Question: When Does My Oil and Gas Lease Terminate and Should I Enter Into an Agreement or Top Lease to Extend my Expiring or Terminated Gas Lease?
What Must a Drilling Company do to “hold” My Gas Lease Beyond 5 Years?
The Impact of Low Natural Gas Prices on Drilling and Expiring Leases
Beware of Companies Crying Poor and Offering Little Financial Incentive to enter into a Gas Lease Extension or Top Lease
Should I Extend My Existing Lease or Enter into a Top Lease at this Time?
Lease Extensions and Top Leases as a Second Bite of the Leasing Apple
Lease Extension and Modification Reviews and Consultations
Many leases in Pennsylvania are set to expire in 2016 or shortly thereafter and Southwestern Energy and other gas companies across Pennsylvania are aggressively seeking to extend existing gas leases for little to no compensation. Given today’s low natural gas prices, Southwestern Energy and many gas companies across Pennsylvania are seeking to extend existing Oil and Gas Leases to avoid drilling expensive horizontal wells into the deeper Marcellus and Utica Shale formations. Property and gas rights owners must be very cautious when considering any extension, modification or amendment of their existing gas lease as these extensions or other changes generally benefit the gas company and not the landowner.
Pennsylvania landowners must carefully consider how the current low natural gas price market may negatively impact Oil and Gas Lease offers by energy companies. As I often say on All Things Marcellus, gas companies are very smart and their landman understand how to present gas lease and other offers to landowners in order to secure signatures. One very common company landman technique at the present time is to use low natural gas prices as a tool to convince landowners to sign bad gas leases and other agreements.
Many Marcellus Shale landowners have contacted my office by telephone and through our websites requesting assistance in understanding their currently active oil and gas lease. Due to the large number of requests, I have started performing detailed oil and gas lease reviews for landowners across Pennsylvania who have already entered into an oil and gas leases, but need assistance in understand the terms of their gas lease and what to expect moving forward.
From my experience, I can comfortably estimate that there are thousands of Pennsylvania landowners who are disappointed and frustrated with the financial terms and property protections contained in their existing Oil and Gas Lease. Virtually every landowner who signed an Oil and Gas Lease early on in the Marcellus Shale gas leasing frenzy is disappointed with the per acre bonus compensation, royalty percentage, royalty deductions, and the lack of property protection terms contained in their Oil and Gas Lease. Most of these landowners entered into an Oil and Gas Lease without adequate legal representation and they unfortunately did not fully understand the terms of their lease and how their gas lease would impact their property for many years and even future generations.
Many Oil and Gas Leases throughout the Marcellus and Utica Shale regions of Pennsylvania are on the verge of expiring due to the Lessee’s (gas company) inability to “hold” the property under the terms of the existing gas lease. In other words, if the gas company does not conduct drilling operations by the end of the term of the existing Oil and Gas Lease, the lease will terminate for lack of activity. Natural gas companies that own expiring leases often approach Landowners requesting that the Landowner sign an “Oil and Gas Lease Extension” in order to extend the end date of the existing lease and provide the gas company additional time to conduct drilling operations. Gas Lease extensions typically range from six (6) months to two (2) years, but the extension time-frames can vary.
I have negotiated hundreds of Pipeline Right‐of‐Way Agreements with approximately 50 different companies across Pennsylvania. I have also negotiated Water Impoundment Pond and Compressor Station Agreements on behalf of Landowner clients in the Marcellus Shale regions of Pennsylvania. There are many issues and concerns that a Landowner must consider when considering a Pipeline Right‐of‐Way Agreement or a Surface Use Agreement permitting a Water Impoundment Pond or Compressor Station on their property.
The Oil and Gas Lease serves as the foundation, blue print, and operating rules of the Landowner’s
relationship with the gas company. It is the gas lease and negotiated Addendum that defines how the gas company and its contractors operate on or under your property and also sets the terms of royalty payment calculations. The gas company looks to the Oil and Gas Lease as the “rulebook” defining what they can or cannot do on or under your property.
Growing up in rural Western Pennsylvania my parents instilled in me many values and characteristics that I am very proud of today. I moved to Eastern Pennsylvania over twenty years ago and have met and worked for hundreds of Landowners across rural Pennsylvania. Kindness, loyalty and the trust that a person’s word serves as their bond are qualities shared throughout the state.
Many Landowners across Pennsylvania are receiving solicitations by companies, partnerships and even hedge funds seeking to purchase their oil, gas and mineral rights. If you are ever seriously considering selling any of your oil, gas and mineral rights, your must contact an experienced oil and gas attorney to review the offer and Agreement of Sale before taking any other action. These offers are strongly slanted to the company seeking to buy your rights and the Agreements of Sale are designed to allow the company flexibility to withdraw or delay the offer. There are many legal tricks and serious pitfalls in these offers and Landowners cannot rely on the company or entity seeking to buy their rights to treat them fairly. The company is seeking to buy the Landowner’s oil and gas rights at the lowest rate possible and to provide as themselves as much flexibility in the offer as possible.