© 2010 Attorney Doug Clark
The Clark Law Firm, PC.

1. Failure to Retain An Experienced Oil and Gas Lease Lawyer

IT IS ABSOLUTELY CRITICAL THAT YOU, THE LANDOWNER, RETAIN AN EXPERIENCED OIL AND GAS LAWYER TO ASSIST YOU IN NEGOTIATING AND/OR REVIEWING A NATURAL GAS LEASE, PIPELINE RIGHT-OF-WAY AGREEMENT, OR SURFACE USE AGREEMENT.

Signing an Marcellus Shale oil and gas lease or a Pipeline Right-of-Way Agreement is a massive, life-changing event in the landowner’s life, that often involves the landowner’s primary and most valuable asset - their land. The executed paid-up oil and gas lease and/or Pipeline Easement Agreement may remain in place for the remainder of the landowner’s lifetime and well beyond. Any decision this important should be made with the assistance of qualified and experienced oil and gas Attorney. The landowner should ask a potential lawyer directly how many oil and gas leases or Pipeline Right-of-Way agreements they have negotitated. Leasing your Marcellus Shale rights is far too important to trust to inexperienced counsel.

Even if a Marcellus Shale landowner is content with the oil and gas Lease offer, Pipeline Right-of Way Agreement, or Suface Use Agreement presented, these contract documents should be carefully with an experienced oil and gas lawyer before execution.

Our office offers a final document review wherein we advise the landowner of the strengths, and more importantly, the weaknesses of their Oil and Gas Lease or other agreements.

Remember, the energy companies have highly paid and skilled lawyers working for their interests. The landowner must arm themselves with a skilled and experienced attorney to fight for their rights and prevent the gas companies from taking advantage of their valuable property.

2. Fear of Attorney Fees

Marcellus Shale landowners often resist retaining an oil and gas lawyer in an effort to avoid costly legal fees. This is an unfortunate misconception and a mistake. In most cases landowners who execute an oil and gas lease receive a significant bonus check generally between 45 days to 120 days after signing their oil and gas lease. The executed Oil and Gas lease and Pipeline Right-of-Way Agreement may extend over the property for generations into the future. If the oil and gas lease is excessively friendly to the natural gas company, these energy company slanted terms will apply through the life of the oil and gas lease and to the detriment of the landowner.

Our attorney fees are generally nominal when compared to the bonus money collected by the client. We often work out arrangements with clients where the majority, and in some cases all, of the lawyer fees are deferred until the landowner receives their up-front bonus payment from the natural gas company. We are confident the price of our oil and gas legal services pale in comparison to the comfort of knowing that your oil and gas lease has been negotiated and/or reviewed by an experienced Marcellus Shale gas leasing attorney who is working for you. Our goal is to assist the property owner in every manner possible and our attorney fee’s and flexibility reflect this commitment.

3. Failure to Maximize Property Protections and Understanding What Is Missing in the Lease

Marcellus Shale landowners should never sign an Oil and Gas lease, Pipeline Right-of-Way Agreement or Surface Use Agreement without fully understanding the terms contained within the documents and any other terms that may be available through additional negotiation. If the landowner is going to sign an oil and gas lease or pipeline agreement that will affect their land for many years, they should not only know what property protections they have, but know what protections may be available, but lacking. Landowners do not get a second opportunity to negotiate a signed Oil and Gas Lease, Pipeline Easement or Surface Use Agreement.

4. Failure to Explore All Potential Oil and Gas Leasing Options

Marcellus Shale Landowners often execute gas Oil and Gas Leases with the first company that contacts them. It is important for the property owner to remain open and explore all available options when considering leasing their Marcellus Shale oil and gas rights. Many times we are able to introduce additional energy and natural gas companies into the negotiation process in an effort to secure higher bonus payments and royalties and/or stronger property protections and addendum. Common sense dictates that the more bidders fighting for the natural gas rights in your Marcellus Shale, the greater the opportunity to strengthen the terms of your oil and gas lease agreement.

Often there are multiple offers available to the landowner from different natural gas companies. These offers usually contain subtle differences that may have a tremendous impact during the term of the extended oil and gas lease and should be fully explored with an experienced oil and gas prior to signing any contract offer.

5. Failure to Look Beyond the Bonus Money and Royalty Percentage

Time and time again Marcellus Shale landowners I speak with are focused solely on the up-front bonus payment and royalty percentage. Certainly the bonus and royalty calculation terms are critical, but there are equally crucial terms written within the convoluted oil and gas leases that can negatively impact the landowner for decades into the future. The natural gas companies are aware of this mistake by property owners and seek to capitalize on the uninformed landowner by presenting oil and gas leases heavily slanted in favor of the natural gas company. The landowner must recognize this fact and seek the guidance of an oil and gas lawyer familiar with these tactics and equipped to fight for the strongest landowner lease possible.

6. Falling Victim to Overbearing Landman

Landowners often contact me and discuss how overwhelmed and confused they are about potentially leasing their property’s Marcellus Shale oil and gas rights. Property owners will report that they feel uncomfortable and intimidated by the actions of the landman pursuing their property’s Marcellus Shale gas rights. During my representation of literally hundreds of landowners, I have found that most landmen are courteous and respectful. However, there are a wide variety of land agents and tactics they employ in efforts to secure an Oil and Gas Lease or pipeline agreement. A landowner must never sign an oil and gas lease or pipeline agreement out of fear, intimidation, or pressure. The property owner should have an experienced oil and gas leasing attorney on their side to protect their interests and eliminate stress and confusion from gas lease negotiation process.

7. Signing an Oil and Gas Lease, Pipeline Right-of-Way Agreement, or Surface Use Agreement Without Sufficient Property Protections

In most cases the natural gas or pipeline installation company is willing to make concessions to the Oil and Gas Lasing, Pipeline Right-of-Way, or Surface Use Agreement in the form of Addendum or exhibits to the basic company agreements. These Addendum and exhibits are often critical in protecting the Marcellus Shale landowner’s property for many years into the future. Whether the issues involve water contamination, environmental concerns, fields and forest preservation, or address any other unique property characteristic or landowner’s concern, a skilled oil and gas lawyer can often negotiate additional protections for the property owner. These strongly negotiated addendum serve to assure the landowner that their property and its unique characteristics are protected from the potential harm of drilling operations and future extraction activity.

8. Believing the “Landman” is Their Friend and Looking out for the Landowner’s Interest

Most often the landman is an employee of a Land Service Company who is contracted by a natural gas or pipeline company to secure an Oil and Gas Lease or a Pipeline Right-of-Way Option Agreement on behalf of the energy or pipeline installation company. Always remember, these landmen are paid to secure oil and gas leases or pipeline easement agreements for their employer and their employer’s clients. They are not paid by the property owner. Landowners should not feel a sense of loyalty to a particular landman because the land agent has been friendly and kind during their meetings. Once an oil and gas lease or pipeline easement agreement is signed, the land agent immediately moves on to the next landowner in effort to lease the next Marcellus Shale parcel or secure the next pipeline easement agreement. The landowner’s decision must be fully informed and made in their best interest as the oil and gas lease and pipeline easement may impact their valuable property for many years into the future, well after the landman has moved on.

9. Failure to Understand Royalty Calculation Language

Landowners in the Marcellus Shale often focus solely on the royalty percentage figure offered and fail to recognize any potential royalty deductions or manipulations of the royalty percentage by the natural gas company. Through the extraction, gathering and marketing process the oil and gas lease may permit the leasing company to make costly royalty deductions that the uninformed property owner did not see coming. Landowners must fully understand the royalty percentage provision and whether any deductions from natural gas royalties are permitted within the oil and gas lease.

Marcellus shale landowners frequently sign oil and gas leases believing they have maximized their royalty percentage and royalty calculation method only later to learn of they were mistaken. It is imperative that the landowner understand the method of royalty calculation as the impact of a mistake could potentially result in the loss thousands upon thousands of dollars over the years of the extended oil and gas lease.

10. Relying on Misinformation

Unfortunately Marcellus Shale landowners are often victims of misinformation that hampers their ability to negotiate an acceptable oil and gas lease and/or pipeline easements for their property. With the tremendous rush of leasing and pipeline easement and installation activity, comes a plethora of misinformation spread innocently and, at times, even with malice. It is vital for the Marcellus Shale landowner to determine the reliability of the source of the information they receive. Remember the landowner is negotiating for themselves and must make the decision to lease their Marcellus Shale gas rights on trustworthy information provided by reliable sources. The Marcellus Shale property owner must carefully consider the motivations of the persons with whom they are communicating with in determining the weight given to their statements.