0 – 15 Minutes
When Pennsylvania landowners stop signing bad Pipeline Right-of-Way Agreements and similar Oil and Gas Lease contracts the money for offered natural gas agreements will rise and landowners will secure better addendum terms. Gas and Pipeline companies are taking advantage of uninformed landowners and securing very company favored natural gas right-of-way easements and oil and gas leasing agreements. Landowners must understand whether their oil and gas lease allows for a natural gas pipeline and or other surface easements. Most gas leases do not grant gas or pipeline companies the ability to install natural gas or water pipelines to transport third party or foreign gas or water across the landowner’s property. Most property owners do not understand the gas pipeline limitations contained in their oil and gas lease and the landman working for the gas or pipeline company does not have the obligation or desire to explain your rights and the company’s limitations for installing a pipelines on your property. If you sign a separate pipeline right-of-way easement agreement, that agreement trumps the gas lease and the pipeline agreement will govern the installation of any pipelines within the approved easement area. Property owners must know when to consider allowing a natural gas pipeline under your existing oil and gas lease as opposed to signing a separate pipeline right-of-way agreement that provides the pipeline company significantly more easement rights. Landowners often have hidden leverage in many pipeline cases where any right of the company to have a pipeline on the property ceases when the gas lease terminates and the company would have to remove any installed pipelines. When the gas lease terminates, the company’s right to install and maintain a pipeline will typically terminate and pipeline companies do not want to lose their authority to have a pipeline on your property whenever the oil and gas lease terminates. Attention all property owners: Stop signing, and learn your oil and gas lease and pipeline rights.
15 – 30 Minutes
Beware of “Buzz Words” presented by smart energy companies and their landman. Landowners must stop being the low hanging fruit and climb the proverbial fruit tree to obtain higher compensation and better natural gas lease and pipeline agreements. Property owners must highly scrutinize all natural gas pipeline right of way easement agreement offers, especially when the compensation rate is only $5, $7 or even $20-$25 per linear foot. I have had many clients sign natural gas pipeline agreements for considerably higher compensation and we must work to educate property owners on their negotiation leverage and their rights to negotiate pipeline easement agreement offers.
Buzz Words like “Indemnification” and “Royalties – No Deductions” are red flag indicators in natural gas agreements and serve as notice to the landowner that the language following the “Buzz Words” must be thoroughly studied, reviewed and scrutinized. Natural gas companies and landman understand that landowners are looking for certain addendum terms and companies understand how to include “Buzz Words” in their natural gas leases, pipeline easement agreements, and other offerings to assist in securing the landowner’s signature. Do not fall into the ‘Buzz Word” trap and be aware of massive loopholes designed by gas and pipeline company lawyers and inserted into oil and gas leases and pipeline right-of-way agreements.
30 – 45 Minutes
Remember, do not believe that you will receive natural gas royalties without deductions for gathering, transportation, compression, marketing, dehydrating, separating, treating and other expenses simply because of a “Royalty – No Deductions” heading or similar royalty calculation “Buzz Word” in you oil and gas lease addendum. Landowners and their oil and gas lawyer must thoroughly dissect and study royalty calculation language to ascertain the true meaning of the addendum term and how royalties will be calculated in the future.
Doug discusses what to do if the gas company miscodes your oil and gas lease and pays your monthly royalties without deductions for post-production costs? We have seen several cases where a producing gas company has miscoded a royalty owner’s lease and has mistakenly paid royalties without taking transportation, gathering or compression deductions. Doug provides a detailed hypothetical wherein a landowner’s lease was miscoded and they were paid over $50,000 in natural gas royalties that they should have not received as the oil and gas lease authorized post-production cost deductions. In this case the gas company caught that they mistakenly miscoded the lease and did not take post-production cost deductions as they were entitled. When the gas company discovered their mistake, the landowner already owed the company over $50,000 in royalty over payments. Doug explains the natural gas royalty owner’s options in this situation and why a landowner may want to voluntarily report over payment of gas royalties due to a company’s mistaken failure to take post-production deductions from monthly royalty payments.
45 – 60 Minutes
Doug goes through a sample Indemnification or Hold Harmless Addendum provision to an Oil and Gas Lease and how this particular indemnification Addendum is very problematic and does not provide the liability coverage the landowner requested. Landowners and royalty owners must carefully read the detailed language of natural gas contracts and not be distracted by “Headings” within the agreements which can be very misleading. Mistakes on indemnification or hold harmless language can expose the property owner to extremely expensive lawsuits even if the property owner or his agent did nothing wrong. Just defending natural gas lawsuits is extremely costly, yet alone the possibility that you may be exposed to future liability and judgements as a result of oil and gas development operations on your property. There is no reason that any property owner should expose themselves to potential liability or even expose themselves to defend a lawsuit as a result of entering into an Oil and Gas Lease, Pipeline Easement Agreement or any other natural gas related agreement. Indemnification and hold harmless provisions are always available, but you have to know what to ask for and how to negotiate the strongest possible indemnification language to the natural gas contract and avoid liability.
