What is in a lease
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What Is In a Lease. By Lester Greevy, Esq. 1460 Washington Blvd. Williamsport, PA 17701 (570) 326-6561. Parties. Lessor – Landowner Lessee – May Change Broker Gas Company Driller. Parcel. How identified – acreage Parcel Number Deed Reference Adjoining Parcels.

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What is in a lease

What Is In a Lease

By Lester Greevy, Esq.

1460 Washington Blvd.

Williamsport, PA 17701

(570) 326-6561


Parties
Parties

  • Lessor – Landowner

  • Lessee – May Change

    Broker

    Gas Company

    Driller


Parcel
Parcel

  • How identified – acreage

  • Parcel Number

  • Deed Reference

  • Adjoining Parcels


Grant and consideration
Grant and Consideration

  • What’s granted

    • Oil & gas

    • Other minerals

    • Pipeline, storage

      • Will extend beyond lease


Grant and consideration1
Grant and Consideration

Grant and Consideration

  • What’s Paid

    • Not in Lease

    • Order of Payment

    • When

      • Upon approval

      • 60 – 90 days


Term or period
Term or Period

  • For How Long – Primary term (from time of signing until Secondary term)

  • Delay Rental - $/Acre

    • Important even in Paid-up lease

      • Shut-in Royalty


Term or period1
Term or Period

  • Paid up Lease – All in 1st year

  • Secondary Term – after drilling and during production


Royalty
Royalty

  • 1/8 = 12.5% State Minimum

  • Negotiable


Royalty1
Royalty

  • How price computed

  • Where

  • Transportation, compression, dehydration


Royalty2
Royalty

  • Shut-in royalty - $/Acre

    • Should equal Delay Rental

    • Limit years-acreage


Domestic use gas
Domestic Use Gas

  • ______ cubic feet

  • Payment in lieu of


Operations drilling or secondary period
Operations – Drilling or Secondary Period

  • When Begun – when completed

  • Well siting fee – surface damages


Operations drilling or secondary period1
Operations – Drilling or Secondary Period

  • Restrictions ___ ft of boundary – storage building, etc.

  • Payment for timber – stumpage

    • Appraisal – Arbitration


Operations drilling or secondary period2
Operations – Drilling or Secondary Period

  • Agricultural lands

  • How much needed

    • Marcellus 4+ acre


Operations – Drilling or Secondary Period

  • Use of water – Ponds

  • Domestic water - pre-drill sample

  • Roadways ingress-egress defined


Operations drilling or secondary period3
Operations – Drilling or Secondary Period

  • Fences, barriers, gates

  • Pre-drill contact


Operations drilling or secondary period4
Operations – Drilling or Secondary Period

  • Re-forestation, re-vegetation

    • Within State Requirements

  • Backfill restoration


Operations drilling or secondary period5
Operations – Drilling or Secondary Period

  • Limited number of wells

  • Seismic - pre-consent


Pooling
Pooling

  • The accumulation of smaller tracts of land


Pooling1
Pooling

  • Unitization-combining of multiple wells to form a specified reservoir


Pooling2
Pooling

  • Severance of other acreage

    • Pugh Clause

    • Vertical Severance

    • Payment


Pipelines
Pipelines

  • How Deep

  • Double Ditch

  • Service other properties

Picture courtesy Fortuna Energy


Drilling
Drilling

  • Pretty well regulated by State


Records and audits
Records and Audits

  • Who can review and where


Lease development
Lease Development

  • No promise to drill or forfeiture for failure to drill

  • Prudent Operator Addendum

    • Will develop property after initial well

    • Will protect from drainage

    • Will attempt to secure market


Abandonment completed operations
Abandonment –Completed Operations

  • Surface damages

  • How determined – Arbitration/Appraisal

    • Temporary or permanent

      • How distributed


Abandonment completed operations1
Abandonment –Completed Operations

  • Equipment-structure removal-time-forfeit


Storage of gas
Storage of Gas

  • No right to store gas from other operations


Government ag programs
Government Ag Programs

  • Clean and Green –Lessee will pay rollback taxes


Government ag programs1
Government Ag Programs

  • CREP/CRP

    • Restore to farmable condition

    • Lessee to reimburse FSA office


Government ag programs2
Government Ag Programs

  • Agricultural Conservation Easements

    • Additional Addendums


Indemnity
Indemnity

  • Hold Harmless – Liability

  • Liabilities

    • Workers Compensation

  • Additional insured - Landowner


Force majeure
Force Majeure

  • Act of God

    • How long delay


Breach or default
Breach or Default

  • Notice

  • Remedies

  • Arbitration


Warranty of title
Warranty of Title

Warranty of Title

  • Lessee may withhold payment if there is a claim

  • Special Warranty only


Extension of lease
Extension of Lease

  • Unfavorable to Landowners

  • Right of First Refusal better


Release of lease
Release of Lease

  • Recordable document


Conditions v covenants
Conditions v. Covenants

Delayed rental and shut-in royalty


Price
Price

  • How much land

  • How many bidders

  • Proximity to producing wells


Addendums
Addendums

  • Conflict

  • Regulation

  • Indemnity

  • Domestic Water

  • Reclamation

  • Fences

  • Pipeline

  • Pugh

  • Well Siting Fee

  • Storage

  • Storage 3rd Party

  • Royalty Computation

  • Livestock

  • Distance

  • Timber

  • Water

  • Location approval

  • Crops

  • Fences

  • Restoration

  • Special Warranty Title

  • Audit Books

  • Clean and Green

  • Arbitration

  • Blue Stone

  • Free Gas

  • Oil & Gas Only

  • Salt Water

  • Fence Well Site

  • Hunting

  • Release of Lease

  • Assignment Notice

  • Ad Valorum

  • Notice of Breach

  • Shut-in Limit

  • No Option to Extend Term

  • Unitization and Pooling Limit

  • Restrictions on Gas Pooling Clause

  • Continuous Drilling Clause


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