Recently a Landman came to our house and introduced us to a "Paid Up Oil and Gas Lease".
I've been Googling this stuff and have learned a few things this past week. In this post I'll try to ask questions which I believe are pertinent to the subject.
We live in Western PA and own 1.05 acres. He offered 2200 bonus for the acre and 15% royalty in the lease. The primary period is for 5 years and secondary is for three years.
Of course we haven't signed it yet as I am trying to educate myself about all of this. I told him I wanted something in the lease that says the oil company will provide us with potable water if our well gets messed up, etc.
A couple days later he emailed us a more formal lease, a Memorandum of Oil and Gas Lease with all the proper information filled in and the lease included addendums for:
No Surface Drilling Use Clause
Hold Harmless Clause
Water Testing Clause
The amount of the bonus went from 2200 to 2310 (how is this amount calculated?)
The landman is with Folse Land Services, LLC and acting as an agent for the gas company, XTO Energy Inc.
The lease states the "Lessee" is XTO Energy Inc, (not the landmans LLC company) which I believe is a good thing.
I have two neighbors on one side of me that haven't signed and one neighbor between me and the proposed drill pad that won't sign. I heard a term called "forced pooling" is this something that happens in Pennsylvania?
I realize 1.05 acres isn't much but I'm concerned if I sign this lease, there is going to be something I'll wish I had known about before signing it. Some tax or other fee?
I'm open to advice and "Do's and Don'ts" of signing a lease.
I wouldn't take anything for granted, water testing is not the same as providing water if your well is polluted. Take things very literal, if it does not say they have to provide potable water, then they don't and you would have to sue them for damages which could cost you $50,000 or more.
In your case I would hire as much legal help as the bonus money would buy from someone looking after your best interest because you have alot more to lose than to gain from the lease of an acre.
Actually it does say they will provide potable water at their expense. Now that leads me to my next question, what’s the real truth to whether or not the ground water will get polluted? There’s a lot of debate and I’m not entirely convinced either way.
I think the odds of water contamination are very low but it would be of some concern to me too. You didn't mention that they included that they would provide potable water in your original post, only that you asked for it should your water become contaminated. I'm used to looking for gotchas and seeing things that sound good but are meaningless or totally inadequate in a lease, read everything carefully using the broadest possible interpretation. If something can mean two different things, in a dispute they will pick the interpretation that favors them. Operators have also gone to court in the last few years to change the previously accepted meaning of some terms of the lease and I don't believe there is any defense against it for the average mineral owner. I suggest you have a lawyer make sure any clauses in your favor are tight and not open to interpretation. Good luck.
I don't think that you would have anything to really worry about with your water well. Rigs are mandated to not be less than 500 feet of any structure. You could have a damage clause added to the addendum that you state the oil company would have to pay you X amount of money (enough to cover a new well) for any damages. Most of the time the landman just represents the company. So XTO would be the actual company paying for the lease. Talk to the landman and try to negotiate the damage clause. The no surface use clause is good for you, its letting you know that they cannot drill on your property. The hold harmless clause- I would have them remove it. It is basically states that the Lessee (you) releases the Lessor (XTO) from any and all liability, damages, environmental damages, etc.... I'm sure you get the picture. You should have a basic damage clause... if you own the surface, that basically states they have to return the surface to its original state and that if they damage crops, livestock etc. they have to pay for that as well. You should be able to have them add an additional clause for damage on the water well. Hope this helps :)
From what I can tell online Pa does not have forced pooling of unleased property. What they are calling forced pooling is older leases that may not even mention pooling now being forcibly combined into a larger unit by operators, with the mineral owner having no say in the process. If you are leased, without very specific pooling language in your lease, the operators have carte blanc to pool how they please. There was even some mention of an operator suing mineral owners. Sounds like they are seeking total capitulation rather than have to actually deal with mineral owners in the future. Good luck.