All Things Marcellus delves into the psychology of landowners and natural gas right holders when making decisions related to the oil and gas development of their property. Doug also gets into the minds of oil and gas companies and the process behind making certain offers to landowners. Doug asked the question “why” is the current lease, pipeline agreement, surface use agreement, or other contract being presented to the Pennsylvania landowner at this particular time. When considering negotiating with an oil and gas or pipeline company, the property owner must understand their leverage and ask themselves why the agreement is being presented at this time.
More importantly, Doug talks about getting into looking at the offer from the perspective of the oil and gas or pipeline company. All Things Marcellus digs into the motive behind the company’s offer and whether the company would be in a position to negotiate that offer and how important is it to the company to secure the landowner signature on the offered agreement.
Doug tanks a close look at Tioga County Pennsylvania gas lease offers in the market in the region at the present moment. Doug walks through a hypothetical offer in Tioga County and what aspects the landowner should be looking at and why this offer may be made at this time. Doug explains in detail major defects in concerns with a sample gas lease offer and what factors the landowner or natural gas right owner should be focusing on when considering the offer. Landowners must scrutinize long primary term offers in oil and gas leases and offers that do not contain royalty shut-in provisions. This scrutiny only becomes more important in times of very low natural gas prices and when gas companies are not spending money to drill and Frack expensive horizontal wells. You must consider the current state of the market, the energy company’s budget, development in your region, the types of agreements that other gas right owners are signing in your area and many other factors when considering hey paid up oil and gas lease or an extension or amendment to an existing gas lease.
Too many landowners or simply reacting because they are receiving an offer to lease their oil gas and possibly mineral rights. Many times the response to an offer may be “no thank you” and waiting to see if a better leasing opportunity comes along in the future. However, this is not specific legal advice for anyone and all Pennsylvania property owners must look at their specific situation and seek specific advice from an experienced Oil and gas lawyer working for them and their interests.
There are many questions landowners should ask when considering leasing the oil and gas rights were entering into a pipeline easement agreement. Unfortunately, too many landowners are not weighing all the necessary factors before executing powerful natural gas contracts. Extremely important factors such as the natural gas royalty rate and whether royalties will be paid without the deductions for post-production costs such as gathering and transportation of the natural gas though pipelines are basic elementary factors that every landowner must consider thoroughly before signing in oil and gas lease.
Landowners must be extremely skeptical of gas lease offers with 12 1/2% royalty that also allow for fold the deductions. Remember, the lowest possible royalty allowed in Pennsylvania is 12 1/2% for natural gas and oil production. You quite simply cannot do worse than Pennsylvania’s guaranteed minimum royalty statue that provides for a minimum of 12 1/2% royalty on oil and gas production. Tack on full deductions and a minimum term of 10 years, and this is not a very impressive lease offer. However, all landowners and property owners must get specific advice for their situation to make the right decision whether to hold off or continue to negotiate an oil and natural gas related offer.