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










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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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Replies to This Discussion

Do oil companies lie?
Hey Billy Bob ,
If they are smiling and their mouth is moving, I wouldn't be afraid to ask for a second opinion! (LOL)
I understand that people get upset with actions like this but the answer is really simple, tell them to get lost. But the problem is that usually Chespeake is one of the few companies in town or at the very least they set the market. Prices would have never gotten so inflated if not for Chesapeake's bad business model. If you think the Companies are being unfair, don't sign. But then you wouldn't get all that free money and this gentleman, who records people without knowing (which could be illegal depending on state laws), would not get his nice fat commision for "representing" the landowners. I wonder how much this guy stands to make off of all of these people entrusting him to negotiate. Just because someone doesn't work for an oil company doesn't mean they aren't trying to take advantage of you. Beware of people that create unnecessary middlemen to get paid!!
If it is not worth it then don't sign. But it's a little absurd to hear everyone complain that they are getting ripped off for tens of thousands of dollars. I personally leased my property in East Texas to a small company for less money but they were willing to give some great landowner friendly surface clauses. So I felt they were the best option for me. My land in West Texas, which has provided for my family for going on 3 generations, I recently released for $500/acre. And please don't get me wrong, I hate everything Chesapeake represents. I hope they get the Karma that is coming to them, but it is hard to have sympathy for someone who didn't accept a $20,000+ per acre bonus.
Chris:

Where in W TX?
There are probably a lot of middlemen responsible for delaying lease activities who are scrambling not only to justify their cuts, but also to avoid taking the heat for their clients' missing the '2008 Haynesville' boat.

Nat Gas is selling for half what it was in August. CHK is down to maybe 1/4 of the stock price as are all the other players' stocks. Banks seem to have forgotten how to lend. So dedicating capital to drilling is much more expensive than it was last quarter. Anyone think the gas in the ground is not affected by this?

Bottom line - It's not CHK (or the other guys) being devious. The stuff is now worth less than it was and is riskier and more expensive to go after. Will it be worth more later - quite possibly. But if one wants a deal now, one takes the current market's terms.

My guess is that the landman in this case could have been actually trying to do the landowner a favor and get his deal grandfathered at $15K while there was some hope of getting that.

Sometimes a 'limited time offer' isn't just a sales tactic.

My 2 cents.

Best,

Joel
eric or no other person or persons are making one dime off this. there doing this because they were concerned about there homes and community all the leases that were being offered were standerd oil and gas leases with hardly to no protection for home and land owners. this group is not about trying to get a record bonus but to get a good sound lease that will protect our homes. also its not illegal to record a conversation.
And I am originally from West Texas so I know what Oil Fields look like.
Chris, you need to drive up to Oil City or Rodessa, La. I've been to places where there's 20 pump jacks on 5 acres and pools of thick toxic waste everywhere. The trees still wont grow and the scum has been there for almost a hundred years. Take a drive up there. There's still old steam engines under delapidated sheds that turned the rods that go for miles out through the debris that ran the pump jacks. I've never seen anything like that in west Texas. But hey, they don't do those sort of things anymore. Just wanted to let you know that things aren't the same everywhere.
I totally understand and I think it is terrible that people of these beatiful areas had to go through that to get where we are today. It really makes me appreciate the Texas Railroad Commision and the job they do to regulate the industry and preserve everything for future generations.
They have every right to pull out or lower offers. Payback happens when they want to drill a well in your section after they've screwed you and they don't have a signed lease in hand.
Chris, don't give the Texas RR Commission more credit than they're due. Take a look at some of the rusty old well junk in East Texas. According to the RR Commission much of it is "in compliance" and the rest is subject only to fines---a whopping $100/year! And we can't blame the landowner's crummy surface agreement for this visual pollution either. In many cases, there was no surface protection because the mineral estate had been severed from the surface estate, oh let me see-50 years ago ago and it will never change. But I digress...

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