Expert: Alan H. Coogan Date: 5/3/2008 Subject: Gas lease extension of term option
Question My husband and I own 58 acres in NY. We signed a paid-up lease that expires in Jan 22, 2009. On the lease it has an Extension of term options. It says that the Lessee has an option to extend the primary term of this lease for an additional 3 years from original date, if they provide the Lessor with credit on or before the primary term expiration date. And that the orginal agreement will transfer to the new lease. I had asked the person and he told me that it just meant that they had an option, but we still had to okay it. We only got a litte over $2000 sign up bonus with 12.5% royality. Our town is working with a bunch of people for up to $3000 an acre. Does this extension mean that if they come to us before or on the date that the lease expires they can extend the lease even if we don't want them too? Thank you!
Answer Dear Becky:
Well, it does sound like it, but I'm not sure because it depends on the exact words of the lease. The companies leasing in western N.Y and PA are looking for long term leases at low cost. By 2009, there should be reports of how well the Marcellus is in fact producing in your area, wherever that is. One might argue they paid nothing for the option, and are not entitled to it. Someone else would have to take the lease with this cloud on the title.
good luck
AHC
