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Public Meeting on Gas Property Leases in Weston, WV

Review & Commentary by S. Tom Bond, Resident Farmer and Retired Chemistry Professor, Jane Lew, Lewis County, WV, July 2, 2014

On Tuesday, July 1, 2014, Tim Greene and Land and Mineral Management of Appalachia (LMMA) held a meeting in Weston to inform Lewis County residents of their services. He was assisted by Rob Wilming, and Mark Burdette handled physical details. LMMA offers management of oil and gas from leasing, through management of one’s income flow (making sure the lessor is not cheated by the leasing company, as Chesapeake may have done in two current court cases), to investment of the royalty received to provide long term income.

Mr. Greene began by giving several examples of bad deals in some leases. He explained LMMA will be able to spot these and explain how they will affect the lessor’s surface. They will be able to ask the right questions in behalf of the lessor and know the going rates for comparable tracts. They are experienced negotiators.

After the presentation there was an extended discussion of heirship in oil and gas ownership. One couple said one of the other heirs was a lawyer. Mr. Greene’s reactions was “Oh, my!” as if that would make it more difficult. During this discussion he also described partition suits, and said LMMA could handle your lease interest in such cases.

When asked if they handled other forms of natural resources, Mr. Wilming answered that they managed timber and “anything that has value.” The firm doesn’t have any lawyers in it, but has contacts to access lawyers when necessary.

One member of the audience said he had been approached about a right-of-way which was to extend 100 feet on each side of the 42 inch pipeline, and was offered $12,000 an acre. It is to carry gas from West Virginia to the Carolinas.

Another asked how long the gas would last. Some of the audience mentioned the well known rapid decline rate of shale wells. Mr. Wilming said he believes the companies will “come back and redrill and refracture.”

Still another audience member asked if the driller would plug the old well that gives a family free gas before drilling a Marcellus well. The answer was “sometimes they will and sometimes they won’t.” The reaction from the audience was that loosing free gas was a very important result to most rural people. One doesn’t usually receive free gas from a Marcellus well. One lady in the room claimed she had a relative that did.

Mr Greene’s concluding remarks included the statement that LMMA is working with clients, gathering information, but the clients decided whether to sign. “Our goal is to get ahead of the information,” he said. “If they don’t pay royalty we don’t get paid.” He also claimed this is being done elsewhere, it is a new concept , and that another company is doing it in southern West Virginia. One member of the audience remarked Mr. Greene was putting LMMA in a position requiring a remarkable degree of trust from the mineral owner with leasing, managing the flow of income, and investing it.

After the meeting this author discussed this approach by email with an expert who has extensive experience with leases, someone who was in the audience. He suggests this is what could happen:

What these guys are doing is trying to obtain exclusive rights to as much land and minerals as possible in order to gain more influence/leverage over the operators and thus drive lease prices and royalties. This is very similar to the land owner coalitions in NY. Once they get enough acreage accumulated the idea is to lease the entire leasehold for the highest price because the operator will have enough instant drilling units and room for transmission infrastructure.

It would thus give this group a huge amount of influence over the operator, and the landowner, because once you give them exclusive rights to negotiate for you then you are tied to the hip with them and have very little choice who they lease to. Since they want a retainer fee and commission sales agreement to advocate, that is why I asked for how long they held the corporation accountable, because the lease should stipulate that if there is water well contamination or anything that would affect the quality of life for the landowner, will they advocate for them.

I suspect the answer is no, they just want to lease and profit from the leasing. When the advocating is over, the landowner has no way to recover from a home that may now be uninhabitable with no potable water, etc. They will not advocate when the landowners property value drops or the quality of life is destroyed. If they stipulated or factored this into the lease then it is possible, but no operator in the world would go for it.

It could be, in the end, the only person they are really advocating for is themselves and their bank accounts, negotiating the lease never to be heard from again once the ink dries on the paper.

>>> NOTE: LAMMA above is one of a number of “Lawyers and Experts for Surface and Small Mineral Owners” listed by the WV Surface Owner’s Rights Organization.