Tusc. co. Ohio been approached my a landman for mineral rights. They are looking for multiple parcels for the Utica shale deposit. We have about 35 acres that is available for lease. They are offering $1000.00 per acre and 1/8 royalties. Im really new to this and want to get the best deal possible. Im assuming the first offer isnt the best offer?? Can you counteroffer like buying a car or house.....?
Thanks!
Tamara:
You control your own mineral rights so you can negotiate with anyone until a lease is signed. If you want to do some research about the going rates in your area, you can try to contact persons in the area whom have recently leased their minerals. Just be sure to watch the length of lease and the % royalty along with the $/acre bonus. If you will scan over this forum, there are posts which deal with lease negotiations and you might pick up some ideas.
Thanks…I have been scanning these posts…Every area of the country has such different resources its like comparing apples to oranges…As for neighbors, there are a few I can contact that may give me information…but some have not signed. They are holding out for a better offer. The first offer is 10 yrs, $1000 per acre and 1/8 percent. We are considering it…thanks!
Tamara:
The $1000/bonus sounds good but the 10 years and 1/8 royalty does not. I would not tie my minerals up for longer than five years or less and I would have to research the going royalty rate for your area. I don't know where your minerals are located so I really can't say if 1/8 is fair for the area. I would recommend you do some research on all of this before signing a lease.
Tamara said:
Thanks...I have been scanning these posts......Every area of the country has such different resources its like comparing apples to oranges......As for neighbors, there are a few I can contact that may give me information...but some have not signed. They are holding out for a better offer. The first offer is 10 yrs, $1000 per acre and 1/8 percent. We are considering it......thanks!
Tamara -
The first offer is never the best, unless they are leasing a subdivision or something like that where everybody is offered the same flat rate.
After years of the Bonus Payments being really low (like in the $15-$35 per acre range), the companies are now paying $3500 - $4000 per acre just across the line into Pennsylvania where both the Utica Shale and the Marcellus Shale are being developed.
With your area only just now being developed, I suggest you shoot for something like $2500 an acre for a straight 3 year lease with you retaining 1/4 (25%) royalty.
They'll counter your counteroffer at a lower Lease Bonus and Royalty, although it might take some time while they continue to lease up all of your neighbors at the lowest rate and royalty that they can (you might be the last to be leased).
The final agreed to Bonus Payment, Term and Royalty will be up to you, but try and negotiate for at least a 1/5 (20%) royalty. That and even up to a 1/4 (25%) royalty is quite common in other parts of the country and they are up to 19% over in Pennsylvania.
With a three year lease, if your land is not included in a unit, when it expires you will be able to lease it again at more than likely a then higher rate. If they insist upon an option to extend the lease for an additional two years, you can allow them that, but I would suggest at 1-1/2 to 2 times whatever per acre amount your lease is for.
I advise everyone who's questions about leasing that I respond to to consult an attorney when negotiating terms for contracts like this.
Bonus, Term and Royalty are always important, but issues regarding surface use and damages can be quite troublesome if you don't have them all addressed in the lease: Environmental indemnity, loss of crops, location and maintanance of roads, drill sites, pipelines, fences, gates - damages to timber, fencing off operation locations to protect cattle, no interference with normal farming or ranching operations, surface water and water well use (or none) - all sorts of things.
If you grow crops, can you imagine what might happen if a roadway or surface installation permanently alters the natural drainage across your fields?
And don't forget to include a Pugh Clause and a Depth Release Clause - otherwise they can hold all of your land halfway to China while only including a single square inch in a unit.
A little expense now may save you a great deal of heartache later on.
Hope this helps!
Charles
Charles Emery Tooke III
Certified Professional Landman
Wow Charles...thank you so much for the great information. Ive been thinking a lot a feel that I really dont want a well, road, tank, pipeline or anyother structure on my 34 acres of homesite. I built this house 6 yrs ago back a 1/2 driveway up into the middle of the woods. It is my dream home in a dream location. SO......is it possible to give them the gas lease with NO surface developement at all? This I am confortable with. It is a 640 acre unit and Im sure my 34 isnt where they could or would actually drill.....but I want to be sure that I dont wake up to a pipeline or road full of trucks outside my door someday.......I do own the adjoining 80 acres as well....but it is already leased out.
Thanks
tamara
Yes, of course. No operations clauses are not unusual, although if they are going to want to shoot seismic lines, you want to let them do that. Sounds like you've found a great spot to get "Dug In"!
Tamara said:
Wow Charles...thank you so much for the great information. Ive been thinking a lot a feel that I really dont want a well, road, tank, pipeline or anyother structure on my 34 acres of homesite. I built this house 6 yrs ago back a 1/2 driveway up into the middle of the woods. It is my dream home in a dream location. SO......is it possible to give them the gas lease with NO surface developement at all? This I am confortable with. It is a 640 acre unit and Im sure my 34 isnt where they could or would actually drill.....but I want to be sure that I dont wake up to a pipeline or road full of trucks outside my door someday.......I do own the adjoining 80 acres as well....but it is already leased out.
Thanks
tamara
Here's an article from Wednesday's Rigzone, which mentions Chesepeake's leasing plans for Utica Shale/Ohio.
http://rigzone.com/news/article.asp?a_id=104419&hmpn=1
I would caution that one way to make sure that you never see a well in the next decade, would be if you and all the neighbors agree to that 10 year lease period. Far too much acreage throughout the US that needs to be drilled in order to "hold the lease" so the O&G will surely have very low drilling priority for any acreage where they secure a 10 year lease at low terms.
Thanks so much....you all have been a tremendous help. Im sure that I will not go for a lease longer than 5 yrs and will ask for more than 1000 an acre as well. Im also not going to allow any surface development. I might ask for more of a % royalty as well........then the ball is in their court. Will give me a little room to negotiate if they counter the offer.........Again, thank you all for the help........
Tamara
Make sure your lease indicates that your royalty payments would be free of all costs!
Free of development cost, processing cost, gathering cost, transportation cost,
Marketing cost, etc.
My most important advise would be to have a good oil and gas attorney help you
"before" you sign. Once you sign, you have to deal with this lease for many many
many years to come.
sima furtick said:
Make sure your lease indicates that your royalty payments would be free of all costs!
Free of development cost, processing cost, gathering cost, transportation cost,
Marketing cost, etc.
My most important advise would be to have a good oil and gas attorney help you
"before" you sign. Once you sign, you have to deal with this lease for many many
many years to come.
I received an offer in May for 43 acres in Salem Twp, Tusc. County, same terms as Tamara's initial offer. I'm hunting an attorney in the area and info on what terms others are getting. This site has been a blessing! Any ideas?
Mr. Dixon.......everyone one of our neighbors just signed the massive group deal that hundreds signed in salem twnsp. They did get 1500 and acre but nothing else was changed. We did not sign because we want a no surface structure clause on our property. We actually live here where not one of the others around us do. Its important for us not to have a pipline, road or rig right next to our house.
i responded to them after hearing about the mass signing and they offered us the 1500. but would not budge on any other changes. The letter was actually kind of curt ....so dont think we will be hearing from them again
Now what I wonder is ......if they build a rig on the neighbors property.......they still cant grandfather us in and build surface structures on our property can they??? I dont care if the dig we jsut want our land free of their construction.
Tamara
Hey, Guys -
What company is doing the leasing?
Charles
Chesepeake....
Charles Emery Tooke III said:
Hey, Guys -
What company is doing the leasing?
Charles
Tamara,
I will be in town this weekend (I Iive in central PA, the other owner lives in Johnstown, OH), can we get together for a chat?
Tamara said:
Chesepeake....
Charles Emery Tooke III said:Hey, Guys -
What company is doing the leasing?
Charles
My husband and I are free sunday…maybe we could arrange to meet. What did you have in mind>??
Wiley Dixon said:
Tamara,
I will be in town this weekend (I Iive in central PA, the other owner lives in Johnstown, OH), can we get together for a chat?
Tamara said:Chesepeake....
Charles Emery Tooke III said:Hey, Guys -
What company is doing the leasing?
Charles
Tamara,
Sorry, I missed your reply. It turned out that I did not make the trip after all.
I'd like to talk but don't want to put contact info on a forum. If your'e on FB, look me up. I might make a trip out just to canvas the neighborhood to see what I can learn. A lot of money is at stake.
Wiley
Here are some examples of Chesapeake/RedSky Land's leasing activities.
http://ipr.interlochen.org/ipr-news-features/episode/12808
http://www.9and10news.com/Category/Story/?id=279156&cID=1
http://salon.glenrose.net/default.asp?view=plink&id=2861
http://blogs.forbes.com/christopherhelman/2011/01/21/chesapeake-energy-whats-up-with-these-lawsuits/
Sounds like Chesapeake/RedSky Land have set up another bogus company to hide behind. Clear Creek Resources. If they are a front for Chesapeake, they are doing it like this to cheat you out of your rightful money. Maybe people were starting to learn that Blanca Peak Energy, LLC was made up of the same people who cheated all those mineral owners in Michigan out of their rightful money. RedSky Land contract employees, Joe McFerron, Adam White, Dan Glashauser, Carole Lindsey, etc. here are some links to what they did in Michigan