A
number of myths exist, either passed off as truth by unscrupulous or
poorly trained landsmen or through misunderstandings among land owners
themselves. Additional misrepresentations can be found on sites listed
in the "Links" page of this website. |
 |
The truth is negotiating with a group is comparive to one stop shopping. Landsmen are more likely to disuade you from staying with a coalition because getting you to sign their lease guarantees their next paycheck.
MYTH: Your bonus amount is based on the value of your property. 'Other folks' are getting bigger bonuses because their real estate is worth more.
The signing bonus you receive is paid per acre and depends only on the size of your lot and the percentage of mineral rights you already own. The higher the signing bonus per acre negotiated for the whole neighborhood, the more everyone in the neighborhood gets. This includes people with only 50% mineral rights or partial mineral rights. That's why we need to negotiate as a group.
MYTH: Those people getting higher bonuses are paying money to lawyers to get it.
If the gas company is willing to pay a certain amount, it makes no difference how the land owner spends it – on a lawyer or otherwise. They are either willing or not willing to pay a certain price. That said, Empire Energy Consultants LLC, is working with Joseph Allen, a local Ithaca attorney with extensive experience in gas contracting. While we believe the “deal” – both monetary consideration and contract provisions that we will recommend – will be in the Coalition’s members’ best interests, we encourage anyone who is so inclined to have the contract reviewed by his or her own attorney.
MYTH: You must sign our developer's contract now or you will get nothing.
The landmen want to get as many people to sign quickly before they find out there’s potential for a better deal. The more people who sign for a lower price, the less leverage a coalition or neighborhood group will have. Three or four companies usually bid on the same property once it becomes organized and they understand that they are in a competitive bidding situation. Just because you do not sign with a landman at this moment does not mean you will never be able to lease your mineral rights.
MYTH: You won't get a better deal from anyone else; we control offers from the major players.
Not only is this statement untrue, it is potentially illegal for landmen to promulgate this false information. Oil and gas programs are, in fact, securities transactions governed by the Securities and Exchange Commission and New York securities regulations. Note that some individuals or groups buy mineral rights from the land owner at one price with the intent to sell them to a “major player” at a higher price. And if they control enough property, they will have the wherewithal to do so. The Coalition is attempting to preserve that higher price for the land owner.
MYTH: Our signing bonus of $xxx is a reality right now. The Coalition's potential offers are just pie in the sky.
Until we have an agreement in hand, we can make no promises about what we will be able to provide in terms of a signing bonus or royalty. However, in no instance where neighbors have worked together as a group (New York, Pennsylvania, and Texas) have we heard of the group ending up with less money or a more restrictive contract than was offered to individual land owners. In fact, the opposite has proven true, time and time again. The bargaining power of the coalitions has more often than not benefited those who waited by virtue of increased competition, higher signing bonuses, higher royalties, shorter contract periods, and more generous lease provisions.
If you join our group, we will not promise you a specific amount of money or make you sign a lease contract until we are sure from the companies exactly what will be paid and when. After the negotiations are complete, you will be given the opportunity to sign a legally binding contract. But you do not have to sell your mineral rights if you don't want to.
Getting organized, developing our own contract, sending it out to bid, receiving and reviewing responses and then negotiating the fine points takes time. While we expect to have this nailed down well before the end of the year, we understand that some people need the up-front money now. We respect the decisions of land owners whose first responsibility is to themselves and their families.
MYTH: These signing bonuses have exploded and you’d better hop on the bandwagon because the companies will be lowering them.
No-one can guarantee that the bonuses and royalties will continue to rise. They directly correlate to the gas companies’ profitability, both experienced and expected. It is in no-one’s best interest to see a company go belly up. But it is in the land owner’s best interest to secure as fair a deal as possible. We are convinced that the increasing cost of natural gas coupled with improved technology to extract it from shale and the existence of infrastructure to transport gas through our region will only increase the value of our minerals to the companies and will result in higher payments to land owners without unduly impacting the companies' profitability. In fact, by working with land owners as a group, the gas companies can lower their expenses by eliminating the middle men and by having fewer lease variations to administer.
MYTH: If you don’t sign our contract, we’ll get it through eminent domain and without paying a sign up bonus.
If the owners of 40% or more of a unit refuse to sign, a gas company cannot use eminent domain (also known as condemnation) to explore or drill in that unit. However, short of gross mismanagement or a lawsuit injunction, there is no likely method to completely prevent all possible drilling in our area. The company only needs a commitment from owners of 60% of the land in a unit to explore and drill. If they pay enough, some land owners will likely sign leases. Should the company develop a productive unit, by law, land owners who do not have contracts will still receive royalties. Once a well has recouped 3 times the cost of drilling, non-participating owners will be notified that they have 3 options for receiving the royalty. Details of this feature are beyond the scope of this site but should there be enough interest, we can develop a page detailing the options.
Note, also, that if a certain percentage of land owners agree to store gas or oil on their properties, the company can legitimately request access to additional lands via eminent domain.