Drilling Down

Attorney Outlines Options as Leases Near 5-Year Mark

YOUNGSTOWN, Ohio – Landowners who leased their mineral rights but have not had any drilling activity may be able to improve their positions as the end of their leases’ primary terms approach, says Alan D. Wenger, chair of the oil and gas law practice group at Harrington, Hoppe & Mitchell Ltd.

Wenger noted that thousands of leases local property owners signed with energy companies in 2011 and 2012 are expiring – often at the five-year mark – a key milestone at which many landowners can take steps to establish that the lease is terminated.

“There are several reasons a landowner may want to act on provisions in these leases or in the law that facilitate their termination when certain conditions prevail,” Wenger said. “For one, an expired but unterminated lease could restrict the owner’s ability to sell or mortgage the property.

“Also, if another developer becomes interested in the oil and gas rights, negotiations could be easier with an expired lease out of the way. Clear title might also give the landowner better leverage if the original lessee were to express renewed interest,” he said.

“Finally, just taking the affirmative step of declaring the lease expired might spur the lessee to offer some payment to extend the lease in hopes of an industry rebound.”

Wenger wrote a memo to landowners with leases negotiated in 2011 and 2012 based on a pattern set by the Associated Landowners of the Ohio Valley and Standing United Really Excels, both HHM clients. The document covers options landowners should consider, based on situations defined in their leases with Chesapeake Energy, BP America and other energy companies.

The memo urges caution because of the high stakes involved.

“You are highly encouraged to contact legal counsel familiar with these issues with any questions, and to seek experienced legal guidance as to preparing notices, affidavits or other steps involved,” Wenger wrote.

Harrington, Hoppe & Mitchell Ltd. is an Ohio law firm with offices in Youngstown, Warren and Salem. The firm provides legal solutions to corporations, other businesses, nonprofit organizations, government agencies and individuals.

SOURCE: Harrington, Hoppe & Mitchell Ltd.

Published by The Business Journal, Youngstown, Ohio.