Existing O&G Leases

The Parable of the Orange.

 Informing modern negotiation theory (although not always reality) is a zeal for avoiding the zero-sum game as expressed in the parable of the orange. The story goes that two gentleman come across a perfectly good orange at the same time and proceed to argue about who spied it first. Eventually they decide to split the orange down the middle and go their separate ways. But if they had better communicated, they would have discovered that gentleman A only wanted the orange for its peel, and having just eaten lunch would have discarded the meat. They would also have discovered that Gentleman B was quite hungry and had no use for the peel. Their interests in the orange were perfectly complimentary but since they never discussed interest, they both lost out on half an orange.

South-Central Ohio was gas and oil county long before the Utica shale boom. And we have leases dating back a hundred years to prove it. Unfortunately, O&G leases were so common in some areas that many landowners didn’t even bother to properly terminate the leases when they were completed. As a result some landowners have dozens, even hundreds of pages of old lease records attached to their property. To be prepared to consider current lease options, the issue of older leases must be dealt with.

You may be the landowner or the the holder of an existing lease. The landowner group accepts both lessors and lessee’s as members, and does not inherently favor one over the other. However, the majority of our members are going to landowners versus lease holders. Lease holders will often be businesses with more knowledge and resources than landowners. In addition, some leases (through no fault of either party) are so ill-equipped to  deal with the issues involved in modern horizontal fracking wells, that we would tend to encourage resolutions that do not merely flip these old leases to the shale operators.

If you are a landowner, the first step is finding out whether or not you have any existing leases on your land. The good news is that if your property is mortgaged in recent years, then your bank or title company likely has all the title work for your property so that you may avoid paying for another title check, or spending hours at the Courthouse. The landowners group is also currently working on developing the lowest cost options to assist  members in their title work needs. These options will be posted in the near future.

In general, if you haven’t had an actual well on your property for a significant period of time, or an old well has been non-productive for a period of time without payment, then the chances are that any leases remaining can be terminated or negotiated to a favorable resolution. In some instances it is as simple as giving proper notice and filing an affidavit.

In the cases of leases held by production (there is a well on your property and it is producing in paying quantities), and newer leases still within the primary term, it may be more complicated, costly, difficult, and even impossible to resolve the lease to your satisfaction. Our goal is to work toward resolution wherever we have the opportunity, but in many cases, leaseholders have valid interests that must be respected.

We will get into more detail on all these issues – but the single most important thing we can do NOW to create the best chances of positive resolution to these types of conflicts – is to build the size of the group.

Next…. we will post the legal requirements for terminating a lease through the affidavit process, and pricing for title work. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s