About Bob Von Rhee Expertise How do you know where to drill for oil or gas? How do you accomplish this task? How many people are involved? How much money? What is the chance of success? the economics? Why don`t all oil and gas wells make tons of money? Why do we need oil and gas in our country? How can we tell if a property has any oil or gas potential? Why can`t we believe everything we see on tv or in the newspapers about oil and gas? What rocks contain oil and gas?
Experience 30 years as a petroleum geologist. Began my career with Exxon in West Texas; worked for many smaller independent companies and now own and operate my own production company and geological consultancy.
Organizations American Association of Petroleum Geologists, and Certified Petroleum Geologist. Tulsa Geological Society, Oklahoma City Geological Society Licensed Petroleum Geologist in Texas
Publications American Association of Geologists Web-based "Search and Discovery"
Education/Credentials BA Geology Lafayette College & MS Geology University of Illinois.
Question I purchased a property in Western PA that included the gas and oil mineral rights. There is a well producing gas and paying me royalties. The sellers gave me copies of two leases. One dated in 1923 and one dated in 1983. The 1983 lease was signed one day after the 60th anniversary of the 1923 lease. The 1983 lease has better terms for me, mainly a 200K cu.ft. house gas allocation and exclusion of pooling and storage rights. The company now operating the well bought it in the late 80s. Once I received from them written acknowledgement of my ownership of the mineral rights I inquired about the house gas allocation as they never gave the free gas to the previous owners. When presented with the 1983 lease they disavowed knowledge of it and said that they operated under the 1923 lease. They surmised that the 1983 was probably signed by a speculator.
Can a lease that is more than 80 years old continue to be valid? What options do I have to enforce the 1983 lease? My guess is that I would need to establish a relationship between the lessee on the 1983 lease and the company from which the current company acquired the well. If my guess is correct how can I go about doing that? Thanks.
Answer First a disclaimer. The expert you need is a Petroleum Landman who is knowledgeable about PA mineral leases and any state statutes and regulations that govern them. I am not a petroleum landman, however I will be glad to offer some observations based on my experience with leases in Oklahoma and Texas.
Simple answer to your question "Do mineral rights leases expire?" YES.
When a mineral owner (lessor) grants a lease to a company (the lessee) the lease always has a term - or a length of time after which the lease will expire unless the company establishes commercial oil or gas production on the lease. The establishment of commercial production - and the subsequent royalty payments to the lessor by virtue of that production - will extend the term of a lease indefinitely until the commercial production ceases. (The royalty checks usually cease at this point) In OK and Tx most leases have a clause that allows a lessor a limited period of time after production ceases to re-establish commercial production (sort of a grace period), but in my experience this is usually only 30 to 90 days.
In some old producing areas like West Texas, and with some very old leases granted in the first quarter of the 20th century when the petroleum industry was in its infancy, some leases were granted with very long fixed terms. There was a very large lease in W. Texas that was granted to Gulf oil with a fixed term of 60 years I believe. At the time (1920's) it was inconceivable that any production would ever last that long. In my experience however, this was the exception not the rule. In Pennsylvania however, tradition might have been different. This is where an regionally experienced Petroleum Landman can help you. And I find it curious that in your situation a new lease was signed one day after the 60th anniversary of the old lease.??? Perhaps the old lease did have a very long, fixed term. Or perhaps it was coincidence.
One other obsesrvation. When the operator of a gas well begins to distribute revenue to royalty owners and other owners in the well, each owner usually signs a "Division Order". There will be a Division Order for every owner in a well. These documents set forth the formal division of revenue for the well. Essentially "what percent of the revenue goes to whom". In my experience, when one signs a division order it represents approval and agreement between the interest owner and the company distributing revenue of the interests and terms under which the owner's getting paid. I suspect this system exists in PA as well as other states.
Here are a few remaining observations.
If the operating company bought the well there should be an "assignment" of the lease to them from the party they purchased it from. The assignment is a legal document that is usually recorded in the County Clerk's office. It establishes the new company as the legal "lessee". Your transaction when you purchased the property would have similarly had a Deed that conveyed to you the mineral rights.
The only way I know of to sort this out is to have an experienced landman, or oil and gas attorney to examine the two leases (1923 and 1983)and render an opinion regarding which lease is in force. If the old lease expired according to its terms, then I would think the new lease would govern the current terms. But there may be complicating factors.
Perhaps someone affiliated with one of the following websites could help you find a landman or O&G atty. The first site is for the American Association of Petroleum Landmen (AAPL). This is the professional association to which most active landmen belong. Although there did not seem to be any information for the public at large, someone there might be able to point you in the right direction.
If I knew the main city in PA where O&G Companies were based, I'd suggest you look in the Yellow pages for an independent landman or O&G atty. This could be risky, so another idea might be to contact this company - Pennaco - whose offices are in Delmont, PA and see if anyone there might assist you in finding professional consulting.
P.S. FYI, many companies are very reluctant to allow lessors to take "house gas" for their own use due to potential liability issues, so don't be suprised if the operating company is very resistant to this. Also, if the production is at a very low rate, they would naturally want to sell as much gas as possible. And if your lease allows only a certain amount of house gas, then the operator will probably require you to install metering equipment on your side to make sure you don't take more than alloted, although 200 mcfd is a lot of gas for personal use.
