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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
slide15

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