Random thoughts from the Penn State Meeting Penn State Lehman 1/28/08

*Approximation- 35 million can be gained from working in joint ventures, more than when the same number of property owners deal with landsmen individually.

*Drilling and leasing speculative – a hit only 50% of the time.

*Any consultant will only strike a deal as good as we give them. One got the summer of ’07 people, a whopping $165.00 an acre. It does not seem to me that there was given particularly good advice in terms of what they might get. The consultant took what they were willing to accept and ran with it. All the consultant did was shepherd. The sheep followed the lead and it took them to less than they might have received. The same might be said of working with an attorney which, is I believe what one of our members said in the first place.

*Properties in a unit will get the percentage of royalties that their acreage allows. Up front money simply gives the drilling companies the right to come on your property. On your property they can do what they darn well please under the parameters of the lease. If we have one hundred acres and our neighbor has four hundred and they find gas on our property, we still only get 1/5 of the royalty.

*Who pays for the added damage to Township or Boro Roads? We have had that problem with quarry trucks and are able to work that out as the quarry owners in general, live here. The gas company does not. Do the municipalities have a legal voice here? If the municipal roads are damaged, we may have to pay more municipal tax.

*Insurance: Be certain that the property owner understands the insurance of the company. It might be a wise plan to up your homeowners in case someone wanders in to look at the drilling process and breaks a leg in a woodchuck hole. Not sure what the gas company’s insurance covers.

*Make payment schedules very clear.

*Take the lease to a copier and raise the magnification so you can read every bit of the fine print.

*The chances of the lease being sold or transferred is high so make certain you know the terms of these actions.

*Have a third party take a sample of your water at least three months before action on your property.

*It takes 5-6 million to drill one well. Gas companies will get 87% of any gas.

*Protect your intended land use. Make sure your lease excludes surface use.

*DEP has only three offices in the whole state for Gas and Oil oversight. (Likewise, our County’s E&S staff is not large) If there was concern that the quarry operators had little oversight the same is true here. DEP only oversees production. Anything beyond that is a civil matter. Your problem. They could care less about your lease. Storm water Management plans must be drawn up for over 5 acres of disturbed ground. We must check on the Clean and Green provisions of the County. Now, new Commissioners so check on their views.

If any structures or outbuildings application must be made to County Planning. Company responsibility? Landowner? Make certain.

*This has the same potential to scour the land as a quarry. Again, watch the lease and make strong provisions to reclaim the land on and beyond what the Commonwealth might find acceptable.

*No gas storage on a property. It has the potential to injure the land permanently.

*A local person to have oversight of the process once the land has been disturbed; that the company is sticking to the lease. (Perhaps Farm Bureau can clarify that. I heard the term Ag. Inspector? On the 22^nd.)

*We need a list of Industry Definitions

*The companies have the technology to place pipelines under a stream bed.

*You can designate the strata you want to lease. Near the surface is best.

*It would be better for the property owner to do a quiet title search. If someone else has signed a lease before you owned the property the company will deal directly with them and leave you out. (For new owners) Again, your attorney can answer any questions about Warranty of Title

*Clarify – The best lease is for 5 years. Ten is too long. They will know shortly after they come to the property if it is valuable to them. If they strike gas then they will be there until the gas runs out. Pipelines are forever so be careful how they are built and put a lot of protection into the lease. Make certain that if there is an extension clause in the lease that you are paid accordingly, not a simple $1.00 a year. That has happened. Sign a five year lease with the provision that if they do not drill in five years the lease is void and must be renegotiated.

This is a wildcat area. The companies are taking a chance: educated guess.

Favored Nations - from Wayne County e-mail

It would be great if a large group of landowner would combine their
>> resources and share in the legal expenses. However, this does not seem
>> to work because each land and mineral owner has different goals and they
>> often want to make better deals than their neighbors. One way to get
>> around this is to have a "favored nations" clause. The requires the
>> lessee to give the lessor terms equal to the best terms for some distance
>> around the land in question. So, no matter what Farmer A has in his
>> lease, if Farmer B is within the area of interest, an he gets better
>> terms, Farmer A's terms will improve. Again, this requires that the
>> landowners/mineral owners truthfully share information. This is
>> something that they often won't do. Nobody wants to let his neighbor
>> what his financial business is. Again, the lessees prey on this
>> mentality to break down the individual lessor.The favored Nations Clause is wonderful security for moving negotiation
> forward. With that clause you can be sure that there wont be a better deal
> to the next group over yonder. There are usually distance limits on them.
> I have seen 2 mile circumferances here. The negative side is you have to
> be a detective to find leases in your area that were agreed on that
> exceeded what you got. But then this is a small tight community and
> eventually everone tells. Especially if they have bragging rights.
Thats
> why the NWPOA has the clause inFAVORED NATIONS CLAUSE (BONUS ONLY): In the event Lessee pays a bonus
> amount greater than the amount paid to Lessor, for an oil and gas lease,
> and/or pooling action, in this section within one (1) year from the date
> hereof, Lessee agrees to pay to Lessor the difference between the bonus
> amount already paid per acre, and the amount per acre of the greater bonus
> paid.
At the end of six months from the date of this Lease, at the written
> request of Lessor, Lessee agrees to determine the average cash
> consideration paid per leasehold acre ("bonus") for all oil and gas leases
> taken by Lessee for the six month period starting from the date of this
> Lease over lands in a five (5) mile radius of the Leasehold Premises, and
> if the average bonus amount paid by Lessee for such leases is greater than
> the bonus paid to Lessor at the signing of this Lease, Lessee will pay
> Lessor the difference as additional bonus. WmBa +/- Ck
FAVORED NATIONS: If at any time or times prior to a well being completed
> on the leased premises, or prior to a well being completed in any pooled
> or unitized units in which the leased premises are included, Lessee or its
> assigns shall obtain a lease from or make a contract with a mineral owner
> under the Leased Premises other than Lessor, then Lessor shall be entitled
> to any benefits paid for, granted or reserved in such lease or contract
> which are greater or more favorable than those paid for, granted or
> reserved in this lease. Lessee shall pay Lessor immediately Lessor's
> prorate share of such benefit, including without limitation, bonus,
> royalty, rental or shut-in payment or any other benefit more favorable to
> such mineral owner than the payment for or the benefits of this lease. If
> necessary in the opinion of Lessor, then Lessee shall amend this lease to
> confer such benefits upon Lessor.
>


>



>>

NWPOA Northern Wayne Property Owners Allience

Hello NEWBIE,

Welcome to the Community at large and the Community of the NWPOA.

While I can not tell you how to proceed with your attorney in Honesdale I can share with you some of my thoughts and observations as well as offer you a mini update from the Alliance.

Let me preface this email with the information that I am not an attorney and in all instances do not give legal advice. Only an attorney and perhaps only an attorney specialized in oil and gas should do that for you. I have spent a great deal of time learning all I can together with a tremendous bunch of neighbors who have at their collective disposal a wealth of resources.

We are farmers in West Damascus. We do not work off of the farm. We love our farm and our children plan to continue on the tradition.

I know that by banding together as neighbors and friends the price being offered has gone from $25 -$300 per acre to $750 per acre. That is not because our land has changed that is because we became united.

I know that earlier only company leases were offered with no or next to none protective addenda. Now that we have negotiated for protections (of which most are agreed to) the Company has begun to freely offer some of those to land owners individually who are willing to sign out side of the group or who do not know about the group. The community at large is already getting great benefits from the NWPOA even if they are not part of the group. Think what happened just 6 month ago to your neighbors next door before the group existed. They signed company leases for very low up front money.

The Northern Wayne Property Owners Alliance is far over 50,000 acres. It has a sister group in New York State of 10,000 acres which blocks in the pipeline to our east. To our west in Susquehanna County we have significant acres as well. The Susquehanna County Farm bureau just completed Meetings in that County similar to the Meetings sponsored here by the Wayne Pike county Farm Bureau in Damascus.

The result has been that multiple companies are now courting us! They are calling and emailing us! They want to position in Marcellus Shale. The companies are respectable and certainly have the financial ability to partner with us. They include:

Equitable Productions

Noble Energy

Cabot Oil and Gas

Chief Oil and Gas

Southwestern Energy

Exco/ North Coast

AND OF COURSE

Chesapeake Appalachia llc

That is 7 companies have come in to this process in just a few short weeks. The competition is purely a result of the property owners banding together. This put us in a very favorable position. The acreage continues to increase daily although I am not actively soliciting for more land. We believe that one fair deal for all of the area would be greatly beneficial to all of the residents.

We have used multiple attorneys at this point and are hiring one final oil and gas attorney collectively to carry the process through the final stages of the negotiations.

When the process is completed we will have one favorable lease draft for each member to consider. If you own 3 separate parcels you will have 3 separate leases listing each parcel individually. Your leases will be identical except for parcel Id information and further they will be the same as your neighbors.

You can take it to your attorney for review. You can choose to sign it or not to sign it.

I will be working with the NWPOA Committee to develop the best deal I can. I will be considering the final offer. I will be waiting to take this document to my attorney if I feel it would be warranted, once it is completed. I will not sign until I am sure that our farm and natural resources are adequately protected.

I will be encouraging the NWPOA to use its position to negotiate a higher royalty payment. It is the royalty payment that my children will have to live with since shale wells can produce gas for a very long time.

I also believe, like you that the Alliance is making history today. I think this process, our process, will change the way people negotiate leases in the future.

I know that this is the right way to do it. I can feel it.

Thanks so much for writing, I know you are feeling overwhelmed by the volume of information emails you have gotten. But isn't it great to have all these resources and this guidance from across the country delivered to your inbox by the neighbors who live right beside you?

Marian Schweighofer 570 224 4352

Suggested Attorneys

Blogger Caution - This is a suggested list only. Absolutely NO guarantee of performance is implied. Do your homework! This list comes from another larger group in Wayne County who is a bit ahead of us in their quest for attorneys who specialize in Oil and Gas Leases. We do not recommend any of these attorneys but publish the list for your own search.

. Lester Greevy and Associates, Williamsport, PA 17801 Phone: (570) 326-6561

2. Rosamelia and Brungard, Randy Brungard, Lock Haven, Pa (570) 748-5572

3. Chris Denton, Elmira, NY (607) 734-0661

4. Richard A. Gerard, Elmira NY (607) 732-3793

5. Michael Joy, Linamin & Bilteroff, Williamsville, NY (716) 633-3200

6. Wesley A. Cramer, Washington, Pa. (742) 222-4520

7. Charles A. Schneider, The Mazza Law Group, State College, Pa. (814) 237-6255

8. Sean Cassidy, Greensburg, Pa (724) 836-4900

9. James A. Naddeo, Clearfield, Pa (814) 765-1601

10. Robert Lewis Jr. , 800 Maplewood Avenue, Ambridge, PA 15003, Phone 724-266-1000

11. Wilson, Thompson, & Cisek 1162 Elk St, Franklin, PA Phone 814-437-2121

12. Robert Clark 201 N. Market Street, New Wilmington, PA 16142 724-946-9093

13. Mathew L. Wolford, Wolfors Law Firm, 638 West 6th Street, Erie, PA 16507 814-459-9600

LLC Companies

It is important to understand that the company with which you signed may not be there for the time a gas company occupies your property. As the exploitation of a site has reached a point where it is no longer economically viable to them; sell rights to smaller firms. An attorney could put in transfer restrictions and do a complete search on the company.