# Natural Gas Lease - Marcellus shale



## bczoom

So many forum places to put this... Rural Living, Business, Finance & Open.  I chose this one as I'm considering it somewhat as a business matter.

There's some very large veins of shale that go from NE PA and head WSW (lower NY, into W PA and skirt into E OH and NW WV) that contain an incredible amount of natural gas.  There's 2 layers of shale, the Marcellus shale (at about 5,000 ft depth) and Utica shale (7-10,000 ft depth).

So, gas companies want to lease land and drill to get the gas.  It's estimated that there may be enough gas down there to supply the entire USA for at least a couple years so it's worth quite a bit of money.

They're scoping out our area now.  They want to lease the mineral rights from landowners.  Payment is done as an initial Lease (they pay you to lock in the rights to the gas under your land for somewhere around 5 years with renewal clauses), then royalties on the gas that's extracted.

The $ offers seem pretty decent.  Each of my deeded properties is under 25 acres so they couldn't do surface activities on my parcels and the only thing they could possibly do is run gas lines under the surface (hopefully in an existing right-of-way).

Anyone have any experience with these types of leases?  What does one need to watch out for?


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## tommu56

Yep I got me a lease for my cabin.
Their is one pad 1 mile NE of me (but not drilling yet) and one future pad site 3/4 mile SW of me.

My lease is with 
http://www.chk.com/Pages/default.aspx

anadarko and Range and PGE has leased in our area 
http://www.anadarko.com/Operations/Pages/USOnshoreOverview.aspx
http://www.rangeresources.com/Operations/Marcellus-Division.aspx
http://www.penngeneralenergy.com/success.html

here is a good site for lease info alot of reading there 

http://www.pagaslease.com/natural_gas_forum/

They are working on a R/W lease on the road in front of my place

They are also doing a 3d seismic survey in the area too.

http://www.cggveritas.com/home.aspx 

Dep did shut some of them down this week because the dirt roads thawed and are heaving / oozing (Texans and Oakie's don't under stand the road cycles up here.


They only need about 5 acres  for a pad site and that is separate compensation keep an eye on that in your lease.
To see if they price it per well or per pad site (multiwell).


tom


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## waybomb

And hire a pro to represent you and negotiate for you.


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## tommu56

waybomb said:


> And hire a pro to represent you and negotiate for you.



Another way is got the group route.
Their is a few in the NC PA area.

You can also specify no surface rights but it might cost you in royalties.

tom


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## EastTexFrank

waybomb said:


> And hire a pro to represent you and negotiate for you.



That is the best advice anyone can give you. 

The companies that you are dealing with are professionals and it's not that that they are out to actively screw you but they won't willingly give away anything that they don't have to.  Get help.


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## muleman RIP

There are a lot of multi county coalition groups forming up here to work together to negotiate leases. Our lease was already made by the Amish guy I bought this farm from for $5 an acre. Now they are trying to extend it at the current rate because of the moratorium on fracking. we shall see how it all plays out.


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## EastTexFrank

EastTexFrank said:


> That is the best advice anyone can give you.
> 
> The companies that you are dealing with are professionals and it's not that that they are out to actively screw you but they won't willingly give away anything that they don't have to.  Get help.



I should add, be careful when dealing with small independents.  They, more than the larger companies, tend to prey on ignorance.  As I said before, get professional help either representing you as an individual or as part of a group or coalition.


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## jimbo

Our local gas company gas company, Columbia Gas, announced yesterday that the cost of their product would be reduced effective immediately.  They stated that they had a source that is stable and abundant in Pennsylvania feeding their system.  This in the face of rapidly rising prices of other energy sources.  Obama will probably stop drilling in favor of putting windmills on top of cars as a source of energy.


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## 79bombi

Anyone have active drilling going on at your property?  Is the impact less or more than what you expected?  There are a lot of stories coming out of PA recently so I was wondering what first hand accounts are?  Maryland has not allowed drilling yet but there are a lot of leases signed in Western Maryland.


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## tommu56

Not directly but 5 miles from me and getting closer
here are some pictures.

http://s218.photobucket.com/albums/cc1/tommu56/gas site/

tom


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## muleman RIP

The biggest impact is the road building and the 1-2 million gallons of water trucked in and out. The pad sites average about 2-3 acres in area and are just a level area with a pipe sticking up and a moisture trap tank that they haul excess water from when needed. The pipeline to connect them does as much damage to the surroundings as the well. I have a pipeline coming across my place for a little over a half mile in length. I stayed after them hard to reclaim it till it is mowable and won't wash out on the hill. They would sooner deal with the landowner than a state DEP inspector. I also know the local contractor who installed the line and he wanted me happy. After 3 years the only way you would know the pipe is there is the markers for it.


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## bczoom

I am working with a group that has contracted a firm to do the legal work as well as the bidding on our behalf.  The firm is quite reputable in this type of work.

I'm reading the proposed lease agreement now.  It's the version written on behalf of the property owners and the gas companies need to work into it.  So far (I'm on page 12 of 16, it's pretty good).


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## bczoom

PS.  For those of you watching this from the sidelines (and in particular, those of you in Ohio), you may be next.  

The Utica shale vein is pretty big in Ohio.
http://www.pittsburghlive.com/x/pittsburghtrib/news/s_724034.html


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## EastTexFrank

bczoom said:


> I'm reading the proposed lease agreement now.  It's the version written on behalf of the property owners and the gas companies need to work into it.  So far (I'm on page 12 of 16, it's pretty good).



And don't forget that everything, and I mean everything, is negotiable.  I built a concrete basketball court (aka a slab foundation for a new house) half way up a mountain in Oklahoma in order to keep one leasee happy.  It all depends on how badly the operator wants to get in there and get drilling.


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## XeVfTEUtaAqJHTqq

So what happens if you don't give them a lease.  Do they have to go around your property or do they just find ways to muscle their way in?


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## bczoom

If you don't sign a lease with them, they're not allowed to get your gas (drill under your property).


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## muleman RIP

bczoom said:


> If you don't sign a lease with them, they're not allowed to get your gas (drill under your property).


And how in the hell will you know which horizontal direction they drill? They can bullshit the state and everybody else and unless you have the 3D images when they run the ground thumpers you will never know. They thumped my place and I gave them a right of way for the line in the hopes they will drill here. They have drilled on the next ridge and up the valley behind me but did not directional drill. Just a straight hole with fracking done in a hurry before the moratorium went in.


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## bczoom

Bump.  Well, we didn't use the group I mentioned back in March, but I signed up all my parcels yesterday.

They have some wells up and running in the area.  The one near me that drilled to Utica is now putting out 9MCF (million cubic feet) each DAY!  There's one over in Ohio not far from me that's getting something like 8MCF + 1000 barrels of oil each day (also from Utica).

Drill baby drill!


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## Cowboy

bczoom said:


> Bump. Well, we didn't use the group I mentioned back in March, but I signed up all my parcels yesterday.
> 
> They have some wells up and running in the area. The one near me that drilled to Utica is now putting out 9MCF (million cubic feet) each DAY! There's one over in Ohio not far from me that's getting something like 8MCF + 1000 barrels of oil each day (also from Utica).
> 
> Drill baby drill!


 Congrats BC.


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## EastTexFrank

bczoom said:


> Bump.  Well, we didn't use the group I mentioned back in March, but I signed up all my parcels yesterday.
> 
> They have some wells up and running in the area.  The one near me that drilled to Utica is now putting out 9MCF (million cubic feet) each DAY!  There's one over in Ohio not far from me that's getting something like 8MCF + 1000 barrels of oil each day (also from Utica).
> 
> Drill baby drill!



I've got my fingers crossed for you.

Producing out of shales is tricky.  It all depends on how fractured they are, how interconnected those fractures are and whether you actually hit any of them or can frac into them when you drill and complete the well.  You can literally have two wells right next to one another with completely different production rates depending on your luck.  

The economics must have changed since I was doing this sort of thing.  A well producing 9 MMCF a day back then would have been a keeper but no great shakes but one that also produced a 1,000 barrels of oil or condensate a day would have been "nice".


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