We were approached by a Land Manager, Ben Huffman, on behalf of American Energy-Utica, LLC based out of Oklahoma. I have been non-stop reading everything I can to ensure we make the right decision, either to lease or not. I know that several people who live in our tiny community of Piney Fork, Ohio have had drilling done on their lands. I'm not sure who was drilling but the name Marcellusshale comes to mind. We only own 1 acre of land. The proposed lease sent to us had the following:
Introductory ltr fm Land Manager, Ben Huffman
A Paid-Up Oil & Gas Lease
Memorandum of Oil & Gas Lease
Order of Payment
The lease that they want us to sign states:
- $6,000.00 after a 120 day period in which they will need to do title/document searches
- 18% Royalties
I've been trying to read everything I can on Mineral Rights. Has anyone else heard anything about this company? Or have any insight into the above requirements stated by the lease?
Linda Sue,
American Energy Utica is Aubrey McClendon's company (who used to run Chesapeake and is generally credited for starting the Utica Shale play. He is still the biggest player in the game and will likely remain so. I have worked for him numerous times and although he is a demanding employer, he has been fair (except notoriously cheap). Many landowners however, will tell you that they feel they have been cheated with regard to royalties payments. I cannot comment on the truth (or lack thereof) regarding these claims. Your only incentive to lease is if you indeed need the $6000 figure up front. If you do, fine. If not, there is little reason for you to lease. A 1 acre parcel in a 1200 acre unit would amount to almost nothing for you in terms of monthly royalty payments, that is if and when you were ever put into a unit. You would likely not have a rig put on your property as they typically need at lease 5 acres for the well pad. Should you lease, insist upon a 'NO SURFACE OPERATIONS ' clause, a PUGH clause and be very careful about the language regarding deduction of any transportation or production costs which would be deducted prior to figuring royalties. You would likely need an attorney to determine such and again, with only 1 acre, would likely be cost prohibitive. I am a CPL with over 30 years experience, the last 5 being right here in Ohio pursuing the Utica shale and I do not have a dog in this hunt. Beware of others who may wish to promote their own agenda or purport to be "experts" who wish to "look out" for your best interests. I hate those who portray anyone in the business as a thief but I must admit the industry does have its share of snakes (then again most industries do). Good luck dear. With regard to the offer, it seems fair, but some have squeezed them for 20% and you could likely get more than the original offer, although your leverage is tempered by the size of your acreage. Even if you did get 20%, it would not make any substantial difference with regard to royalties paid on a 1 acre tract.
Hello John,
Thanks for the enlightening information. We contacted the Land Manager about 2 things:
1) Getting partial payment of bonus ($6000) up front (rather than have to wait 120 days) and
2) Having the clause of 120 days to research and do title pay per work done sooner.
He assured us it wouldn't take 120 days that it would only take about 30 days, in fact, he went so far as to say he would guarantee us it wouldn't take more than a month to do the title search. I pressed him on both issues and he then stated he was the middle man that he couldn't change anything in the contract. I stated to him that he should contact whomever makes the paperwork and let them know of the above to issues. He said he would. About 30 minutes later he called back and left a message on our answering machine to say Utica would not change the paperwork on the 120 day search, its across the board as a standard clause and he didn't address the bonus money upfront at all.