The Gasicane Is Gone... continued from front page
At one point during the peak of the Gasicane, I was called by a landowner from West Virginia, who told me that there were so many landmen searching deeds that folding tables were being set up outside of the courthouse to handle the volume of deed search requests.
In 2008 more than 3/4 of a million information hungry visitors and willing members were daily gobbling up, and sharing information about negotiating a natural gas lease and avoiding common pitfalls
At this point in time, the discussions centered largely on; "How high will bonuses go?" and "If I wait longer, will I totally lose out?". Although there was some discussion about how future royalties would be calculated and paid, the main focus was on how much and how soon.
By October of 2008 some landowners in Pennsylvania were able to negotiate up-front bonuses of over $6000 an acre 18% royalties, with non-renewable terms of 5 years or less. (A far cry from the early $25/25%/5yr auto renewed 5yr leases signed early on in 2007.) But like any storm, normalcy returned, thanks to our financial regulators getting caught with their pants down at the end of 2008. I watched one drilling company stock drop from the mid-$60's to under $4 a share in one day. Land that could have been leased for $thousands an acre just a few months before, were now being solicited to lease for $250 an acre, or less.
When It Rains... It Pours...
By spring of 2009 the Anti Fraccing crowd was in full voice. It mattered little that the hysteria being developed was based on "what-if's" instead of empirical data, it was a brute force attack against the very technology that could make a cleaner, abundant energy product readily available to the nation. In the spring of 2009, New York regulations made fraccing almost impossible and promised a new set of regulations to govern fraccing. Shortly thereafter, the Delaware River Basin Commission unilaterally claimed full, regulatory jurisdiction over all the water that feeds into the Delaware River. It too imposed a moratorium on natural gas drilling, with the promise of rules regulating gas drilling by the following summer. (As of today, March 28, 2015, both the NY and DRBC moratoriums are still in effect and no regulations have been released).
Combined with the moratoriums in NY and the DRBC, natural gas prices plummeted from their highs of $14+ in 2007 to current values which have ranged as low as $2 and change. Below the actual cost of drilling a horizontal well, according to some natural gas drilling sources I have spoken with recently. Is it any surprise that companies like Hess have returned leases that they would still owe payments on and are only holding on to leases that were paid up front leases Hess acquired from Chesapeake.
The Landman really wasn't your friend, was he? And neither is the government.
An Old Sage once remarked; "We all see clearly through the spectacles worn on our butts". Many landowners are now realizing that the landman who acted like their best friend and who painted that rosy picture of the potential royalties they might receive was glossing over some very important points. That of deductions.
Deductions are those nasty little clauses (or lack thereof) that enable a company to calculate your portion of the royalty sale at the percentage on your lease agreement and then deduct expenses from that amount. One company, who may still be in litigation is purported to have created a company, which it sold gas to and then, charged itself inflated expenses, which were then passed back to the landowner's royalty payment. One landowner ended up receiving the equivalent of just 3% out of the 12.5% royalty they thought they were going to receive. We created a place where Deductions Can Be Tracked so landowners can see what companies are taking the biggest bites out of their royalties.
While we have tended to look to our government representatives for our welfare, they are looking at us as objects from which to extract more cash to cover their lavish spending habits. Although it doesn't take but a few months to add more taxation to natural gas extraction, it has been years of talking about the rights of landowners regarding natural gas royalties. Today the landowner is in the same untenable position he or she was 8 years ago. It took less time to win WWII than it is taking to protect our own residents, or write unambiguous rules for the process of extracting natural gas.
Together We Stand... Or....
Although the Gasicane has passed, the power of current, factual information networking is now more important than ever before. Most landowners affected by land use regulations reside in rural settings and as those in Upstate New York can attest, the large voting blocks in the urban areas often override the voice of those outside of the cities. That voting block does not consist of generational caretakers of the land and resources consumed by apartment dwellers, oblivious of the realities of land stewardship.
Although we can find innumerable politically divisive issues to argue about, we can stand together on one cause, and set the political fractionalism aside for the most important issue that affects all of us. Our constitutionally guaranteed right to the use of our land.
On that one, single issue we must stand and fight for. When we joined together to network information about negotiating a natural gas lease and overcoming company negotiation tactics we forced the companies to change the way they were doing business. When companies began pulling some shady tactics on how royalties are paid, we have networked that information and enabled those affected to bring those issues to a head. I say WE, because I am just a web developer who has the skills to make this networking website work. It is YOU who make it possible for all of us to quickly assess what is happening around us.
Yes. The Gasicane came, and it went. But the lesson that I have personally taken away from it is that IF we stand together in unity and cover one another's back as a landowner family. We can not only benefit from the use of the resources from our land, but we can, as a unified force, demand representatives who respect our rights equally as important as the rights of those in urban areas.