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Permalink Reply by Grillin' - MmmMmm on October 12, 2009 at 2:05

There have been two fairly large deals done in Northeast Pennsylvania recently for $5500/ acre with a 20% royalty. 5 year term. No cost deductions. Friendsville Landowner's group. Go to the sister site www.gomarcellusshale.com for more details.

From what I can see, your biggest problem is that your land is in New York State. The government there is being unworkable in terms of moratoriums and permitting issues, all brought on by the greenie weenies and the powerful NYC lobby. If you look at drilling maps, there is a line of demarcation at the border between PA and NY. It will stay that way for a while. Given the choice to drill in one state or another, NY will be last due to its history of being unfriendly to industry. Current administration in NY State is not going to make that much better.

I'd hold off leasing for awhile until the permitting issues are clarified.

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Permalink Reply by Steven Danis on October 12, 2009 at 3:52

Grillin', for the most part I agree with you. New York does have the unfortunate habit of shooting itself in the foot on many an issue, not only in regards to horizontal drilling. One thing I would add to your post is that the Friendsville Group included several thousand acres in Broome County, New York as well as the bulk of the acreage which is in Pennsylvania. That deal set off a little bit of a bidding war between Fortuna which had secured the bulk of the Friendsville group landowners and Chesapeake who was then tried to horn in on the action. A big problem for many landowners nowadays in New York is a growing trend by both Chesapeake and Fortuna to hang on to the penny ante leases they signed people up for 5 years ago by invoking force majeure and various covenants in the leases, alleging delays in drilling to be beyond their ability as a private corporation to cope, and hoping thereby to extend those super cheap leases. I was curious if there is any such problem also in the Haynesville Shale?

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Permalink Reply by Grillin' - MmmMmm on October 12, 2009 at 6:19

In the HS there is no moratorium on drilling so the force majeure won't apply. I have no doubt that without the government's little moratorium there would be lots of drilling in NY state as there is a lot of nice rock up that way. So I'm guessing the Force Majeure may have a chance. I'm sure folks will rail against the companies for trying to enforce a contract, but its the contract. The companies will do all they can to follow the terms when they are in their favor! And there is nothing wrong with that.

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Permalink Reply by Mac Davis on October 11, 2009 at 11:16

Be sure to pay lots of attention to the terms of the lease other than just the dollar amounts. Watch out for things like no surface access, no automatic renewal, no rights to do seismography, no rights to run pipelines, no responsibility for you to defend the lease, etc.

I'm sure there's some other terms you want about what costs they can deduct, etc.

Be sure you get a check you can immediately cash, not a bank draft that may or may not get paid. Be sure that when you sign, you're getting a commitment from them to lease. I think some of the time, you're committing to lease, but they're not committing to it. i.e. They can back out, but you're on the hook.

Do we have a concise thread here somewhere of the terms landowners want to see or avoid in a lease?

How many acres?

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Permalink Reply by Jack Blair on October 12, 2009 at 9:15

Thanks Mac,

Got the papers in the mail today. They bumped up the dollar amount to $2500./acre. Have not had time yet to check out the terms you pointed out....but will. There are 23 acres involved. Thanks for your advice.

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Permalink Reply by Bacon on October 12, 2009 at 10:29

It'd be wise to get yourself an experienced landowner attorney. You'll be glad you did.

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