the Steubenville (OH) Herald-Star, we get a mountain of good intelligence on what energy companies have and are paying in the West Virginia panhandle:
- AB Resources is paying the New Vrindaban Hare Krishna Community in Marshall County $2,500 per acre for approximately 4,000 acres, and 18.75 percent production royalties. That works out to $10 million in lease payments.
- Chesapeake paid $750 per acre and 14 percent royalties to the Wheeling Park Commission for leases in the Oglebay and Wheeling Parks in 2009. The park commissioner is not happy that Chesapeake is planning to pay more this year to lease public lands in neighboring Ohio County.
- Chesapeake paid $2,800 per acre and 18.75 percent production royalties last month to the Marshall County Board of Education for rights to 177 acres in Sherrard.
- Chesapeake has 11,000 acres under lease in Ohio County, and 45,000 acres (with 26 wells drilled) in Marshall County.
- Trans Energy owns and operates 300 active wells in Marshall, Wetzel and Marion counties, with 40,000 acres under lease.
Also, according to the article:
Current lease contracts range from as low as $5 per acre to as high as $2,800 per acre, with production royalties ranging from 12.5 percent to 18.75 percent. Landowners are being urged to think carefully before signing any contract.*
*Steubenville Herald-Star (Mar 8th) – Steubenville Herald-Star – Natural gas could bring riches to Panhandle
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Cameron County | Clearfield County | Elk County | EQT Corp | Jefferson County (PA) | Lease & Royalty Payments | Pennsylvania
Energy Company EQT Buys Rights to 58,000 Acres in PA, Now Holds 500K Net Acres in the Marcellus Shale
EQT Corp. said today it is buying mineral rights to 58,000 net acres in the Marcellus Shale from a group of private operators and landowners for $280 million in stock and cash. That works out to $4,828 per acre. While the names of the sellers were not disclosed, most of the land is located in the Pennsylvania counties of Cameron, Clearfield, Elk and Jefferson.
The deal includes a 200 mile gathering system and approximately 100 producing vertical wells. The deal is expected to close on April 30th, at which time EQT will then control approximately 500,000 net acres in the Marcellus Shale.
More Details: Yahoo Finance (Mar 2) – EQT Announces Strategic Marcellus Acreage Acquisition; Increases EUR per Marcellus Well; Provides Update on Latest Marcellus Well
