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| 12/3/2008 1:25:00 PM Email this article • Print this article | |
Experts Examine Gas Leases
By Jesse Disbrow
The Tioga County Landowners Group held its first of three informational meetings of natural gas issues, inviting members of local government and groups to come and speak to the Candor community on November 25.
The Tioga Gas Lease program assembled a panel of four experts to present information about natural gas leasing to the assembled crowd at the Candor High school auditorium.
Mike Dannaher, representing the office of the New York State Attorney General, gave an initial presentation on some of the basics of what you should look into when signing a lease. Dannaher went over some of the tricks that landsmen use and some of the things you should be o n the look out for in regards to getting a lease.
Dannaher spoke about landowners' rights in regards to oil and gas leases. State attorney general Andrew Cuomo has made it a point to get landowners fair leases, according to Dannaher, and he provided some tips for landowners signing a lease.
Dannaher spoke about key clauses that are included in every lease, including the leasing clause, the lease term clause, the bonus payment clause and the royalty payment clause. The leasing clause describes the rights that the lessor is granting the lessee, such as "the right to access and extract oil, gas and their constituents," and "all exclusive rights needed to explore, develop, produce, measure and market production." These mean that the company is being given the right to do exploratory tests, drill wells, and use or install roads on a landowner's property.
The leasing term clause represents how long the lease runs. There are generally two terms, the primary and secondary terms. The primary term is a set amount of time numbered in years. The secondary term however is the one to look out for. It allows a lease to go on indefinitely as long as certain terms are met, such as continued gas production or continued rental.
The two payment clauses represent the amount of money you will be paid for leasing out your land. The bonus payment is a fixed amount or dollar-per-acre amount. The royalty is a share of the proceeds from the sale of the gas. Depending on any deductions this will determine the percentage a landowner receives.
The attorney general's office provided the following tips to take into account when signing a lease. They say that you should consult an attorney before you do anything else. Make sure you ask enough questions of your attorney and the person asking you to sign that you fully understand the terms and conditions you are agreeing to. Make sure to get all promises in writing and to receive a signed copy of all documents before the landsman leaves.
You should negotiate, as you can probably get better terms than the initial offering, and if possible you should shop your lease around by contacting other gas operators. You may also consider negotiating your lease in a group of neighbors or another group like the Tioga Landowners Group. Dannaher also said that you have the right to cancel your agreement within three business days of signing the lease. In order to do this you must comply strictly with all requirements and it is strongly suggested you consult your attorney.
Brett Chedzoy, of Cornell Cooperative Extension, presented information on what natural gas exploration means to foresters.
Even if it is only a small woodlot or wooded area, you should take precautions to protect your timber and land. If you want to save wood for chimneys and stoves you must set out that information beforehand. If you have wood of any value you must specify how the gas developing companies must take down the trees.
Chedzoy said that the normal practice is for drillers and developers in clearing forests were to simply bulldoze trees, splintering and shattering the wood. If you plan on trying to sell your wood, or if you want to keep it nice for stacking and stoves you must specify in your lease. If you do specify that you would like the wood on your lot cut a certain way than you must specify it in your lease.
Chedzoy also noted that forestland has a much shallower minimum depth for laying pipeline. You have to have enough where it won't be an issue. The minimum depth of three feet requires permission to travel across the pipeline with trucks or other equipment.
Chedzoy also mentioned how removing a woodlot could affect the wildlife. He said stipulations could be added to allow for creating new animal habitats to replace those destroyed by drilling or pipeline laying.
A simple example would be to have the drilling company install a wildlife pond after the drilling operation is complete. One method of hydro-fracturing requires a dual pond system to dilute fracturing materials and these ponds could be converted to wildlife ponds at the end of the well's operation. He also said that stipulations could be added to your lease to stop drilling during the hunting or bird nesting seasons.
The Tioga Landowners group will host two more programs in Candor at the school auditorium in December. The first will December 2 and talk about pipeline issues as well as leasing pitfalls. The second meeting will be on December 16 when county officials from Bradford County, PA, an area already embroiled in gas exploration, will come to show a video they made while studying the environment, social and economic impacts on Wise County Texas. Both of these presentations will start at 6:30 p.m.
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