Landowners exercise lease options
FINGER LAKES—As gas and oil leases come up for renegotiation or termination, a group of area residents have gathered together literature and advice on the options for a landowner.
When it comes to leases, residents can have a say on how long a lease lasts, if mineral and water rights will be included, where the company will be active on the surface, etc. According to the respective Soil and Water Conservation Districts, 20 percent of Yates County is leased and around 13 percent in Schuyler County. Steve Knapp, Barrington resident and one of the people organizing the information, said he knows of several people who have received letters about leases coming to the end of their initial terms. Brett Chedzoy, senior resource educator for the Schuyler County Cornell Cooperative Extension, said he too has received a number of calls from residents about leases coming up for renegotiation.
The Friends of Barrington have retained the advice of Hammondsport-based Attorney Rachel Treichler. She has reviewed and commented on the terms of a Chesapeake oil and gas lease, which is available online with the group’s other documents at http://www.friendsofbarrington.com/fracking/leaseholders.html. Treichler is also scheduled to speak at the Finger Lakes Produce Auction in Penn Yan, Wednesday, Feb. 15.
In reviewing the one lease, Treichler covers signing a lease for the first time. At the start, Treichler said compulsory integration may be a more favorable option for a landowner. She explained that integration means the gas or oil from under a person’s property is drilled from another location without any surface activity. Compulsory integration can only happen when 60 percent of the land in an area is leased to the company.
Some people may still want to sign a lease. Treichler suggested going for a three-year term, instead of five years. She said to keep the leasing clause as limited as possible, adding “Just lease oil and gas, not all mineral rights.” And for anything else that can be covered, she said should be done under separate leases. Treichler said landowners should lease each geological formation separately and any storage rights negotiated in a different kind of lease.
When actually signing a lease, Treichler points out several clauses or parts that a landowner may not want included. Treichler said all surface activity and access to water should be excluded from a lease. If the landowner wants to include this, Treichler said to include writing that makes the company “provide substantial additional payments for hosting each such facility.”
“Water may be more valuable than gas,” said Treichler. “If you do give water rights, lessee should pay for water usage. Payments Clause should provide payments for every right granted by the Leasing Clause.”
Another document on the website from Fleased.org covers terminating a lease. It says to first be careful about checks being sent near the time of lease’s termination date. Fleased said many leases contain “delay rental” clauses, which allow the company to extend the lease merely by sending such a check; acceptance and cashing this check will extend the lease. It also outlines how to file a notice letter, but adds before taking any actions described to get the advice from an attorney.
The document says there are several deadlines to keep in mind, like waiting until 10 days after the expiration date of the lease to mail in a notice letter and the 30 days the company has to respond. A sample letter is included, listing where various information should be included.
Knapp said another big concern is the issue of “Force Majeure.” He explained that some gas companies are claiming because the New York State Department of Environmental Conservation is not currently allowing high-volume slick-water hydrofracturing, gas leases can be extended beyond the agreed upon term. He added this is being considered in a court case currently.