How Can I Contact Oil Producers to Lease My Land

Introduction

Natural gas development has intensified throughout Pennsylvania over the final several years, and "Marcellus shale" has become a household term. Every day, news headlines bring us the latest developments on gas well drilling and all the topics surrounding it--economic, environmental, legal, and social. With some estimates of up to $1 trillion in recoverable gas from Marcellus shale in Pennsylvania lonely, conspicuously natural gas development isn't going abroad someday presently--and the manufacture will go along to accept a major economic impact on individuals and communities in the Democracy and beyond for years to come.

Although natural gas has been extracted from secret in Pennsylvania since the mid-1800s, new technologies--in particular, horizontal drilling and hydraulic fracturing--are making gas extraction from deep reserves more economically feasible. Increasing demand for cleaner domestic energy will bring nearly standing exploration. The gas industry is seeking access to loftier-volume reservoirs of natural gas, called "plays," that lie far beneath the hills and valleys of Pennsylvania, Ohio, and West Virginia. Gas wells that tap the Marcellus, Utica, and other deep shales--as opposed to the shallow wells that have been effectually for centuries--are known equally unconventional wells.

Many landowners are realizing pregnant income past leasing their property to gas companies for exploration and drilling. Maybe a gas company representative or landman has knocked on your door, asking you lot to sign a lease that grants permission to explore or drill for natural gas on your land. How do yous make up one's mind what to practice? Only when you lot understand the gas exploration and leasing process can yous make sound decisions for your state and your family. Just, reliable, unbiased data about gas deposits and leasing is hard to come by because information technology'southward usually carefully guarded to forestall competing businesses from interfering with 1 another's gas evolution plans.

This guide can be a useful tool for belongings owners who are faced with the conclusion to lease or non to charter. Information technology covers the basics of gas leasing and answers some common questions about natural gas exploration in Pennsylvania. The guide outlines what the gas resource is, how and why landowners are likely to exist contacted, how a gas lease works, and what to consider when making decisions almost gas leasing. It isn't meant, however, to be an exhaustive handling of all natural gas issues or to serve every bit legal advice. You should consult an attorney who specializes in gas leasing earlier making legally binding decisions.

Basics most natural gas leasing

Property owners have the right to excerpt natural gas under their property unless the correct has been leased or sold.

To check on the status of your rights, consult public records, deeds, and existent estate titles--yous might need the help of an attorney or abstractor to do this. If you ain these natural gas rights you may lease the right to explore for gas to a company that has the equipment and expertise to recover or receive the gas for a period of time, and to have payment for the lease and royalties for the value of the gas. Note: "mineral rights" and "natural gas rights" are not necessarily the same affair, and you should exist articulate on what rights are legally yours. Check the human action to your property for this data.

Gas leases are legal and binding documents--they are contracts.

They represent an official written understanding between two parties, usually between the gas visitor and the landowner. Because leases are bounden contracts, to protect your rights as a landowner, you should take the proposed lease reviewed by a lawyer who is knowledgeable in Pennsylvania oil and gas law and experienced in gas leases before entering into whatever contract. Once you sign a lease, there's really no way you tin can go out of it until information technology expires, unless yous can testify fraud on the function of the gas visitor.

Gas leases are negotiable.

To save time, gas companies may offer a preprinted gas lease. You can accept this lease, refuse it, or utilize it equally a starting point for negotiating. You tin make changes to the lease by creating one or more than addenda that are approved by both parties.

Don't feel pressured to lease your land for natural gas exploration and drilling.

There is no Pennsylvania law or manufacture regulation that states you have to lease if yous take natural gas on your property. The determination is yours to brand.

If you do decide to lease your land, stay involved in the procedure.

Keep the lines of communication open up with the gas visitor--information technology's in your best interest to have a adept human relationship with them, and for the most part they want to be skillful neighbors. Stay informed about what's happening on your land as well every bit in your community. Be an educated landowner!

Where Is the Gas?

The Marcellus shale, a deep layer of rock that lies 5,000 to 9,000 feet underground, runs from the southern tier of New York through western Pennsylvania into the eastern one-half of Ohio and through West Virginia. In Pennsylvania, the germination extends from the Appalachian plateau into the western valley and ridge.

Horizontal drilling techniques make it possible to recover large amounts of gas from natural fractures in shale. Every bit organic sediments were laid downwards 380 million years ago, the black shale of the Marcellus formed. Methane and other natural gas components formed as that organic material decayed and degraded, and that natural gas is at present trapped tightly in the dense shale. Nearly 300 million years ago, the pressure of the gas created shale fractures that run as slices from northeast to southwest. While a vertical well may cross 1 of these fractures and other less productive fractures, new technology allows horizontal drilling, which can cantankerous a series of very productive fractures.

In certain locations, other dumbo black shales in Pennsylvania--such as the Utica shale, which lies at least 2,000 feet below the Marcellus--are also potentially rich in natural gas in its marsh gas class as well as oil and what's known every bit "moisture gas," which includes propane, butane, and pentane. Shallower shales throughout the country as well offering potential for natural gas extraction.

Map showing the extent of Marcellus Shale plays in Pennsylvania, Ohio, West Virginia, New York, Maryland, and Virginia, with Pennsylvania'south major river basins overlaid.

Map showing the depth of Marcellus Shale deposits, and the purlieus line between where wet gas and dry gas are found.

Where and How Does Drilling Have Place?

As a landowner, you must requite written permission for whatsoever natural gas exploration or drilling on your land. All proposed work should be clearly described in the lease or annex, including compensation for whatever damages, earlier whatsoever action begins. Gas wells are drilled where a gas company has obtained the right to explore for and develop natural gas. Wells are sited according to applicable mineral laws and regulations, with the goal of extracting gas efficiently with every bit few wells equally possible. Geologists and geophysicists working for gas companies use seismic data to interpret hugger-mugger rock layer formations. They go this data through seismic testing.

Slow-moving trucks that contain seismic equipment are a familiar sight in Pennsylvania'due south gas-rich regions. Seismic equipment generates ii-dimensional images of subsurface rock patterns that help gas companies decide the extent of the shale, the direction of the shale layer for drilling purposes, and geological hazards to avert, such as faulting. In much of the Marcellus region of Pennsylvania, a three-dimensional organisation of seismic testing is used to clarify gas deposit geology. Extensive grids of cabling, modest underground explosive charges, and geophones create and record new seismic data.

Sign indicating a seismic crew is working nearby.

If seismic data suggest a reasonable possibility of efficient gas access at a specific location, a well volition be drilled using long sections of drill pipe. Depending on the geology, the drill may travel vertically for several thousand feet, and so gradually angle until it is drilling horizontally. Multiple layers of cement and steel casing are put into place to stabilize the well bore and protect groundwater. In many cases, multiple wells may be drilled side by side on the same well pad, radiating out in opposite directions.

Cross-department diagram of a typical horizontal Marcellus well.

Hydraulic fracturing is a standard practise in the gas manufacture and a necessary pace in the natural gas extraction process. It involves using water, sand, and chemical additives to create, extend, and prop open up formation fractures for the highest gas production.

Gas Leasing Process and Terms

Natural gas trapped underground has little or no value to landowners. Information technology becomes a valuable resources only when companies with the proper equipment and technical power begin to extract it and transport information technology to consumers. When natural gas is extracted from a leased property, the property owner is paid a royalty.

Equally gas companies and geologists decide where gas drilling might exist worthwhile in Pennsylvania, they send contractors, called landmen, out to landowners to secure the natural gas exploration rights for a menstruum of time as gas development begins. This practice helps forbid some other company from tying upward the natural gas exploration rights and making exploration more complicated and expensive. Landmen volition usually visit owners of large parcels commencement, to lock upwardly equally much land as possible in a brusk time. For landowners, this visit is oftentimes the get-go experience they have with natural gas drilling.

Not all landmen are part of a gas company. Some represent independent brokers and others represent speculators. Each of these businesses will have a different motivation for securing a lease on a packet of privately owned land. Depending on where seismic information advise optimum gas production, dissimilar landowners volition receive different offers regarding drilling, exploration, surface access, and payments.

In any scenario, you as a landowner should know that the lease will be the footing of negotiation and that the written terms of the contract will supervene upon annihilation that is said orally during contract negotiations. An constructive gas charter should spell out clearly what each party is agreeing to during the gas exploration process. It should spell out the rights and responsibilities of each party in the agreement, how issues are to be handled, and how long the agreement lasts.

Gas companies must have sufficient acreage under lease earlier a well can be drilled. Companies make up one's mind the drilling unit they want to work in and designate the boundaries of the unit in a process called unitization. Usually, unitization is based on an area's geology, and unit size can range from 100 to 1200 acres or more and is not mandated by land law. Landowners in the unit of measurement receive a pro-rated share of the royalty based on the acreage they take in the unit.

A discussion about landowner groups: You might take heard friends or neighbors talk nigh landowner groups in the context of gas leasing. There are different types of landowner groups. Some exist merely for sharing information near what companies are looking to lease in their item surface area, current rates, and whatsoever special terms or atmospheric condition to the leases. Other groups are involved in marketing their land--they seek out and maximize acres that share a edge and brand bid proposals to energy companies interested in leasing. Notwithstanding other landowner groups engage in collective bargaining, in which all landowners sign off on leasing terms accepted by the majority. This saves free energy companies many hours of individual negotiations and gives landowners a stiff negotiating position with companies looking to lease land. If you lot're interested in possibly joining a landowner group, decide what type of grouping best suits your needs. Research groups in your surface area before committing to annihilation.

While the majority of gas leases in Pennsylvania deal with producing natural gas from deep underground shales, depending on where yous live, you might be approached with an offer to sign other types of leases--such as for shallow wells or for wastewater deep injection wells. As always, it'southward best to consult an chaser with expertise in gas leasing if you're asked to sign such a lease.

You also might accept heard of the term "top leasing." A peak lease is one that "lies on top" of a current lease and would accept effect when the existing lease agreement ends. While a request for a top lease shows that a company is interested in your property, yous should even so approach such an offer with due diligence. Volition a top charter maximize your benefits?

Components of a Gas Lease

This section outlines some important components of gas leases. While it'due south not intended every bit a complete list of gas lease issues, information technology will help you empathise the basics of what's involved in a gas lease.

An case gas lease

Length of Lease

Your charter agreement volition specify a chief term, usually 5 years, and many signed gas leases are accompanied by bonus and rental payments that last through the primary term of the lease. Depending on the terms of the lease, gas production on leased country and if yous are in the drilling unit of measurement may atomic number 82 to a secondary term that lasts as long as product is agile, every bit divers in the lease. You and your attorney should carefully consider the language in the lease agreement because similar-sounding phrases, such as "and so long as operations are conducted" and "and then long equally gas is produced in paying quantities," can have very different impacts.

Gas Lease Payments

In any contract, yous demand to know what you lot're giving upwardly and what you're getting. If you lot are offered a gas lease, what you'll be getting is, of course, payment. The original offering might include payments as a signing bonus, country rental fees, and/or royalty payments.

A bonus payment is a one-time payment for signing the lease.
Royalties are payments made to you, the landowner, past the free energy visitor when natural gas is extracted from your land. Royalties, which are based on the terms agreed to in the lease, recognize the landowner's right to a portion of the value of the gas resulting from the lease of exploration rights.
Rental payments are unremarkably made annually. Sometimes, the bonus and rental are made in one payment for the stated term of the charter, and then the lease is referred to as a paid-upwardly lease.
A gas charter may also specify a delay rental in addition to the base rental. A delay rental is made to compensate the landowner for delays in gas product or drilling.

There are no "going rates" or standard rental payments in gas leases in Pennsylvania. The amount offered will depend on many variables. Higher bonus and rental payments are normally offered based on a visitor'south understanding of the area's geology and proximity to optimal drilling locations. Unfortunately, the data nearly where the best concentrations of natural gas are located is hard to notice and tin be disruptive for a nonscientist. Attention educational sessions offered by unbiased parties such as Penn State Extension and talking with friends and neighbors are practiced ways to observe prices companies are offering in your expanse.

These factors may increment potential bonus or rental payments

Property occupies a big portion of prime natural gas geology in your area
Property is relatively near the prime gas geology
Property owner is willing to let less restricted exploration or drilling

These factors may subtract potential bonus or rental payments

Property comprises a small portion of acreage designated by companies as prime geology
Holding is unlikely to be virtually the best geology
Lease restricts gas exploration on the surface (sometimes this makes only a small departure)

Before settling on a lease, consider what home or farm expenses might relate directly to the lease. Legal fees, property tax increases, and other expenses may be necessary to enter into a lease, or during drilling, for the designated term(s). Yous should consider these expenses forth with the company's offer so that you tin can run into your net economical gain. The timing and method of rental and bonus payments should be clearly stated in the gas lease. Failure to brand payments may cancel the lease, merely simply if it is so stated in the lease.

Pennsylvania constabulary states that a gas charter is not valid unless it guarantees the landowner royalties of at to the lowest degree 1-eighth, or 12.5 percentage, minus whatsoever marketing deductions, which would be considerable, of all natural gas removed from the property. Y'all may negotiate with the energy company for a royalty payment that exceeds this minimum.

Leases are commonly written to end rental payments when royalty payments begin. If gas is being produced on only a portion of the property, the lease should be clear equally to whether the royalty and rental terms apply to the entire bundle or just the producing portion. A royalty may apply only to the producing portion of the property however terminate rental payments on the rest of the property. If applicable, you should make up one's mind how a royalty payment on a portion of your belongings might affect your overall rental payment expectations. Having your chaser include a Pugh clause in the addendum gives y'all the option of separating these balance acres from the lease and potentially re-leasing them in the time to come.

A close-in royalty is paid where 1 or more wells are fully developed but non producing marketable gas. This may be due to lack of pipeline connections, market timing to increment wellhead acquirement, or other product and manual circumstances. A private gas charter may land a period of time, such every bit six months, that the landowner would take to wait before the shut-in royalty starts. During that time, the gas company may reserve the right to change the well, drill a unlike well, or otherwise adjust its product. Over again, you lot will demand to read the charter carefully, with your attorney, and make certain you understand what payments volition come, how they will exist fabricated, and when they will stop. Royalties from gas and mineral properties are taxable as ordinary income.

Past do for some older, shallow gas leases allowed for free gas for the landowner. The landowner would be responsible for the piping of the free gas from the wellhead to the residence. This is not commonly done now with unconventional wells, equally it could add significant expense and liability for the landowner.

Landowners who take a well sited on their property may receive payment beyond the royalties from gas extracted from their belongings.

Surface or Subsurface Rights

When considering gas leasing, yous should understand the extent of rights you lot are granting to the free energy company and seek to limit those rights if necessary. A standard lease will probably give the energy company very broad rights to the use of your property's surface. Surface exploration may include tracked or wheeled equipment in fields and forests to record geologic data, the utilize of small surreptitious explosive charges to create sound waves that tape seismic data, movement or construction of drilling rigs, country grading for the construction of a drilling pad and access route, equipment storage, and parking or worksite activity for personnel, amidst other things. If you sign a lease granting surface rights, you can limit those rights. You tin can land, for case, that you lot have the final say on where a well is sited or where access roads are built on your property. You should also brand certain y'all are protected in the issue that drilling activities cause harm to crops, livestock, buildings, or personal property.

Some landowners restrict any surface activity for gas exploration on their state. In many simply not all of these cases, the parcel may be likewise small to conduct worthwhile surface explorations and the gas company will offer the landowner a gas charter that requires permission for surface access simply if necessary. You could choose to negotiate terms that prohibit any surface activity whatsoever. Your contract addendum would state that the gas company has no surface rights only that you are granting sub-surface rights.

In shale areas of Pennsylvania, energy companies are interested in large blocks of land, and often they desire groups of neighbors to agree to unitization. In this instance, if you are part of the unit and the free energy company would drill a well on your neighbor'south property, you would still exist paid a royalty based on your prorated share. If the well was drilled on your belongings in the unit and your lease provided for you to receive a well siting fee (often $2,000 to $15,000), you would receive that across the royalty payments.

Right of Get-go Refusal

A right of beginning refusal is a term in the lease you could insist on instead of an option to automatically renew. The right of get-go refusal has to do with what happens after your lease expires. At that point, the right of first refusal gives the gas company the right to match whatever competitor's offer for renewing the lease. For your purposes, this could be preferable to the option to automatically renew, which allows the gas company to renew the lease for the primary term. Every bit a landowner, yous might not agree to the choice to automatically renew because essentially it locks yous into the original offer. The right of kickoff refusal will help you in getting the all-time offering possible if you want to renew your gas lease.

Storage of Gas

In certain cases, natural gas tin can be pumped back into a gas well after existence extracted elsewhere. Gas is stored to accept reward of seasonal market changes. Gas is in higher demand in the wintertime, so gas extracted during the summer tin exist pumped down into the gas formations under pressure, anticipating release closer to wintertime. Gas storage makes utilize of depleted reservoirs. Although gas storage can increase wellhead revenue, information technology can also complicate the private gas lease. You should consider gas storage separately from the original exploration and drilling charter, and develop a separate gas storage lease, possibly for added income. Gas storage leases are oft arranged with a unlike company, so if gas storage is proposed in the exploration lease, it tin oft be easily negotiated out. Be alert to the means in which gas storage will affect your lease payments. For instance, a well might be shut in and not producing marketable gas. If that well is converted for storage, a storage fee like to a rental payment would proceed, only with no royalties. These payment changes should be described conspicuously in the lease or annex.

Pipelines

When considering signing a contract, spotter out for terms that would requite blanket admission to the gas company for pipeline rights-of-way. If gas is being moved from a drilling unit that you're receiving a royalty from, pipeline admission is expected by the company and is reasonable for the landowner to grant. If the right-of-fashion is for gas to exist transported from a unit that is not on your property, then this should be negotiated separately and the gas company should pay you lot an additional fee for this utilise.

The Other Party in the Understanding

When you hold to and sign a gas lease, you are entering into a binding legal relationship with a concern--a relationship that may continue for many years. Before signing the lease, yous should know exactly with whom you are making the agreement. The other party may not exist a gas company, only rather a speculator, a broker, or an contained landman who might sell the lease or take partial buying of the royalty. Landowners who intend to sign a gas lease should be gear up to negotiate a clause making lease assignments or sales subject to their blessing. Make sure you sympathise with whom you are dealing and whether your lease is freely assignable.

Gas workers capping a well.

Leasing Considerations for Site-specific Factors

Every bit a landowner, you might non exist sure what is worth negotiating and what is not, particularly if the energy company doesn't give you lot much information almost the potential for drilling. Landowners who desire to control surface activity on their property can stipulate such details as road construction, repair or compensation for timber stand impairment, constructive restoration of impacted farmland, and other site-specific factors in a private lease. If your lease understanding allows for whatsoever surface access, you and your attorney should ensure that your interests are protected in writing. Issues you may desire your lease or addendum to accost include the post-obit:

Extent to which water may be used, such equally from a farm swimming, well, or stream, during the drilling process
Fairly assessed value of, and compensation for, damage to crops, timber, or water resource; for data near protecting your forested state, encounter the post-obit Marcellus Education Fact Sheets:

" Woods Landowners and Natural Gas Evolution "
" Woods Landowners and Natural Gas Evolution: Timber Resources "

Implementation of effective conservation and land restoration, such as:

Protection of agriculture soils during exploration and well operations and then farmland is restored to total productivity afterward
Protection or replacement of farm infrastructure, such as roadways, livestock travel lanes, drainage features, and fences

Road location and construction review past landowner and a qualified engineer or forester
Site of well relative to other property uses
Possible timing of surface operations to allow for livestock pasturing, hunting, or other rural land activities that accept restricted seasons
Carve up written understanding on location of pipelines in the property

Farmers should brand sure that they are compensated for whatsoever lost acquirement due to natural gas drilling activities on their land.

When negotiating a lease, you should as well include a provision to crave the gas visitor to indemnify you for any liability you lot might incur as a result of drilling activity. Indemnification means the gas company will protect you against or compensate you for whatsoever loss, damage, or injury that happens on your property as a result of drilling. The indemnification clause should be written to accost all possibilities, including situations such as someone tripping over the drilling equipment, contamination of a neighbor's water well, an explosion caused past the release of natural gas, and so along. In improver, since litigation is expensive even if you ultimately win a instance, the indemnification clause should include a duty to defend then that the gas company is obligated to rent an attorney for y'all to defend against any lawsuit.

Another type of clause yous should exist aware of is the market enhancement clause. Different leases from several years ago, many leases today include enhancement clauses that permit the gas visitor to take "postproduction costs" and "deductions" for the expense of producing, gathering, storing, separating, treating, dehydrating, processing, transporting, and marketing natural gas. Y'all could end up having substantial deductions in your royalty checks for postproduction costs taken under this market enhancement language. Be aware of these marketplace enhancement clauses and consult with an attorney before like-minded to them.

How to Observe Credible Sources of Information

If you're considering signing a gas lease, stay as informed as possible. Go far a point to keep up to date on natural gas activity in your area. Talk to friends and neighbors, observe out near landowner groups in your surface area, read publications, and visit websites that you lot trust. Gas leasing is a challenging outcome, so information technology'southward good to keep an open up heed, be discerning, and wait for information that'southward backed by enquiry.

Penn Land Extension is a good identify to kickoff. Extension has always been known for disseminating unbiased, research-based information to Pennsylvania'southward citizens, and that'due south a valuable resource when it comes to natural gas problems. Extension educators recognized how important gas exploration could exist for Pennsylvania landowners and communities when landmen first started knocking on doors, and the first leasing workshop was held in 2001. Today, Penn State Extension's Marcellus Educational activity Squad--a group of experienced educators and faculty--piece of work throughout the state to make sure citizens have access to reliable information. Canton extension offices may host an educational workshop, discuss leasing arrangements, or refer you to regulatory or legal specialists.

Making Decisions About Gas Leasing

When the moment arrives and you're sitting at the kitchen table holding a standard gas charter contract and wondering whether to sign it, what exercise you exercise? The conclusion to sign a gas charter rests entirely with the parties named in the lease certificate--namely, yous and the energy company. There is no legal requirement that would force you into signing a charter with a gas visitor, and public government cannot use the ability of eminent domain in the natural gas exploration process.

Since yous are not legally obligated to sign a gas lease, the decision to sign is personal. Here are a few things to keep in listen as y'all consider leasing:

In any contract, you're giving something upward and getting something in render. Do you understand what yous're getting in return for allowing gas activity on your land?
What long-term plans do y'all have for the land in question? Would gas leasing fit into those plans or interfere with them?
Are whatsoever of your neighbors leasing? Will that affect your decision?
Is annihilation in the lease unclear? Does something seem unfair? You can negotiate until you lot experience your interests are tended to. An attorney can help greatly with this procedure.

It'southward also a good idea to keep a journal or log of all contacts, conversations, and activity that happens from the moment you are get-go approached almost leasing. Writing things downwards not only can help you keep your thoughts organized, it can besides provide documentation should you need it subsequently.

For Landowners Who Are Currently Leasing

If y'all are currently leasing your country for natural gas exploration and drilling, you've already experienced at least some of the processes and issues covered in this guide. Yous might have some questions most your electric current lease based on what you've read here. For example, if water testing provisions aren't included in your current charter, information technology is your responsibility to become your water tested. Equally well, you lot'll have decisions to make about the future of your property. If your lease is close to expiring, volition y'all renew? When natural gas activity on your property comes to an end, you should have a clear agreement of how your land (forestland, grassland) volition be reclaimed.

Make certain you understand your lease terms, stay upwardly to date with natural gas activity on your land and the surrounding surface area, and maintain adept communication with the gas company leasing your property. If you revisit your lease and take questions, consult your attorney.

Gas Lease Linguistic communication

The language on a gas lease contract is difficult for most nonlawyers to empathise. Sentences tend to exist long and boring, full of legal terms landowners exercise not run across very oft (judicial conclusion, leasehold, lessee, cash equivalency, etc.). Few landowners tin can read through each sentence in the preprinted lease and understand its significant and implication for their property. Gas company representatives may translate the diction, but anything they say out loud is not what will bind the parties in the contract. The wording in the printed contract will bind the landowner to the gas exploration process, for improve or worse.

The standard lease gas companies provide is usually as favorable equally or more favorable to them than to the landowner. Once more, this is where the importance of legal counsel comes in. Your attorney can protect your rights past helping you translate the legalese, and then if necessary you can modify the lease by using addenda, which can make the agreement as favorable to both parties. It is not uncommon for 20 or more of these to be added to the typical industry lease to change it in a mode that is more than benign to y'all, the landowner.

The Role of Legal and Financial Professional Advisors

A qualified chaser can translate a gas lease, propose changes, better the document, and add the specific terms you want. An attorney tin can also correspond yous if trouble arises. For instance, if royalty payments are not fabricated in the fashion agreed to in the lease, an attorney can apply his or her knowledge and influence to resolve the matter. While many lawyers in Pennsylvania can aid with gas lease contracts, some attorneys have all-encompassing experience in oil and gas rights to work out special arrangements. It is fair to inquire a lawyer if he or she has experience with gas charter contracts and what compensation will exist required for this legal assistance. In fact, before y'all hire an attorney, it'due south very important to exist certain that you understand the attorney's fee. Different attorneys charge differently.

As well as an chaser, consider hiring a financial planner or accountant to help you manage any income you receive from leasing. A financial professional can besides help you deal with tax implications of gas leasing income. No matter what y'all decide to do with income you lot might realize, here's one tried and truthful word of advice: Don't spend any coin until you accept it!

Charter Amendments

In areas where gas leases are about to expire (approaching the end of their main term), the charter holder may approach the landowner to extend the lease with a lease amendment. One time in place, the lease amendment may override terms and conditions in the initial gas lease, so it'southward important to understand what is being amended and/or modified and how information technology will affect you, the landowner. Charter amendments can be used to alter an former conventional" gas lease that may exist on the holding. Virtually commonly these charter amendments volition attempt to increase the unit size so that the property tin be integrated into a larger shale gas unit (generally 800 to 1,200 or more acres). Compensation or bonus payments for lease amendments tin can vary. You may non be offered whatever compensation, or you may be offered a substantial bonus. Equally with any legal document, you lot should consult with an attorney earlier signing a lease amendment.

Gas Leasing FAQs

How tin can I find out if gas companies are leasing in my expanse?

There are several things you tin exercise. Talk with your neighbors and inquire them if they've been contacted by any gas companies. Check the Pennsylvania Section of Ecology Protection (PA DEP) website for companies active in your county and township. Check with your county's Recorder of Deeds. Contact your local extension function for names of Penn State Extension Marcellus Instruction Team members in your expanse. If yous call an free energy company, you should have your tax parcel number handy considering they volition ask for that, besides as the township or county you alive in.

What should I exercise if I am asked to lease my country for gas exploration?

Ask the gas visitor representative or landman for a copy of the charter and say yous will expect it over. Never sign annihilation on the spot. Ask your attorney to review the lease and explicate its impact on you and your landholdings.

Do I demand an attorney? If and so, what type of attorney do I demand?

To protect yourself and get the best outcome, you should consult an chaser. Exploring and drilling for gas is a multimillion-dollar venture for energy companies. If a successful gas deposit is tapped on your country, your signature could correspond a million-dollar determination. Earlier signing whatsoever natural gas lease agreement, y'all demand to know what yous are getting and what you are giving up. An attorney with experience in gas police force is your best assurance to get the most out of your gas lease agreement.

Ane mode to find a good attorney is through word of mouth. Who are your friends and neighbors using?

The company I originally leased with is transferring my lease. How will that touch me?

Transferring leases is mutual in the natural gas industry. Sometimes, a holding company will collect leases so it can sell them to the highest bidder--a company that will actually drill. If your charter is transferred, the terms volition stay the same. In the interest of keeping informed, you should know the name of the company that holds the charter.

My neighbor got more than than ten times what I leased for. Can I demand more?

Y'all would have to speak with an experienced attorney in gas law. But unfortunately, the answer is probably "no." Remember, a gas charter is a binding legal contract. The time to do the research and brand sure that the lease is most benign to you is before signing the lease understanding. One time you sign, you lot are legally jump by the terms you lot agreed to.

I own but four acres. My neighbors have leased. Are the gas companies interested in my little slice of land?

Yep. Although you may never have a drill rig on your belongings, if your holding is in a drilling unit, you are due royalties based on the number of acres you accept in the unit of measurement.

Is it better to form a group of neighbors or go it alone?

Your conclusion to lease or not to lease should be based on what'south important to you. You may want to join or form a group that has the same goals for land use since the corporeality of property available to the visitor by the group oft increases its interest and typically provides greater leverage when negotiating terms of the gas lease. On the other hand, if you and your neighbor have unlike goals for your land, you might want to negotiate on your own.

If I sign a lease, how, when, and how much will I get paid?

You may be offered a one-fourth dimension bonus payment from the energy company when you sign the lease. You might also receive a delay rental payment, which is an annual payment that would end when a well is drilled on your property. Royalty payments get-go when natural gas is extracted from your land. The state law requires that you be paid a royalty of 12.5 percent, but yous may negotiate for more than than this minimum. All of these types of payments are negotiable.

Many factors determine the corporeality and manner of payments you volition receive after signing a gas lease. These include the electric current natural gas market, past drilling results in your vicinity, amount of acreage to exist leased, the presence of pipelines or other infrastructure in the area of your property, and more.

How can I find the going rate for a lease?

Never accept a showtime offering on the spot. Earlier you lot take or sign anything, do your research. Talk to your neighbors to find out what they have been offered or have negotiated. Contact a few companies with capacity to drill shale wells and determine their involvement in your landholdings. Talk with an attorney who is familiar with oil and gas law about negotiating for the best terms. Contact a member of the Penn Country Extension'due south Marcellus Instruction Team to notice out more well-nigh companies that might be leasing in your region.

It's important to realize that the gas industry has changed over the past several years, and natural gas prices have decreased because of an abundant supply. Because of this environment, the "shelf life" of a lease will vary co-ordinate to location, economic science, timing, and contest amidst gas companies in your surface area.

What is the Law of Capture? Does it mean my neighbor can take the gas out from under my country?

The Law of Capture states that if a well is drilled on a property, annihilation that comes up out of that well belongs to the owner of that property. Simply in the case of natural gas in shale, this is not a concern. First of all, it'due south illegal to drill under property that is not leased. Furthermore, because the gas in the shale is in dense rock rather than pockets, there's little business well-nigh a Marcellus well extracting natural gas from a neighboring holding. The Marcellus shale has to exist hydraulically fractured to release the trapped gas, and this fracturing potentially will release gas up to 1,000 feet from the bore hole. The gas companies typically design the drilling units to allow enough distance around the wells and so that gas produced from them will be from that unit only.

If I sign a charter allowing a gas company to explore and drill for natural gas on my land, what does this all entail?

This lease covers exploration and drilling but. If a gas company wants to store gas on your property or send gas from someone else's property across your land, you should be compensated for that separately. Y'all and your attorney should make sure that provisions for storage and transmission of gas are non included in a standard gas charter unless the gas is transported from your drilling unit. In fact, information technology's of import to make sure all processes are covered in dissever agreements--including seismic activity, storage, transportation, pipeline, and timber management.

Who is responsible for making sure my lease agreement is complied with?

It's actually up to you, the landowner, to make certain the gas company is honoring the terms in your lease. You should know what stipulations are included in your lease and keep the lines of communication open with the gas company to ensure those stipulations are carried out.

How long is natural gas development going to final in my area?

The curt reply is, it can be difficult to tell. Natural gas development depends on many factors, and economics is an important one. Gas companies respond to the price of gas, and they will go where the most valuable commodities are. For instance, natural gas prices currently are depression because of the arable supply from the shale, and some gas companies are kickoff to move to areas where they can extract moisture gas and oil.

How do I know my royalty check is accurate?

If you accept concerns about your royalty checks, your chaser or financial adviser can aid you determine whether the bank check amounts are accurate.

My farmland is assessed under the Clean and Green plan. How will gas leasing affect its status?

Clean and Green is a preferential cess that was enacted to encourage landowners to preserve land for farming and forestry, and it allows the landowner to pay lower real estate taxes on agricultural or forested land. Recent changes to the Clean and Green program help protect landowners who are leasing country for natural gas activity. Originally, Clean and Dark-green required a penalization or roll-back revenue enhancement if belongings that qualified for the program ceased to exist used for canonical purposes. As a result of new legislation, roll-dorsum taxes are due just for the portion of the belongings being used in a nonqualified mode, such as natural gas exploration and drilling.

If your land is assessed under Make clean and Light-green, you'll want an addendum stating that the gas visitor will reimburse you for any back taxes you have to pay as a upshot of gas leasing and/or exploration. If your land is under any kind of preservation or conservation easement program, in that location are limitations on how you can develop the country. You lot should talk over these issues with your attorney.

What tin can I do to protect my water supply if I allow drilling on my belongings?

Information technology'south of import to realize that natural gas in the shale is about 5,000 to 9,000 anxiety underground, and the groundwater supply is simply about 400 anxiety surreptitious, so drilling activeness doesn't accept place nearly groundwater. Nonetheless, when a gas well is drilled, a steel casing is cemented in place to protect that groundwater.

While every precaution is taken and regulations are in place to minimize the chances that h2o volition be contaminated, the best way to know for certain that your well, stream, or pond is condom is to have your h2o tested both before and afterward drilling. You can negotiate in your lease to accept the gas visitor pay for h2o testing. If the exam shows changes after drilling, you lot tin file a complaint with the regional part of the Pennsylvania Department of Environmental Protection'south Agency of Oil and Gas Management.

I've had my water tested, merely I don't sympathise the results. Where can I get help interpreting the written report?

Understanding your h2o examination report, only they can be disruptive to read and interpret. You tin can observe lots of helpful information online at Penn Land Extension, including a water test estimation tool and a publication chosen " Water Tests: What Practice the Numbers Mean ?"

Tin I lease and forestall surface disturbance?

During the lease negotiation, y'all may include addenda that limit or prevent surface disturbance of your property. It is important to discuss with the gas company what their electric current plans for evolution are and how your property may exist affected. You should notice information nearly the proposed gathering pipeline path, compressor stations, water lines, and access roads. While you may be in a position to completely eliminate surface disturbance of your belongings, you lot still demand to allow transport of natural gas from the unit.

What is well spacing and why should I be concerned virtually information technology?

Well spacing refers to the distance between the well bores associated with natural gas or oil evolution. With the increased number of horizontal wells beingness drilled, it'south besides important to understand well pad spacing. Most gas companies are drilling multi-well pads, meaning each well pad tin have two or more than wells on them. Typically, wells are about 15 feet apart on the pad. While a traditional vertical well may drain the gas from 80 acres, a horizontal drilling well may cover more than than 1,280 acres. Agreement the relationship betwixt well pads, gathering lines, compressor stations, and fresh water impoundments is of import and then you lot tin effort and forecast which parts of your property may be afflicted past natural gas evolution and production.

Glossary

Abstractor: A trained professional person who verifies that the history of a belongings championship search is consummate, the belongings owner does indeed own the property, and in that location are no other interests on information technology.
Addendum: An addition to a basic gas charter, usually a condition or restriction to make the lease weather condition more favorable to the landowner.
Partitioning order: A document that lists a landowner'due south portion of the gas produced from a pooled production unit. Gas leases allow companies to combine or pool properties of multiple landowners into a production unit that defines the area the company intends to produce natural gas from by drilling multiple horizontal wells. All landowners with acreage in the unit share in the royalties based on their proportional ownership of the unit. Earlier receiving their starting time royalty check, most landowners volition be asked to sign a division social club.
Drilling Unit: The area from which a well draws natural gas. The unit is designated by the company and based on the area'due south geology and where the gas would be fatigued from when a well is drilled. Landowners within a drilling unit share royalties.
Dry Gas: Natural gas from the well free of liquid hydrocarbons; gas that has been treated to remove all liquids; pipeline gas.
Held by Product: A gas manufacture term used to describe a gas lease that has been extended. Many oil and gas leases include a primary term of five years, meaning that the gas visitor has v years to brainstorm drilling operations on the leased premises or the lease volition elapse at the end of the primary term. The gas lease moves into a secondary term as stated in the lease so is extended every bit long as gas is produced in paying quantities.
Hydraulic Fracturing: A well stimulation process used to maximize the extraction of underground resources such as oil and natural gas. This process enhances subsurface fracture systems to allow oil or natural gas to move more freely from the rock pores to the well diameter and up to the surface. A mixture of water, sand, and chemical additives are commonly used to create, extend, and prop open up the fractures.
Landman: An agent who works for a drilling company or who is contracted by a drilling company or broker. The mission of a landman is to negotiate the lowest possible lease cost and most advantageous terms for the free energy/gas/drilling company.
Police force of Capture: A law stating that the owner of a tract of country acquires title to the oil and gas produced from wells drilled on that land, though information technology may be proved that part of such oil and gas migrated from adjoining lands. In the example of unconventional horizontal wells, this is generally non a peachy concern because shale gas is in dense rock rather than pockets and it'southward very unlikely that a shale well will extract natural gas from a neighboring property.
Natural Gas Liquids: components of natural gas that are liquid at the surface in field facilities or in gas processing plants. Natural gas liquids include propane, butane, pentane, hexane, and heptane. The term is commonly abbreviated as NGL.
Pooling: Combining leased properties to create a unit for drilling. About gas leases have a provision stating that the gas company tin combine or "pool" leased land with adjoining land, up to a certain number of acres.
Seismic ii-D and iii-D: Data used by geologists and geophysicists working for gas companies to interpret hole-and-corner rock layer formations. Seismic equipment generates ii-dimensional or three-dimensional images of subsurface rock patterns that help gas companies improve understand the geology.
Shallow Well: A traditional gas well that is much shallower than a shale well. Shallow gas wells accept existed for centuries and are sometimes referred to as conventional wells, while those that are drilled into Marcellus shale are called unconventional wells.
Tiptop Lease: A lease that "lies on top" of a current lease and would accept effect when the existing lease agreement ends.
Anarchistic Formation: A shale formation below the base of the Elk sandstone or its geologic equivalent where natural gas cannot exist produced except past horizontal or vertical well bores stimulated by hydraulic fracturing.
Unconventional Well: A well that is drilled into an unconventional germination.
Unitization: A process in which gas companies designate the boundaries of a drilling unit that comprises several backdrop. Commonly, unitization is based on an expanse'south geology, and unit size can range from 100 to 1200 or more acres. Landowners in the unit receive a pro-rated share of the royalty based on the acreage they have in the unit of measurement.
Wet Gas: Meet "natural gas liquids."

Resource

Marcellus Educational activity Fact Sheets from Penn Country Extension:

" Wood Landowners and Natural Gas Evolution "
" Forest Landowners and Natural Gas Evolution: Timber Resources "
" Tax Treatment of Natural Gas "
" Negotiating Pipeline Rights-of-Style in Pennsylvania "

Penn Land Marcellus Center for Outreach and Inquiry

Penn Country Marcellus Shale Electronic Field Guide

Penn Country Public Dissemination "Explore Shale" Project

Center for Agricultural and Shale Police

State Agencies

Pennsylvania Department of Environmental Protection (DEP)

Pennsylvania Section of Environmental Protection (DEP) Oil and Gas Programs

Pennsylvania Department of Agriculture

Pennsylvania Department of Conservation and Natural Resources Oil and Gas Resources

Pennsylvania Public Utilities Committee

Other Resources

Delaware River Basin Committee (DRBC)

National Association of Royalty Owners (NARO)

Shale Training and Education Middle (Shale TEC)

Susquehanna River Basin Commission (SRBC)

U.S. Energy Data Administration

U.S. Geological Survey (USGS)

Written past Krista Weidner

stewartapans1977.blogspot.com

Source: https://extension.psu.edu/natural-gas-exploration-a-landowners-guide-to-leasing-in-pennsylvania