NORWICH – A group of 120 hopeful landowners turned out Wednesday evening for a Chenango County Farm Bureau forum to learn how to negotiate profitable leases for natural gas that may or may not lie beneath their property.
During the gathering, Gary Kuehl, who owns 91 acres in Smithville, said he had been approached that morning by an oil and gas company. “After what I learned here tonight, I’m glad that I didn’t sign anything,” he said.
The event, held at Norwich High School, was specifically directed at landowners as opposed to oil and gas company representatives. When two of a handful of executives present in the auditorium attempted to interject during the nearly three hour discussion, they were asked to sit down.
“This is not a debate. ... We are here to protect the landowners’ rights. ... This is not your forum and you may not speak,” Southern Tier attorney Chris Denton said.
Denton, one of three speakers at the informational meeting, began studying mineral rights law in 1998 when large quantities of natural gas were discovered in Trenton/Black River reservoirs in Chemung County. It is estimated that the natural gas industry has invested approximately $200 million in New York, primarily to develop faults in the Finger Lakes and south central New York.
Denton asked the audience for a show of hands of those who had entered into leases already. About 12 people put their hands up. When asked, nearly 25 indicated they had turned down a natural gas company’s attempt to lease their land.
Denton said leasing, or entering into a compulsory integration lease with adjacent landowners, can be advantageous to anyone approached depending upon their particular situation. However, in both cases, he suggested hiring an attorney experienced in the industry.
“Whatever you do, you need an attorney to determine what’s in it for you. Otherwise, the companies are going to skate rings around you. ... A lease is as dangerous as a deed. It is not a contract. It is a transfer of possession. You can only own the gas when you possess it,” he said.
Also, refinancing mortgages or making capital investments or improvements to structures during the period of the lease is prohibited. “You can’t get the bank’s help when there are liens on your property,” he said.
Invited speaker and Chemung County Farm Bureau President Ashur Terwilliger suggested negotiating “every word” in a lease.
Denton attributed the legislative rights that landowners currently have - specifically when approached by companies to participate in compulsory integration leases - to the Farm Bureau’s lobbying efforts back in 2005. “This legislation we are talking about wouldn’t be there to help you without the Farm Bureau,” he said. “They have the landowners’ and farmers’ rights at heart and have taken the lead on this issue.”
“You people are lucky,” Terwilliger said. “When this thing started, we knew zero. We knew nothing. There’s no question that New York state’s farmers are hurting. Maybe this could turn it around for you, but don’t just take what they offer. There is no state law limiting the amount.”
Denton, Terwilliger and Matt Brower, from the New York State Agriculture and Markets, offered the following suggestions:
1) Don’t accept a lease with a term limit for more than 3 years.
2) Don’t lose track of the royalties by concentrating on the signing bonus, which could be anywhere from $200 to $700 per acre.
3) Don’t take 12.5 percent offered for royalties. Ask for 18.75 percent.
4) Lease one layer at a time. If they hit at a deep layer, Terwilliger said companies will want shallow wells around it later.
5) Don’t put multiple deeds you may have for your property into one lease. Have a lease for each parcel.
6) Be concerned with your farm’s life sources, such as springs and underwater aquifers that might be affected by seismic testing.
7) Make seismic companies pay for testing and hold them liable for damages.
8) Be there when they light flares and demand free access to data results.
9) Get a drilling fee.
10) Make sure pipes are buried beneath plowing depth.
11) Fill your farm operation’s need for gas.
12) Gas companies are required to cap wells.
Brower suggested that farmers keep as much land in production as possible while natural gas is being explored. Access roads should be fenced in to protect livestock and run in the same direction fields are plowed. He said top soil should be stripped away first and covered away from the brine and other subsoils brought up. “Avoid compaction and mixing,” he said, “and address both surface and subsurface drainage. Prepare for when drainage tile is broken.”
Brower said New York State Agricultural District laws regulates permits and industry experts are available to conduct field inspections. “If you aren’t in an ag district, make sure these protection issues are covered in your lease,” he said.
All three speakers advised landowners who have been approached to be cautious and patient. “Do they need you or not? They’ll pay out if they do. Hold out,” Terwilliger said.
“There is no stampede required,” Denton said.
Following the meeting, Gale Hamstra of South Plymouth said she appreciated the Farm Bureau’s focus on landowners. “This was for us. I’m leaving with a pocket-full of information to go over, so we’ll know what we are doing.” Hamstra said she and her husband had been approached by a natural gas company interested in leasing their 120 acres.
Gary Franklin of Plymouth said his father had been approached to lease his land last summer. “He told them he wasn’t interested, but they’ve been coming back every week,” he said. “He wants to build a house...I wish he had come. He needs to get a lawyer.”