AP: What Happens Next For "Lowballed" Land Owners?

The Associated Press’ Michael Rubinkam wrote an interesting story this weekend, focusing on landowners who signed deals with drilling companies early in Pennsylvania’s Marcellus Shale boom – leases that are worth pennies, compared to what people made a few years later.
Many of those deals are now expiring, but companies are taking efforts to keep the current agreements in place, so they avoid renegotiating for much higher prices:

“There’s just too much money at stake — between a $3 lease and a $7,500 lease — for the operators to walk away from,” said Robert Jones, an attorney in Endicott, N.Y., who represented a group of landowners who sued successfully in federal court to shed their old leases. “They’re desperate to hold on to them like the landowners are desperate to get rid of them.”
Often, that means energy companies are drilling not to produce natural gas, at least not right away, but to extend their cheap leases indefinitely. It’s called holding land by production. So long as the driller has sunk a well capable of producing gas, or even started preparations to drill a well, the original lease terms remain in force.
“It’s going to be a topic of great litigation over time,” said Dale Tice, an oil and gas attorney in Lycoming County, where hundreds of wells have been drilled. “The verbiage that appears in the leases may be relatively clear, but what’s going to be unclear is what exactly the gas company has to do” to hold the land by production. “Does it mean they can just put a stake in the ground?”

Editor's Picks