Caught on tape: Secretly recorded mineral lease negotiations

Posted: Oct 23, 2008 05:32 PM CDT

Updated: Oct 23, 2008 06:37 PM CDT

Caught on tape: Secretly recorded mineral lease negotiations










KSLA News 12 Headlines More >>

Haynesville Shale: A week of the good, the bad and the ugly

by Jeff Ferrell

SHREVEPORT, LA (KSLA) - Caught on tape: What some call the 'darker side' of the Haynesville Shale. Secretly recorded negotiations for mineral rights show the tactics some landmen use to get someone to sign on the dotted line.

There's a battle of wills taking place right now in parts of the Ark-La-Tex. It pits property owners who want the most money for their mineral rights versus leasing agencies and their landmen trying to make a buck. And as we discovered, it's not always pretty, as the following transcript of a recording shows:

LANDOWNER: "Why are ya'll tryin' to pressure everybody to sign today when they, you Know, on a legal document you can take it to your lawyer and have 'em look at it?"
LANDMAN 1: "We're not pressuring anybody to sign today."

Eric Clarke played portions of a recently recorded conversation between some Haughton residents and leasing agents with Baton Rouge-based agency Mark A. O'Neil, which represents Chesapeake Energy in negotiations for natural gas trapped two miles underground and locked inside rock known as shale. The landmen first delivered some bad news to the hastily called group of property owners:

LANDMAN 1: "Chesapeake has dropped the offer from 15-thousand an acre to 5 thousand."
LANDOWNER: "Wow. I don't see how that's legal."

Clarke is president and coordinator of the East 80 Oil and Gas Coalition, which represents 17-hundred people who own more than 69-hundred acres in and around the Haughton area of Bossier Parish. Clarke then played a portion of the recording where the landmen gave property owners a ray of hope:

LANDMAN: "Our boss said, in this neighborhood..."
LANDOWNER: "Right..."
LANDMAN: "Fifteen can stand 'til Friday afternoon."

Clarke said their wording may sound pleasant, but in his opinion their point is clear: "Sign now or we're pulling out! Who's pulling out? Is it the gas company or is it the leasing agents."

Clarke explained that his group made the secret audio recording to document what is sees as very hard sales pitches and played another quote:

LANDMAN: "It's just like our boss told us the other day, 'pigs get fat, hogs get slaughtered.' And sure enough, that's, you know, they've proven their point."

Clarke said he and his group hope that the recording sends a strong message to landmen and their companies. "We do not mind ya'll coming out here and making offers, that's what ya'll are out here for. But, these kind of tactics and putting people under this kind of pressure has got to stop."

Clarke added that he does remind coalition members they're free to sign a mineral lease agreement if they want. Members do sign a letter of intent so that Clarke and the group can negotiate on their behalf. "We just want to make sure that the people are protected, the water's protected," concluded Clarke.

KSLA News 12 has contacted "Mark A. O'Neil and Associates" out of Baton Rouge for their comment about the actions of their leasing agents in our report. We're still waiting for a response.

Chesapeake, for it's part, released a statement saying the company does not condone high-pressure tactics, saying,"we believe very strongly in educating landowners and giving them plenty of time to make decisions."

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And I'm sure that this isn't the worst of it.
nope that was the lest distrubing part of the recording they were some real jerks. cheasapeak isnt any better in my opinion they know good and well what there agents are doing.
Your thoughts ... if people who thought the deal was done now choose to fight for what they thought they were getting, how long would it take them to settle the dispute? If, however, they say fine, allow lessor to back out, and go shopping again, how long before they find another lessee? If you have a large enough group that's near a majority of a unit, can the companies afford to force pool that many and end up paying 100% royalty to all those landowners?
I have no unearthly idea how long it would take them to settle, much less whether they even would settle.

So, it's sort of like dragging out a divorce in court, even though you don't really want the divorce. Time & money well spent?

It likely will be cheaper for them to drag the litigation on and on and on.

Cheaper for the companies, right? I can't imagine it being cheaper for the individuals or even a group.

If they only drill one vertical well per section to HBP, there's not going to be that much production.

So, the company who dreams of 8 wells per unit is now stuck with only one? How much $$$ will that get them? They're in it for the profit.

I'm thinking folks should say thanks and move on. It might not have meant to be a t this point in time, there may actually be something better down the road. Why be HBD (held by dispute) of your own choosing?
Thanks, I've seen you post that before about Aubrey's statement. That's what I figure this is all about. As long as they hold signed leases, even in dispute, it looks good on paper while wooing the cash rich company.

Now the lessors feel stung by the old bait & switch tactic, which is, if I remember, illegal but I don't know if it applies here. So, if they drag out their grievance, it might just actually help CHK get their deal done. Then it's somebody else's headache, and the lessors still don't have their money.
Banks? Nah, they were already in deep doo-doo with mortgages. I strongly favor door #2, lure buyers. I can hear the conversation on the 9th hole now ... "We have strong commitments for X number of acres in this play." Door #3 would get them to door #2, to shove a lease down throats coupled with the applications to force pool pushed the panic button on landowners not yet fully educated. Unfortunately, the economic doo-doo avalanched instead of snow balling, so some were caught not only with their pants down, but stripped. Isn't there an ancient Asian proverb that says a butterfly flapping it's wings and stirring the air will be felt on the other side of the world?

Any word from Mr. McCotter lately?
This is how the game is played. An offer can be made and unless accepted and bound by some sort of consideration being passed, the offer can be retracted and reduced.

We just have to wait until the market/demand for gas increases and the gas companies will be back to offer more money per acre.

We must have a thick skin and not take this stuff personally. Be patient. It is just business.
I believe this is more like how one company has chosen to play the game. Unless I've missed something, I don't hear any similar complaints against other O&G companies in this play. I've read the complaints against some of the middlemen, but not against say Petrohawk.

I agree, wait is what we'll do, and with increases in market/demand will come the increase in competition between companies. Then we'll be able to chose who we'll deal with and remember how CPK conducted themselves. I personally will be more willing to take a lower bonus & % with a company who has exhibited more integrity and be more willing to include important clauses.
Great point sesport person.
Thanks Mr. Stewart, just wish I'd been a squirrel in a tree on that 9th hole when those pants fell. LOL
Very well said!!
well said

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