Advice on Lease Agreement and Pooling Agreement in Clay District

Our landman just said the best he could do was the standard (revised Feb 2014) Antero lease, which includes a statement about the lessor leases the described tract acquired by (in my case a will book number and page citation) then says something about lessor intends to lease all acreage owned by lessor no matter where. When I told the landman that I couldn't sign a lease like that he said he couldn't change it. Same with the market enhancement. I said we didn't want deductions, thinking he would send their Gross Proceeds, but he said that was the best he could do. I just asked my attorney advice, but certainly won't sign a lease like that. For many people who own just one tract the first is not a problem but I inherited several tracts in Ritchie several of which are unleased...

Nancy, They seem to be flip flopping from those two clauses. They pulled the gross proceeds off the table for us and they are back to the enhancement clause. That clause will still let them charge you to "enhance" the minerals from the well head to the point of sale. There are so many loopholes in those clauses that the only way around them would be to not accept them. We have an oil/gas adviser looking into those now and I will let you know what he says on the matter.

Thanks a lot DT. EQT is just as bad on this topic.

I think that Ritchie is starting to come in play a lot more. They have been grabbing up leases from unassuming owners for the last few years and now they are going to have to deal with the "others". I know they have drilled quite a few wells in Ritchie. I don't know if it will reach Doddridge Co. standards but, they have doubled and some more on the bonus money and royalty percentage has gone up considerably. You have to remember, we are still on the ground floor. The ball is in their court for a change. We must try to get as much in language also or we will be saying, what if, down the road.

DT, I share your perception. In investigating our family opportunity in Ritchie I have conducted quite a bit of research. Nancy Mosely has been a great help in suggesting web sites and other resources. The Assessor's office has provided perspective as well, based on what they see and hear from mineral owners and local businesses working directly with Antero. Last week I called and introduced myself to three others with whom we share mineral rights. I've learned (and observed) that people, while recognizing the land men "are all horse traders" (a direct quote from a surface/mineral owner) that few have really studied the lease thoroughly or truly negotiated the bonus/royalty amounts. This makes me sad for them and their progeny. I think that this is one of the reasons that bonuses are lower in WV, too. I'd like to do my part to change that for the better!

I know our family is still living with a lease for another tract that was signed by my grandparents in 1981. You and I are not just making an agreement that we will live with, but one that those who come after us may very well have to live with as well. I took to heart Nancy's point about not having control who will eventually hold the lease, therefore our family is working to create an agreement that will serve us ( and future generations) regardless of what company one day holds it.

I've looked carefully at the aerial views of the wells and fracking lines. It is very obvious that rights to our land are highly desirable to Antero. All but one other interest holder has signed on and he has a meeting to sign his lease this week from what he told me. Our land man called a family member earlier this week saying he was asked by his manager at Antero to verify that we are working as a family with one attorney representing all of us. Based on this, I told our attorney to ask for the figures Kyle Nuttall suggested above. Let's see what happens.

We also asked for several revisions to the lease - points addressed by you and others concern us as well. Again, we'll see what comes back. Also on the table is a pooling agreement for the already leased acreage. We hope we can use it to leverage better terms for the unleased tract.



DT said:

I think that Ritchie is starting to come in play a lot more. They have been grabbing up leases from unassuming owners for the last few years and now they are going to have to deal with the "others". I know they have drilled quite a few wells in Ritchie. I don't know if it will reach Doddridge Co. standards but, they have doubled and some more on the bonus money and royalty percentage has gone up considerably. You have to remember, we are still on the ground floor. The ball is in their court for a change. We must try to get as much in language also or we will be saying, what if, down the road.

Susan, very true comment about why lease money is lower. A lot of agents came in these counties and offered 500/1000/12.5% or so and people thought that was like hitting the lottery. Compared to pennies on the dollar a few years ago and very little % for signing a lease, it looked good. The companies have tied up a ton of property by low balling those who did not know or did not care. If you don't have good language in your lease, you may as well "give" the minerals to them. A lot of people out of state have had to negotiate over the phone or by mail. I would find that very difficult to do. We can't even negotiate a good lease when we have set face to face with agents at our dining room table on multiple occasions. I have read posts that some people are satisfied on how well they were treated while negotiating. I would have to say it depends what satisfies you and how much time you put into being satisfied. The agent we have now is more competent than the other 3 or 4 we have had. He listens and gets back to us but he still has not presented much to satisfy us. So we wait, patience??

So in today’s mail is a letter from Steptoe and Johnson, a firm representing Antero stating that I need to call within 10 days about leasing my interests or risk having them sold. They’ll file suit pursuant to WV Code Section 37-4-1, which provides relief to property owners. I’ll drop off the letter to our atty Monday and see what he says. Thoughts?

http://www.legis.state.wv.us/wvcode/Code.cfm?chap=37&art=4#04

That is the statute. I forgot what you have written about this. Are they saying that other property owners want to lease and you are slowing down the process so they will bring a partition suit to force you to lease or have your mineral interest sold?

Susan Yeah, Imagine Antero, the company that treats people so good doing something like that. Wonder what they would say if you told them you were going to bring suit against them for harassment and undue stress which led to being attended to by a doctor? Lol We got threatened with partition from them this week also. I told them Wv. has no forced pooling/integration and I resented the threat. That is why I said in my post, it is good to keep negotiations in the form of a letter or email not by phone. That way you have proof you are trying to get a lease together, if they ever follow through with their threats. Make sure you keep a copy of that letter.

Side note: Has ANYONE ever had a partition suit brought on by an oil company? I have read of a lot of threats on this by people but, no one has came forward with any more info.

Wv. Code 37-4-1 on Partition

Tenants in common, joint tenants and coparceners of real property, including minerals, lessees of mineral rights other than lessees of oil and gas minerals and stockholders of a closely held corporation when there are no more than five stockholders and the only substantial asset of the corporation is real estate, shall be compelled to make partition.

Ok, what do you make of the law? I read that lessees of mineral rights OTHER THAN lessees of oil and gas minerals can do partition.

What do you folks read from this?

My lawyer sister read this and sees it that way. There is something in there about the partition must not adversely affect any of the parties.

This thread has been so helpful! Would love to know how it all turned out, though.

What do you want to know about and what is the status of your negotiating a lease?

You are lucky that Antero's lawyers gave you as much info as you have received. I received one letter with a contract telling me to call a certain ARC agent before a given date. I did, no response from either that person or the lawyer. We might be talking about the same lease as it is connected to the Mountain/Mole Hill area/Clay District. Why should ARC talk to owners since they know that can us WV law to steal the property from the owners at a smaller cost then if they had worked out contracts with said owners? rcr 3/24/2017

I question that law as it appears to me it does not apply if more then 5 parties are involved. They quoted that law to me in regards to property having over 250 owners. However, in the latest update on my situation ARC now wants the judge to force me to sale in property to ANTERO. So that makes me believe they quoted the law just to scare you even though it appears the law as writen does not favor their interests? rcr 3/24/2017

I noticed that I have slipped into this discussion some of the problems I am having with ARC in Doddridge County. For those of you who are looking at contracts only covering one county: When I first received the unexpected contract for Ritchie County I was in a hurry and only took a quick look at the new contract. It is very different then the Doddridge contract. The original Doddridge contract I received mentioned that the corporation would not be held responsible for accidental personnel injury or death to those working for or contracted by the corporation while doing assigned duties. After showing the contract to several others I was surprised to see that most "did not notice" what the contract did not state. Signing the contract indicated that you were in agreement with the terms and conditions stated within. What was missing was the statement that by signing the contract you agreed to take on Third Person Liability!

Why? Because the law's way of thinking asks first if the parties involved were not doing the assigned tasks at the assigned location at the assigned time would they have been injured or killed (as applies). The answer is "NO". So who is responsible for those parties being at the location dong assigned work at an assigned time. The employer, HOWEVER you signed the contract which indicated that the corporation will not be held responsible. Is there any other party that CONTRIBUTED to the parties being where they were, etc. when injured or killed? "YES", the Lessor.

During the last thirty years (or more) since I first came across Third Party Liability I've seen it applied to someone traveling to a car club's meet after seeing the meet posted in a national magazine (the club president lost a year old custom built home, the vise president lost $6,000, and the treasurer lost $6,000) at the "high" end, and at the "low" bands who had to cover the cost of removing posters (wages of a large university's maintenance and police staff's wages) simply because they gave free passes to the parties that plastered the posters on all surfaces that would take a tack (the court indicated that the band had "employed" the parties that placed the posters simply because they were "paid" by the exchange of something of value, the tickets.), and, well I have lost count of all the in betweens.

I stopped taking part in car club activities, no longer work at music presentations, dropped out of several historical re-enactment meets, and questioned if I would be "safe" while volunteering for various historical societies. Translation: I stay home and am no longer active.

It should be easy to see why one has to pay very close attention to Third Party Liability when the activity involved involves natural gas. Look at the safety records for operations in West Virginia during the last six years and take note which parties have the most "incidents" .

How much do you think YOU can afford to lose simply because you failed to realize that you agreed to make the Lessee untouchable when it comes to injuries and deaths?

Now, I will admit that ARC did modify the contract by indicating the corporation would "make an effort" to protect the Lessor. My distant cousins living in the western states informed me that the 'effort" is usually a token effort, as little as possible to indicate "they tried". When that 'effort" failed the corporation stated they did the best they could and walked away. That effort was enough to satisfy the agreement noted n the contract. (I have been informed that a number of my distant cousins have suffered because of ARC's contracts or the activities of ARC.

The Doddridge contracts include clauses that cover what the Lessee has to do when it is determined that, in this case, the wells are no longer productive. The Ritchie contract I have makes no mention of the subject. I have come across one case in which a reported 6000 cubic feet concrete well pad was left intact when the drilling effort ended. Some may argue that the site was "out in the woods" and there was little possibility that another tenant seeking land for non-gas use might come along who would turn down the property because the concrete would be in the way. True, but I have seen areas here in Ohio that I "wrote off" decades ago because the soil was 90% clay and therefore of little use for farming. During the last 15 years the same land has become a VERY large warehouse park that is being used for distribution. Okay, in this case Central Ohio is within reasonable reach of 80% of the US population and on a major interstate highway with other interstate highways only a short drive away, but that is not saying the Dodridge/Ritchie area is worthless when it comes to some other activity.

I will shorten this by going straight to a "problem" I am seeing in both Doddridge and Ritchie Counties: The fact that I had no knowledge of having inherited parcels of land until a party approached (unsolicited) wanting to lease my mineral rights. I never stated that I wanted to bring the gas to the surface and sell it on the open market. (As far as I am concern thegas has been under the property for a long time, it is not bothering me or the neighbors, so let it stay there until some future generation need natural gas) The party wanting the gas hands me a contract stating that before I receive royalties there will be a deduction of funds to cover the cost of drilling and operating the well/transportation costs/and the cost of storage until the gas is sold.

I have stated this on this site before, this is the classic "If YOU furnish the ham WE can have ham and eggs, if SOMEONE ELSE furnishes the eggs". And to make it worse the contract indicates that by my signing the contract I am in (total) agreement with the lessee. Yet I am not given a voice in the operations that would be taking place on my property (or at least I am a co-owner holding an unassigned portion of the land).

In my Doddridge contract over 250 people have signed the contract, some by force, but the corporation is still taking them to court and asking the judge to strip us our holdings.

Every thing that has been done since I received the first contract was, in the eyes of ARC, a "formality". They are making token efforts to "comply" with the WV laws until they talk a judge into stripping us of our property.

In closing, for those of you who have read this far, is it the common practice in WV for the defendant to receive notice of court hearings from the lawyers who are arguing the case for the Plaintiff? I have yet to receive notice of hearings directly from the court, which is the way it works in Ohio and other states.

(Yes, I was going to write more but after working myself up I can't remember what I was going to cover.)

rcr 3/25/2017

It is common practice here in WV to receive notice of filings by the plaintiff from the plaintiff. The court could make them responsible for providing notice to all the defendants, too. Saves the court time and money, makes the oil and gas company pay for it.

Also, I assume you're talking about a partition suit. If so, there are going to be Nominal Defendants listed on the pleadings. The courts here in WV have decided that that is necessary. Nominal Defendants are only included for purposes of notification as far as I can tell. They will not lose their mineral interests. The other defendants are the ones that will lose their mineral interests.

You're right to be careful about the way leases are written. The company is going to dump as much liability and cost on to you as it thinks it can get away with. I've been telling my clients to get a good Indemnification clause.

Kyle,

I am not certain, but believe the WV Supremes have ruled that a partition suit covers all mineral owners. Therefore, if a forced sale is ordered, all interests are sold.

The complaints I've seen exclude all the Nominal Defendants. They're pretty clear that they're not trying to do anything at all to the Nominal Defendants. So far, nobody I've talked to has said their interest was sold on the courthouse steps when they were listed as Nominal Defendants. Antero has been pretty adamant with me about the fact that they're not taking anything from Nominal Defendants.

Do you remember which case you're thinking of? It could be that the whole Nominal Defendant classification was created as a way of dealing with whatever you're thinking of.

Kyle,

I will always defer to your knowledge, but in ruling in my favor, one of the issues mentioned by the judge was all owners would be effected, all interests would be sold, et al.