Are They Starting to Lease Natural Gas in Woodward Township 17744 Again

Introduction

Natural gas development has intensified throughout Pennsylvania over the last several years, and "Marcellus shale" has get a household term. Every day, news headlines bring the states the latest developments on gas well drilling and all the topics surrounding information technology--economic, environmental, legal, and social. With some estimates of upward to $1 trillion in recoverable gas from Marcellus shale in Pennsylvania alone, clearly natural gas development isn't going abroad anytime soon--and the industry will continue to have a major economic touch on on individuals and communities in the Democracy and beyond for years to come.

Although natural gas has been extracted from undercover in Pennsylvania since the mid-1800s, new technologies--in item, horizontal drilling and hydraulic fracturing--are making gas extraction from deep reserves more economically viable. Increasing need for cleaner domestic energy will bring about continuing exploration. The gas industry is seeking access to high-book reservoirs of natural gas, called "plays," that lie far below the hills and valleys of Pennsylvania, Ohio, and West Virginia. Gas wells that tap the Marcellus, Utica, and other deep shales--every bit opposed to the shallow wells that have been around for centuries--are known as anarchistic wells.

Many landowners are realizing meaning income by leasing their property to gas companies for exploration and drilling. Perhaps a gas company representative or landman has knocked on your door, asking you to sign a lease that grants permission to explore or drill for natural gas on your land. How do you make up one's mind what to do? Only when you understand the gas exploration and leasing procedure can you make sound decisions for your country and your family. Merely, reliable, unbiased information virtually gas deposits and leasing is hard to come up by because it's normally carefully guarded to preclude competing businesses from interfering with 1 another'southward gas development plans.

This guide can exist a useful tool for property owners who are faced with the determination to lease or non to charter. It covers the basics of gas leasing and answers some mutual questions almost 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 about gas leasing. It isn't meant, even so, to be an exhaustive treatment of all natural gas issues or to serve as legal advice. You should consult an chaser who specializes in gas leasing before making legally binding decisions.

Basics about natural gas leasing

Property owners accept the right to excerpt natural gas nether their holding unless the right has been leased or sold.

To bank check on the status of your rights, consult public records, deeds, and existent estate titles--you might need the help of an attorney or abstractor to do this. If you own 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 accept payment for the charter and royalties for the value of the gas. Note: "mineral rights" and "natural gas rights" are not necessarily the aforementioned thing, and y'all should exist clear on what rights are legally yours. Cheque the deed to your holding for this information.

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

They represent an official written agreement between two parties, unremarkably between the gas visitor and the landowner. Because leases are binding contracts, to protect your rights every bit a landowner, y'all should have the proposed lease reviewed by a lawyer who is knowledgeable in Pennsylvania oil and gas law and experienced in gas leases before entering into any contract. Once you sign a lease, in that location'south really no way yous tin can get out of it until information technology expires, unless yous can prove fraud on the part of the gas visitor.

Gas leases are negotiable.

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

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

At that place is no Pennsylvania constabulary or industry regulation that states you have to lease if you lot take natural gas on your property. The conclusion is yours to brand.

If you exercise decide to lease your country, stay involved in the process.

Keep the lines of communication open with the gas company--information technology's in your best interest to take a skillful relationship with them, and for the virtually function they desire to be good neighbors. Stay informed about what's happening on your state likewise equally in your customs. Be an educated landowner!

Where Is the Gas?

The Marcellus shale, a deep layer of stone that lies 5,000 to nine,000 feet hugger-mugger, runs from the southern tier of New York through western Pennsylvania into the eastern half of Ohio and through West Virginia. In Pennsylvania, the formation 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 downward 380 million years ago, the blackness shale of the Marcellus formed. Methane and other natural gas components formed every bit that organic textile decayed and degraded, and that natural gas is now trapped tightly in the dumbo shale. About 300 meg years ago, the force per unit area of the gas created shale fractures that run as slices from northeast to southwest. While a vertical well may cross one of these fractures and other less productive fractures, new technology allows horizontal drilling, which can cross a serial of very productive fractures.

In certain locations, other dense black shales in Pennsylvania--such every bit the Utica shale, which lies at least 2,000 feet below the Marcellus--are also potentially rich in natural gas in its methane class as well equally oil and what'south known equally "wet gas," which includes propane, butane, and pentane. Shallower shales throughout the country besides 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's major river basins overlaid.

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

Where and How Does Drilling Accept Place?

Every bit a landowner, you must requite written permission for any natural gas exploration or drilling on your land. All proposed work should exist conspicuously described in the lease or addendum, including compensation for any damages, before any action begins. Gas wells are drilled where a gas visitor 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 equally few wells as possible. Geologists and geophysicists working for gas companies use seismic data to translate underground rock layer formations. They get this data through seismic testing.

Slow-moving trucks that contain seismic equipment are a familiar sight in Pennsylvania's gas-rich regions. Seismic equipment generates two-dimensional images of subsurface rock patterns that assist gas companies make up one's mind the extent of the shale, the direction of the shale layer for drilling purposes, and geological hazards to avoid, such as faulting. In much of the Marcellus region of Pennsylvania, a 3-dimensional system of seismic testing is used to clarify gas deposit geology. Extensive grids of cabling, small surreptitious 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 will be drilled using long sections of drill piping. Depending on the geology, the drill may travel vertically for several g feet, then gradually angle until information technology 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 adjacent on the same well pad, radiating out in opposite directions.

Cross-department diagram of a typical horizontal Marcellus well.

Hydraulic fracturing is a standard practice in the gas manufacture and a necessary footstep in the natural gas extraction process. Information technology involves using water, sand, and chemic additives to create, extend, and prop open formation fractures for the highest gas production.

Gas Leasing Process and Terms

Natural gas trapped hole-and-corner has little or no value to landowners. Information technology becomes a valuable resource only when companies with the proper equipment and technical ability brainstorm to extract it and ship it to consumers. When natural gas is extracted from a leased belongings, the belongings owner is paid a royalty.

As gas companies and geologists decide where gas drilling might be worthwhile in Pennsylvania, they send contractors, called landmen, out to landowners to secure the natural gas exploration rights for a menstruation of time as gas development begins. This practise helps prevent some other company from tying up the natural gas exploration rights and making exploration more complicated and expensive. Landmen will ordinarily visit owners of large parcels outset, to lock up equally much land as possible in a short time. For landowners, this visit is ofttimes the kickoff experience they have with natural gas drilling.

Not all landmen are part of a gas visitor. Some represent independent brokers and others represent speculators. Each of these businesses will have a different motivation for securing a lease on a parcel of privately owned land. Depending on where seismic data suggest optimum gas product, different landowners volition receive different offers regarding drilling, exploration, surface admission, and payments.

In whatsoever scenario, you as a landowner should know that the charter volition be the footing of negotiation and that the written terms of the contract volition supplant anything that is said orally during contract negotiations. An effective gas lease 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 determine the drilling unit of measurement they desire to work in and designate the boundaries of the unit in a procedure called unitization. Commonly, unitization is based on an expanse'southward geology, and unit size tin range from 100 to 1200 acres or more and is not mandated by state police force. Landowners in the unit receive a pro-rated share of the royalty based on the acreage they have in the unit of measurement.

A discussion almost landowner groups: You might accept heard friends or neighbors talk about landowner groups in the context of gas leasing. At that place are dissimilar types of landowner groups. Some exist simply for sharing data about what companies are looking to lease in their particular area, current rates, and whatsoever special terms or conditions to the leases. Other groups are involved in marketing their land--they seek out and maximize acres that share a edge and make bid proposals to energy companies interested in leasing. Withal other landowner groups engage in collective bargaining, in which all landowners sign off on leasing terms accustomed by the majority. This saves energy companies many hours of individual negotiations and gives landowners a strong negotiating position with companies looking to lease land. If you're interested in perhaps joining a landowner group, decide what blazon of group 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 alive, yous might be approached with an offering to sign other types of leases--such as for shallow wells or for wastewater deep injection wells. As always, it's best to consult an attorney with expertise in gas leasing if you're asked to sign such a lease.

You also might have heard of the term "top leasing." A meridian lease is one that "lies on acme" of a electric current lease and would take outcome when the existing lease understanding ends. While a request for a meridian lease shows that a visitor is interested in your property, you should still arroyo such an offer with due diligence. Will a height lease maximize your benefits?

Components of a Gas Lease

This section outlines some important components of gas leases. While it's not intended as a consummate listing of gas lease issues, it will help you understand the basics of what's involved in a gas charter.

An case gas lease

Length of Lease

Your lease agreement will specify a primary term, usually five years, and many signed gas leases are accompanied by bonus and rental payments that last through the principal term of the lease. Depending on the terms of the lease, gas production on leased land and if you are in the drilling unit of measurement may pb to a secondary term that lasts as long every bit production is agile, as defined in the lease. You lot and your attorney should carefully consider the language in the lease understanding because similar-sounding phrases, such as "so long equally operations are conducted" and "so long equally gas is produced in paying quantities," can have very different impacts.

Gas Lease Payments

In whatsoever contract, you lot need to know what you're giving up and what you're getting. If you are offered a gas lease, what you'll be getting is, of course, payment. The original offer might include payments as a signing bonus, land 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 energy visitor when natural gas is extracted from your state. Royalties, which are based on the terms agreed to in the charter, recognize the landowner'due south right to a portion of the value of the gas resulting from the lease of exploration rights.
Rental payments are commonly made annually. Sometimes, the bonus and rental are fabricated in one payment for the stated term of the charter, and and so the charter is referred to as a paid-up lease.
A gas lease may also specify a delay rental in improver to the base rental. A filibuster rental is fabricated to compensate the landowner for delays in gas production or drilling.

In that location are no "going rates" or standard rental payments in gas leases in Pennsylvania. The corporeality offered volition depend on many variables. College bonus and rental payments are usually offered based on a visitor'south understanding of the area'south geology and proximity to optimal drilling locations. Unfortunately, the data about where the best concentrations of natural gas are located is hard to find and tin exist confusing for a nonscientist. Attending educational sessions offered by unbiased parties such as Penn State Extension and talking with friends and neighbors are good ways to discover prices companies are offer in your surface area.

These factors may increase potential bonus or rental payments

Property occupies a large portion of prime natural gas geology in your expanse
Holding is relatively near the prime number gas geology
Property owner is willing to allow less restricted exploration or drilling

These factors may decrease potential bonus or rental payments

Belongings comprises a small portion of acreage designated by companies equally prime geology
Property is unlikely to be nigh the best geology
Lease restricts gas exploration on the surface (sometimes this makes only a small difference)

Before settling on a lease, consider what habitation or farm expenses might relate directly to the lease. Legal fees, holding tax increases, and other expenses may be necessary to enter into a lease, or during drilling, for the designated term(southward). Y'all should consider these expenses along with the company's offer then that you can see your cyberspace economic gain. The timing and method of rental and bonus payments should be clearly stated in the gas charter. Failure to make payments may cancel the lease, merely only if it is then stated in the lease.

Pennsylvania constabulary states that a gas lease is not valid unless it guarantees the landowner royalties of at to the lowest degree one-8th, or 12.v percent, minus any marketing deductions, which would be considerable, of all natural gas removed from the property. You may negotiate with the energy company for a royalty payment that exceeds this minimum.

Leases are commonly written to cease rental payments when royalty payments brainstorm. If gas is being produced on only a portion of the property, the charter should be articulate as to whether the royalty and rental terms employ to the unabridged parcel or merely the producing portion. A royalty may apply only to the producing portion of the property notwithstanding end rental payments on the remainder of the property. If applicable, yous should decide how a royalty payment on a portion of your property might touch on your overall rental payment expectations. Having your chaser include a Pugh clause in the annex gives you the option of separating these rest acres from the lease and potentially re-leasing them in the futurity.

A close-in royalty is paid where 1 or more wells are fully developed but not producing marketable gas. This may be due to lack of pipeline connections, market timing to increase wellhead revenue, or other product and transmission circumstances. A private gas charter may country a period of fourth dimension, such equally 6 months, that the landowner would have to look before the close-in royalty starts. During that time, the gas company may reserve the right to alter the well, drill a different well, or otherwise adjust its production. Over again, y'all will demand to read the lease carefully, with your chaser, and brand sure you sympathise what payments will come, how they will be fabricated, and when they will cease. Royalties from gas and mineral properties are taxable as ordinary income.

Past practice for some older, shallow gas leases allowed for costless gas for the landowner. The landowner would be responsible for the pipage of the free gas from the wellhead to the residence. This is non ordinarily done at present with anarchistic wells, as it could add significant expense and liability for the landowner.

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

Surface or Subsurface Rights

When because gas leasing, y'all should understand the extent of rights y'all are granting to the energy company and seek to limit those rights if necessary. A standard lease volition probably give the energy company very broad rights to the utilise of your property'southward surface. Surface exploration may include tracked or wheeled equipment in fields and forests to tape geologic data, the use of small underground explosive charges to create audio waves that record seismic data, motion or construction of drilling rigs, country grading for the construction of a drilling pad and admission road, equipment storage, and parking or worksite activity for personnel, amidst other things. If you sign a charter granting surface rights, yous tin can limit those rights. Y'all can state, for example, that y'all accept the final say on where a well is sited or where admission roads are congenital on your property. You should also make sure you are protected in the upshot that drilling activities cause damage to crops, livestock, buildings, or personal property.

Some landowners restrict any surface activity for gas exploration on their land. In many but not all of these cases, the packet may be likewise small to conduct worthwhile surface explorations and the gas visitor will offer the landowner a gas lease that requires permission for surface admission simply if necessary. You could choose to negotiate terms that prohibit any surface action any. Your contract addendum would state that the gas company has no surface rights merely that yous are granting sub-surface rights.

In shale areas of Pennsylvania, energy companies are interested in large blocks of state, and often they desire groups of neighbors to hold to unitization. In this case, if you are part of the unit and the energy company would drill a well on your neighbour's belongings, you would all the same be paid a royalty based on your prorated share. If the well was drilled on your property 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 beyond the royalty payments.

Right of First Refusal

A right of get-go refusal is a term in the lease you could insist on instead of an option to automatically renew. The right of commencement refusal has to exercise with what happens after your charter expires. At that bespeak, the right of showtime refusal gives the gas company the right to friction match any competitor'southward offering for renewing the lease. For your purposes, this could be preferable to the option to automatically renew, which allows the gas visitor to renew the lease for the principal term. As a landowner, you might not hold to the option to automatically renew considering essentially information technology locks you into the original offering. The right of kickoff refusal will aid you in getting the all-time offer possible if you want to renew your gas lease.

Storage of Gas

In certain cases, natural gas can be pumped back into a gas well later on being extracted elsewhere. Gas is stored to take advantage of seasonal market changes. Gas is in college demand in the winter, so gas extracted during the summertime can be pumped down into the gas formations nether force per unit area, anticipating release closer to winter. Gas storage makes employ 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 lease, and develop a divide gas storage lease, possibly for added income. Gas storage leases are oftentimes arranged with a different company, so if gas storage is proposed in the exploration charter, information technology tin ofttimes be easily negotiated out. Be alarm to the ways in which gas storage will touch on your charter 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 continue, but with no royalties. These payment changes should be described clearly in the lease or addendum.

Pipelines

When considering signing a contract, sentry out for terms that would requite blanket access to the gas company for pipeline rights-of-manner. If gas is being moved from a drilling unit of measurement that you're receiving a royalty from, pipeline access is expected by the company and is reasonable for the landowner to grant. If the right-of-way is for gas to be transported from a unit that is not on your property, then this should be negotiated separately and the gas company should pay y'all an boosted fee for this employ.

The Other Party in the Agreement

When you concord to and sign a gas lease, you are entering into a binding legal relationship with a business--a human relationship that may continue for many years. Before signing the lease, yous should know exactly with whom you are making the understanding. The other party may not be a gas company, just rather a speculator, a broker, or an independent landman who might sell the charter or take partial buying of the royalty. Landowners who intend to sign a gas charter should be ready to negotiate a clause making lease assignments or sales subject to their approval. Brand sure y'all understand 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 be certain what is worth negotiating and what is not, particularly if the energy company doesn't give you much information about the potential for drilling. Landowners who want to control surface activity on their property tin 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 charter agreement allows for any surface access, you lot and your attorney should ensure that your interests are protected in writing. Problems you may want your lease or addendum to address include the post-obit:

Extent to which h2o may exist used, such as from a farm swimming, well, or stream, during the drilling process
Fairly assessed value of, and compensation for, impairment to crops, timber, or water resources; for information near protecting your forested country, see the following Marcellus Education Fact Sheets:

" Woods Landowners and Natural Gas Development "
" Forest Landowners and Natural Gas Development: Timber Resources "

Implementation of effective conservation and country restoration, such as:

Protection of agronomics soils during exploration and well operations then farmland is restored to full productivity after
Protection or replacement of farm infrastructure, such every bit roadways, livestock travel lanes, drainage features, and fences

Road location and construction review by 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
Split up written agreement on location of pipelines in the property

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

When negotiating a lease, you should also include a provision to require the gas company to indemnify y'all for whatsoever liability you might incur equally a upshot of drilling activity. Indemnification means the gas company will protect you confronting or compensate you for any loss, harm, or injury that happens on your property as a upshot of drilling. The indemnification clause should exist written to address all possibilities, including situations such as someone tripping over the drilling equipment, contagion of a neighbor'south h2o well, an explosion caused by the release of natural gas, and so forth. In addition, since litigation is expensive even if you ultimately win a case, the indemnification clause should include a duty to defend so that the gas company is obligated to rent an attorney for you to defend against any lawsuit.

Another type of clause you should be aware of is the marketplace enhancement clause. Unlike 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. You could end up having substantial deductions in your royalty checks for postproduction costs taken under this market enhancement language. Exist aware of these market enhancement clauses and consult with an chaser before agreeing to them.

How to Detect Apparent Sources of Data

If you're considering signing a gas lease, stay equally informed as possible. Go far a betoken to keep upwards to date on natural gas activity in your area. Talk to friends and neighbors, detect out most landowner groups in your area, read publications, and visit websites that you trust. Gas leasing is a challenging issue, so information technology's good to keep an open up heed, be discerning, and expect for information that's backed by enquiry.

Penn State Extension is a practiced identify to showtime. Extension has always been known for disseminating unbiased, enquiry-based information to Pennsylvania's citizens, and that'southward a valuable resources when information technology comes to natural gas problems. Extension educators recognized how important gas exploration could be for Pennsylvania landowners and communities when landmen first started knocking on doors, and the commencement leasing workshop was held in 2001. Today, Penn State Extension's Marcellus Education Team--a grouping of experienced educators and faculty--piece of work throughout the land to make certain citizens have admission to reliable information. County extension offices may host an educational workshop, discuss leasing arrangements, or refer y'all to regulatory or legal specialists.

Making Decisions Virtually Gas Leasing

When the moment arrives and you're sitting at the kitchen tabular array holding a standard gas lease contract and wondering whether to sign it, what do you do? The decision to sign a gas lease rests entirely with the parties named in the lease document--namely, you and the free energy company. In that location is no legal requirement that would force yous into signing a lease with a gas company, and public government cannot apply the power of eminent domain in the natural gas exploration procedure.

Since yous are not legally obligated to sign a gas lease, the decision to sign is personal. Hither are a few things to keep in mind as you consider leasing:

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

It's likewise a good idea to keep a journal or log of all contacts, conversations, and action that happens from the moment y'all are commencement approached about leasing. Writing things down non merely tin help y'all keep your thoughts organized, information technology can too provide documentation should you need information technology later.

For Landowners Who Are Currently Leasing

If you are currently leasing your land for natural gas exploration and drilling, you've already experienced at least some of the processes and issues covered in this guide. You might take some questions about your current lease based on what you've read hither. For example, if water testing provisions aren't included in your electric current lease, it is your responsibility to get your water tested. Equally well, you'll have decisions to make about the future of your property. If your lease is shut to expiring, will you lot renew? When natural gas activity on your holding comes to an finish, you should accept a articulate understanding of how your state (forestland, grassland) will exist reclaimed.

Make sure you empathize your lease terms, stay up to date with natural gas activity on your state and the surrounding area, and maintain good communication with the gas visitor leasing your property. If you revisit your charter and have questions, consult your chaser.

Gas Lease Language

The language on a gas lease contract is difficult for most nonlawyers to understand. Sentences tend to be long and tedious, full of legal terms landowners do not see very frequently (judicial determination, leasehold, lessee, cash equivalency, etc.). Few landowners can read through each judgement in the preprinted lease and empathise its meaning and implication for their property. Gas visitor representatives may translate the wording, but annihilation they say out loud is not what will demark the parties in the contract. The wording in the printed contract volition bind the landowner to the gas exploration process, for better or worse.

The standard charter gas companies provide is usually as favorable equally or more favorable to them than to the landowner. Again, this is where the importance of legal counsel comes in. Your chaser tin protect your rights by helping you interpret the legalese, then if necessary you tin can change the charter by using addenda, which can make the agreement equally favorable to both parties. It is not uncommon for twenty or more of these to be added to the typical industry lease to change it in a way that is more than beneficial to y'all, the landowner.

The Role of Legal and Financial Professional person Advisors

A qualified chaser tin can interpret a gas charter, propose changes, amend the document, and add together the specific terms you desire. An attorney can besides represent you lot if problem arises. For case, if royalty payments are not made in the manner agreed to in the lease, an attorney tin use his or her knowledge and influence to resolve the matter. While many lawyers in Pennsylvania tin can help with gas lease contracts, some attorneys have extensive feel in oil and gas rights to work out special arrangements. It is off-white to inquire a lawyer if he or she has experience with gas charter contracts and what compensation volition exist required for this legal help. In fact, before you rent an attorney, information technology'south very of import to be certain that you empathize the chaser's fee. Different attorneys accuse differently.

Besides equally an chaser, consider hiring a financial planner or accountant to aid y'all manage any income you lot receive from leasing. A financial professional tin can also aid you deal with tax implications of gas leasing income. No matter what you decide to exercise with income yous might realize, here'due south one tried and true discussion of advice: Don't spend any money until you have information technology!

Charter Amendments

In areas where gas leases are about to elapse (approaching the end of their principal term), the lease holder may arroyo the landowner to extend the lease with a lease subpoena. Once in place, the lease amendment may override terms and conditions in the initial gas charter, so information technology'southward of import to understand what is being amended and/or modified and how it volition impact you, the landowner. Lease amendments can exist used to alter an old conventional" gas lease that may be on the property. Most ordinarily these lease amendments will effort to increase the unit size so that the property tin be integrated into a larger shale gas unit (generally 800 to i,200 or more acres). Compensation or bonus payments for lease amendments can vary. You may non be offered any compensation, or you may be offered a substantial bonus. As with any legal certificate, you lot should consult with an attorney earlier signing a lease subpoena.

Gas Leasing FAQs

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

In that location are several things you can practise. Talk with your neighbors and inquire them if they've been contacted past any gas companies. Check the Pennsylvania Department of Ecology Protection (PA DEP) website for companies active in your county and township. Check with your county'south Recorder of Deeds. Contact your local extension office for names of Penn State Extension Marcellus Education Team members in your expanse. If you call an free energy company, y'all should have your tax parcel number handy because they will enquire for that, every bit well as the township or county you alive in.

What should I do if I am asked to lease my land for gas exploration?

Enquire the gas visitor representative or landman for a copy of the lease and say yous will look information technology over. Never sign anything on the spot. Inquire your attorney to review the lease and explicate its bear on on you and your landholdings.

Do I need an attorney? If so, what blazon of chaser do I need?

To protect yourself and get the best outcome, you should consult an attorney. Exploring and drilling for gas is a multimillion-dollar venture for free energy companies. If a successful gas deposit is tapped on your land, your signature could stand for a million-dollar conclusion. Before signing whatsoever natural gas charter understanding, y'all need to know what you are getting and what y'all are giving up. An attorney with experience in gas constabulary is your all-time assurance to get the most out of your gas lease agreement.

One 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 affect me?

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

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

You lot would have to speak with an experienced attorney in gas constabulary. Merely unfortunately, the answer is probably "no." Call back, a gas lease is a binding legal contract. The time to practise the enquiry and brand certain that the lease is nearly benign to you is before signing the lease agreement. One time you sign, you are legally bound by the terms y'all agreed to.

I own only four acres. My neighbors have leased. Are the gas companies interested in my piddling piece of state?

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 lot take in the unit.

Is it better to form a group of neighbors or become it lone?

Your decision to lease or non to lease should be based on what's of import to you. You may want to join or form a group that has the same goals for land use since the corporeality of property bachelor to the company by the group ofttimes increases its interest and typically provides greater leverage when negotiating terms of the gas lease. On the other hand, if yous and your neighbor have unlike goals for your state, you might want to negotiate on your own.

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

You may exist offered a one-time bonus payment from the free energy company when you sign the lease. You might besides receive a delay rental payment, which is an almanac payment that would finish when a well is drilled on your property. Royalty payments first when natural gas is extracted from your land. The country police force requires that y'all be paid a royalty of 12.5 per centum, but you may negotiate for more than this minimum. All of these types of payments are negotiable.

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

How can I find the going charge per unit for a lease?

Never accept a first offer on the spot. Earlier you accept 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 interest in your landholdings. Talk with an chaser who is familiar with oil and gas law about negotiating for the best terms. Contact a member of the Penn Land Extension'due south Marcellus Education Team to notice out more than nigh companies that might be leasing in your region.

It's important to realize that the gas manufacture has changed over the by several years, and natural gas prices have decreased considering of an abundant supply. Considering of this surroundings, the "shelf life" of a lease volition vary co-ordinate to location, economics, timing, and competition amongst gas companies in your area.

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

The Police force of Capture states that if a well is drilled on a holding, anything that comes up out of that well belongs to the owner of that property. But in the case of natural gas in shale, this is not a concern. Outset of all, it'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 concern about a Marcellus well extracting natural gas from a neighboring property. The Marcellus shale has to exist hydraulically fractured to release the trapped gas, and this fracturing potentially will release gas upwardly to ane,000 feet from the bore hole. The gas companies typically pattern the drilling units to allow plenty altitude around the wells and so that gas produced from them will be from that unit only.

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

This charter covers exploration and drilling merely. If a gas company wants to store gas on your belongings or ship gas from someone else's property beyond your land, yous should exist compensated for that separately. You and your attorney should make certain that provisions for storage and transmission of gas are not included in a standard gas lease unless the gas is transported from your drilling unit of measurement. In fact, it's important to make sure all processes are covered in separate agreements--including seismic action, storage, transportation, pipeline, and timber management.

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

It'south actually upwards to you, the landowner, to make sure the gas company is honoring the terms in your lease. You should know what stipulations are included in your charter and go along 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 short answer is, it can be hard to tell. Natural gas development depends on many factors, and economics is an important one. Gas companies respond to the cost of gas, and they will become where the nigh valuable commodities are. For example, natural gas prices currently are low because of the abundant supply from the shale, and some gas companies are first 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 attorney or financial adviser can help y'all make up one's mind whether the check amounts are authentic.

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

Make clean and Green is a preferential assessment 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 assist protect landowners who are leasing land for natural gas activeness. Originally, Clean and Greenish required a penalization or roll-back revenue enhancement if property that qualified for the programme ceased to be used for canonical purposes. As a result of new legislation, coil-dorsum taxes are due but for the portion of the property being used in a nonqualified manner, such equally natural gas exploration and drilling.

If your land is assessed under Clean and Green, you'll want an addendum stating that the gas visitor will reimburse you for whatsoever back taxes you have to pay every bit a result of gas leasing and/or exploration. If your state is under whatsoever kind of preservation or conservation easement plan, there are limitations on how yous can develop the land. You should talk over these issues with your attorney.

What tin I do to protect my h2o supply if I allow drilling on my property?

It's of import to realize that natural gas in the shale is virtually v,000 to ix,000 feet underground, and the groundwater supply is only about 400 anxiety hush-hush, so drilling activity doesn't take place near groundwater. Yet, 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 water will be contaminated, the best mode to know for sure that your well, stream, or pond is safe is to have your water tested both before and subsequently drilling. You tin negotiate in your charter to have the gas company pay for water testing. If the test shows changes after drilling, you tin can file a complaint with the regional function of the Pennsylvania Department of Ecology Protection'southward Agency of Oil and Gas Management.

I've had my water tested, simply I don't empathize the results. Where can I get assist interpreting the report?

Understanding your water test report, but they can be disruptive to read and interpret. You can find lots of helpful information online at Penn Land Extension, including a water exam interpretation tool and a publication called " H2o Tests: What Practice the Numbers Mean ?"

Can I charter and prevent surface disturbance?

During the lease negotiation, yous may include addenda that limit or forbid surface disturbance of your property. It is important to talk over with the gas company what their current plans for development are and how your property may be affected. You should find data about the proposed gathering pipeline path, compressor stations, h2o lines, and access roads. While you lot may be in a position to completely eliminate surface disturbance of your belongings, you nonetheless demand to allow send of natural gas from the unit.

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

Well spacing refers to the distance between the well bores associated with natural gas or oil development. With the increased number of horizontal wells existence drilled, information technology'south also important to understand well pad spacing. Well-nigh gas companies are drilling multi-well pads, meaning each well pad tin have ii 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 fourscore acres, a horizontal drilling well may cover more than than one,280 acres. Understanding the relationship between well pads, gathering lines, compressor stations, and fresh water impoundments is important so you can try and forecast which parts of your property may exist affected by natural gas development and production.

Glossary

Abstractor: A trained professional who verifies that the history of a property title search is complete, the property owner does indeed own the property, and in that location are no other interests on information technology.
Annex: An improver to a basic gas charter, usually a status or restriction to make the charter atmospheric condition more than favorable to the landowner.
Segmentation lodge: A document that lists a landowner'south portion of the gas produced from a pooled product unit of measurement. Gas leases allow companies to combine or puddle properties of multiple landowners into a production unit of measurement 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. Before receiving their outset royalty check, most landowners will be asked to sign a division order.
Drilling Unit: The area from which a well draws natural gas. The unit is designated by the company and based on the expanse's geology and where the gas would be fatigued from when a well is drilled. Landowners inside a drilling unit of measurement 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 Production: A gas industry term used to describe a gas charter that has been extended. Many oil and gas leases include a primary term of five years, pregnant that the gas company has 5 years to brainstorm drilling operations on the leased premises or the lease will expire at the end of the primary term. The gas lease moves into a secondary term as stated in the lease and and then is extended as 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 bore and up to the surface. A mixture of h2o, sand, and chemical additives are ordinarily used to create, extend, and prop open the fractures.
Landman: An agent who works for a drilling company or who is contracted past a drilling visitor or broker. The mission of a landman is to negotiate the everyman possible charter price and about advantageous terms for the energy/gas/drilling company.
Law of Capture: A law stating that the owner of a tract of land acquires championship to the oil and gas produced from wells drilled on that land, though it may be proved that part of such oil and gas migrated from adjoining lands. In the case of anarchistic horizontal wells, this is generally non a slap-up business concern because shale gas is in dense rock rather than pockets and it's very unlikely that a shale well volition extract natural gas from a neighboring belongings.
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 equally NGL.
Pooling: Combining leased properties to create a unit for drilling. Most gas leases have a provision stating that the gas company tin can combine or "puddle" leased land with adjoining land, upwardly to a sure number of acres.
Seismic 2-D and three-D: Data used by geologists and geophysicists working for gas companies to interpret hush-hush rock layer formations. Seismic equipment generates two-dimensional or three-dimensional images of subsurface rock patterns that help gas companies ameliorate understand the geology.
Shallow Well: A traditional gas well that is much shallower than a shale well. Shallow gas wells take existed for centuries and are sometimes referred to as conventional wells, while those that are drilled into Marcellus shale are chosen anarchistic wells.
Top Lease: A lease that "lies on peak" of a electric current charter and would take event when the existing lease agreement ends.
Unconventional Formation: A shale germination below the base of the Elk sandstone or its geologic equivalent where natural gas cannot exist produced except by horizontal or vertical well bores stimulated past hydraulic fracturing.
Unconventional Well: A well that is drilled into an unconventional formation.
Unitization: A procedure in which gas companies designate the boundaries of a drilling unit that comprises several properties. Commonly, unitization is based on an area's geology, and unit size can range from 100 to 1200 or more than acres. Landowners in the unit of measurement receive a pro-rated share of the royalty based on the acreage they have in the unit.
Wet Gas: See "natural gas liquids."

Resources

Marcellus Instruction Fact Sheets from Penn Land Extension:

" Forest Landowners and Natural Gas Development "
" Wood Landowners and Natural Gas Evolution: Timber Resource "
" Taxation Treatment of Natural Gas "
" Negotiating Pipeline Rights-of-Mode in Pennsylvania "

Penn State Marcellus Eye for Outreach and Inquiry

Penn Land Marcellus Shale Electronic Field Guide

Penn State Public Dissemination "Explore Shale" Project

Middle for Agricultural and Shale Law

State Agencies

Pennsylvania Department of Environmental Protection (DEP)

Pennsylvania Department 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 Commission

Other Resource

Delaware River Bowl Commission (DRBC)

National Association of Royalty Owners (NARO)

Shale Preparation and Didactics Heart (Shale TEC)

Susquehanna River Basin Commission (SRBC)

U.S. Energy Information Assistants

U.S. Geological Survey (USGS)

Written by Krista Weidner

grosschai1988.blogspot.com

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