Expert: Alan H. Coogan Date: 5/15/2008 Subject: gas lease
Question Mr. Coogan,
I own 180 acres in Cambria County, PA. I signed a lease over 4 years ago with a small local gas company who is only drilling shallow gas wells. My lease is $2/acre with 12.5% royality with a 5 year term. The lease is one sided in favor of the gas company. There are many other local farmers with the same lease and terms. The gas company only has drilled a few wells and are not actively drilling as we speak. Many of the leases are set to expire starting in August 2008. This all happened before the Marcellus Shale came into play. Current offering now are at least $600/acre plus 15% royalities and the prices increase each day. Rumor has it the gas company is planning to return to the area late this summer and start putting access roads and a survey stake onto our properties. This supposedly contistutes drilling activities and they will be able to lock in our properties. Can these companies what until the 11th hour of the contract and then pull a fast one? Is there anything we as landowners can do? In my opinion, this does not meet the spirit of the contract but I do not know if we have any recourse or rights? I would re-sign with this company pending they paid the current market rates for land leases. Any guideance would be greatly appreciated.
Answer Dear Lee: what constitutes commencement is a matter of law in the particular state. It usually requires a good faith continuation. I do not practice in PA, but here, for example, grading a site is enough for commencement. Ask a Pa lawyer. I would also put them on notice that no "games" will be tolerated,
good luck
AHC
