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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. 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

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  1. What Is In a Lease By Lester Greevy, Esq. 1460 Washington Blvd. Williamsport, PA 17701 (570) 326-6561

  2. Parties • Lessor – Landowner • Lessee – May Change Broker Gas Company Driller

  3. Parcel • How identified – acreage • Parcel Number • Deed Reference • Adjoining Parcels

  4. Grant and Consideration • What’s granted • Oil & gas • Other minerals • Pipeline, storage • Will extend beyond lease

  5. Grant and Consideration Grant and Consideration • What’s Paid • Not in Lease • Order of Payment • When • Upon approval • 60 – 90 days

  6. 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

  7. Term or Period • Paid up Lease – All in 1st year • Secondary Term – after drilling and during production

  8. Royalty • 1/8 = 12.5% State Minimum • Negotiable

  9. Royalty • How price computed • Where • Transportation, compression, dehydration

  10. Royalty • Shut-in royalty - $/Acre • Should equal Delay Rental • Limit years-acreage

  11. Domestic Use Gas • ______ cubic feet • Payment in lieu of

  12. Operations – Drilling or Secondary Period • When Begun – when completed • Well siting fee – surface damages

  13. Operations – Drilling or Secondary Period • Restrictions ___ ft of boundary – storage building, etc. • Payment for timber – stumpage • Appraisal – Arbitration

  14. Operations – Drilling or Secondary Period • Agricultural lands • How much needed • Marcellus 4+ acre

  15. Operations – Drilling or Secondary Period • Use of water – Ponds • Domestic water - pre-drill sample • Roadways ingress-egress defined

  16. Operations – Drilling or Secondary Period • Fences, barriers, gates • Pre-drill contact

  17. Operations – Drilling or Secondary Period • Re-forestation, re-vegetation • Within State Requirements • Backfill restoration

  18. Operations – Drilling or Secondary Period • Limited number of wells • Seismic - pre-consent

  19. Pooling • The accumulation of smaller tracts of land

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

  21. Pooling • Severance of other acreage • Pugh Clause • Vertical Severance • Payment

  22. Pipelines • How Deep • Double Ditch • Service other properties Picture courtesy Fortuna Energy

  23. Drilling • Pretty well regulated by State

  24. Records and Audits • Who can review and where

  25. 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

  26. Abandonment –Completed Operations • Surface damages • How determined – Arbitration/Appraisal • Temporary or permanent • How distributed

  27. Abandonment –Completed Operations • Equipment-structure removal-time-forfeit

  28. Storage of Gas • No right to store gas from other operations

  29. Government Ag Programs • Clean and Green –Lessee will pay rollback taxes

  30. Government Ag Programs • CREP/CRP • Restore to farmable condition • Lessee to reimburse FSA office

  31. Government Ag Programs • Agricultural Conservation Easements • Additional Addendums

  32. Indemnity • Hold Harmless – Liability • Liabilities • Workers Compensation • Additional insured - Landowner

  33. Force Majeure • Act of God • How long delay

  34. Breach or Default • Notice • Remedies • Arbitration

  35. Warranty of Title Warranty of Title • Lessee may withhold payment if there is a claim • Special Warranty only

  36. Extension of Lease • Unfavorable to Landowners • Right of First Refusal better

  37. Release of Lease • Recordable document

  38. Conditions v. Covenants Delayed rental and shut-in royalty

  39. Price • How much land • How many bidders • Proximity to producing wells

  40. 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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