Re: Oil and gas lease

Posted by wisbaker on July 21, 2014 at 19:38:58 from (173.30.33.15):

In Reply to: Oil and gas lease posted by rrlund on July 21, 2014 at 13:19:37:

There is gas and oil in Central Michigan, My Father in Law was an oil field services engineer, I met my wife in Lansing as she stayed there after her dad had been assigned to manage the central Michigan field office for Schulmberger. As John T. said have the lease looked over by an attorney, yes you're locking your options up for oil & gas for 10 years at $24,000. No telling what's really going to happen, I'd research the company offering the lease, are they purely speculating or trying to bundle enough land to make a project attractive. Unless Michigan law has changed since I left they have to have so much land to drill, if adjacent land is drilled on and the owner of your lease fails to act to develop your tract they can be sued and made to pay you for missed royalties. The big question is if you lease does your lessor have enough money to drill, are they willing to sell or reassign the lease or do they have enough money to pay damages? After/as my my Father in law retired he and a few of his cronies bought up a bunch of gas leases in West Virginia (some say at one time they held leaseholds on 25-30% of West Virginia), they sold some of the leases off to finance some wells and ended up sinking two wells, they both are in production but not throwing off significant money, one doesn't even break even but we get to deduct the depreciation of the well, another throws $100-$200 a quarter, with the depreciation there isn't much tax liability. Of course he had 25% of the syndicate and left equal shares to each of his 4 kids so the money is about 1/16 of the wells profit (1/4 of a quarter).

Again find out about the company and make sure you know all the rights and privileges you are granting or leasing and find out the financial stability of the company buying the lease.
Friends of ours fought Consumer's power over a lease for a right of way for a gas pipe line. He ended up getting a much better deal than his neighbors because he fought it. They got the same money but a much more restrictive lease as it was considered adverse. The public's need for the pipeline allowed the state to force him to let the lease but CP wasn't allowed to share or reassign the lease, couldn't have anything protruding from the ground and they could only work on the right of way when access to the ROW was over bare fields(couldn't run on planted ground) unless damages were paid up front. This worked well for them as 10 years after they let the lease CP assigned/shared it with a power transmission company, the transmission company ended up buying another ROW to get around their farm. He said it was worth it to see the look on the line crew leader's face when the Sheriff's Deputy told them to leave the farm or they'd be arrested and their trucks and equipment impounded.

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