Learning Too Late of the Perils in Gas Well Leases

Social, legal and health issues related to air and water toxic pollution in Australia.

Learning Too Late of the Perils in Gas Well Leases

Postby HVPA_research » Sat Dec 03, 2011 6:37 am

Links to this page: http://forum.huntervalleyprotectionalliance.com/viewtopic.php?f=3&t=405, http://bit.ly/tenwJ1 .

* From HVPA Mailing list *

Learning Too Late of the Perils in Gas Well Leases

Anyone who is even for a moment thinking about leasing his/hers land to CSG companies should read this article and all the comments. The experience of the US landholders shows that they were babes in the woods when dealing with the shale gas company landsman. Yes, this is shale gas country, not coal seam gas, but the technologies and the resource companies habits are not all that dissimilar. AGL would, of course, try to make us believe otherwise. There are differences, Americans who own the mineral rights on their land get from 10 to 20% of royalties from gas sales! Not all of them do, some live on split estates where someone else owns the underground and these are in a real trouble. Just like all of us in Australia.

After Scott Ely and his father talked with salesmen from an energy company about signing the lease allowing gas drilling on their land in northeastern Pennsylvania, he said he felt certain it required the company to leave the property as good as new.
Drilling Down

So Mr. Ely said he was surprised several years later when the drilling company, Cabot Oil and Gas, informed them that rather than draining and hauling away the toxic drilling sludge stored in large waste ponds on the property, it would leave the waste, cover it with dirt and seed the area with grass. He knew that waste pond liners can leak, seeping contaminated waste.

“I guess our terms should have been clearer” about requiring the company to remove the waste pits after drilling, said Mr. Ely, of Dimock, Pa., who sued Cabot after his drinking water from a separate property was contaminated. “We learned that the hard way.”

These advocates also say that landowners’ eagerness to start earning royalties has made them vulnerable to deceptive tactics by landmen.

“We’re in town until tomorrow,” the landmen typically say, according to interviews with more than two dozen landowners in Ohio, Texas and Pennsylvania. “We have already signed up all your neighbors.”

The landmen then claim that if you do not sign right away you will miss out on easy income because other drillers will simply pull the gas from under your property using a well nearby.

Some landmen show up in poorer areas shortly before the holidays, offering cash on the spot for signing a lease. They might offer thousands of dollars per acre as a bonus to be paid shortly after the lease is signed. Royalties, which usually run between 12.5 percent and 20 percent of what the companies make for selling the gas, can mean tens of thousands of dollars per year for landowners.

For some landowners, it can be a costly mistake.

“It’s been one expense after another since our water went bad, and the company only has to cover part of it,” said Ronald Carter, 72, of Montrose, Pa. Mr. Carter and his wife, Jean, said they signed a lease in 2006 for a one-time fee of $25 per acre on their 75 acres and annual royalty payments of 12.5 percent.

The Carters live on $3,500 a month, including the $1,500 per month they average in gas royalties. But they had to spend $7,000 to install a water purifier when their drinking supply became contaminated in 2009 after drilling near their property.

The Carters joined a lawsuit with about a dozen neighbors, including Mr. Ely, accusing Cabot Oil and Gas of contaminating their drinking water.

Mr. Stark, the Cabot spokesman, said that his company was not responsible for any water contamination in the area and that Cabot’s studies showed that the gas seepage into the drinking water was occurring naturally.

“All the testing we have been able to conduct show the water meets federal safe drinking water standards,” Mr. Stark said.

In 2009, Pennsylvania ordered Cabot to provide the affected residents with water. For the Carters, the company has paid for bottled water and for the installation of a water buffalo next to their trailer. Mr. Stark added that his company had offered to pay for treatment systems to remove gas if it leaked into their drinking water.

Mr. Carter said that even though Cabot had paid to provide him with bottled water and a water buffalo, he can barely afford his electricity bill, which doubled because he has to heat the water buffalo to make sure it does not freeze.

Those expenses may soon go up.


* Bob
* Meredith, NY
Anyone who thinks it’s possible to negotiate protective clauses is kidding themselves. As the article makes clear, landmen have an arsenal full of tactics and tricks and threats at their disposal.

A Pugh clause? An indemnification clause? No right to invoke force majeur? The right to negotiate the location of the well pad, or the setback from your house?

Your neighbors have all signed. If you don’t, we’ll just drill underneath your land. We’re leaving on Tuesday, the offer’s only good until then. And they won’t even have to lie about it. As for forming a landowner coalition, that’s like trying to unionize, but there will always be a few people desperate enough for the cash to sign the boilerplate lease, and once they do, the dominoes fall, and so will all those nice protective clauses your coalition lawyer wrote into the lease agreement.

And as for restoring your land, forget it. By the time they leave, they’ve either declared bankruptcy, or transferred the lease to a company with no assets. You’ll be lucky if they cap the wellhead with a few feet of cement before they leave.

But even then, it’s only a matter of time before the cement begins to crack and the casings inside the wellbore start to shrink, and the 50% or more of the gas that was too unprofitable to extract repressurizes and slowly migrates upwards, toward your groundwater. If you think that’s just some anti-drilling scare tactic, just Google “why oilwells leak” and see what the engineers have to say.
* Dec. 3, 2011 at 2:05 a.m.

* Bart Coughlin, Dedham, MA
Thanks for this great comment.
Thanks for this great comment. The people signing leases are not simply greedy or stupid. They are at the receiving end of a sophisticated marketing machine and don't have the background to understand exactly what they are getting into. This is a replay of sub-prime mortgage abuse in a different form all over again. Unfortunately the corporate PR system will demonize the victimized landowners, and a lot of Americans will buy into the corporate propaganda, as one can see from many of the comments posted.
* Dec. 3, 2011 at 2:49 a.m.

* carlA
I own property in Dimock. We will never lease yet now we are forced to live with stench of compressor station, truck traffic, roaring droning noise and poisoned water wells nearby. Gov, Corbett gets hundreds of thousands from the gas drillers and gives them carte blanche, with the blessing of the DEP , to rape and pillage Pa. It begs the question; given the history of the oil and gas industry, why would anyone with an ounce of intelligence trust them? Every job created destroys ten more. A job is meaningless if you can't live in your home or drink the water. New Yorkers , wake up. Gas fracking is coming to you.
* Dec. 3, 2011 at 2:02 a.m.
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