OXFORD – Oxford Land Group President Bryant LaTourette opened a recent educational forum on natural gas by encouraging the 200-plus audience of landowners to “make things happen” in the Marcellus Shale.
“Some people wonder what happened, some people see things happening and there are those who make things happen,” he said. “We’re here to make sure everybody wins and makes a top percentage of the production.”
The coalition, like many others in the Appalachian River Basin, formed last year shortly after it was revealed that the Marcellus held exponentially more natural gas than was previously known. Comprised of 350 landowners representing approximately 24,000 acres, its mission is to draw up and negotiate leases and easements that protect members’ interests and help them to achieve a fair bonus and royalty price.
Unlike in other parts of the New York where horizontal drilling into the Marcellus is on hold until state environmental regulations are clarified, drilling into at least four other lucrative formations here, and, in particular, procuring easements for a major pipeline, continue in full swing in Chenango County.
The Oxford Land Group’s typical easement, for example, would have five pages added in order to make it worthwhile for the landowner. “Many people are signing easements and leases without legal counsel, in part, because they can’t afford it. We are pushing for our lease to have Norse Energy pay our attorney’s fees,” said LaTourette.
Through its subsidiary, Nornew Inc., Norse Energy of Norway plans to complete a pipeline in 2010 that would run south through Chenango County to the Millennium Pipeline in Broome County. The main line would travel from Plymouth to Preston, Oxford, Coventry and Afton. Tributaries would spider off of that to wells in other towns. Landowners up and down the line have been approached for easements and many have signed.

Easements
Typical contracts most likely won’t have the protections landowners need, according to T. Mary McDonald, an attorney with the law firm of Fix Spindelman Brovitz & Goldman and one of four speakers at the event.
First and foremost, she said it’s possible that a company, such as Norse, might in the longer term transfer its easements to another company. Easement agreements should contain language that assures payment before such a transaction takes place or assures that the new company will pay. “Your relationship was with Norse. You might not feel as good about your agreement with the new company,” McDonald said.
The attorney also said to specify only one pipeline per easement and that the right-of-way shouldn’t be used for other reasons, such as storing natural gas. In addition, knowing exactly where the pipeline is on the property, and having your lawyer know, will protect current and future plans for the land. “Don’t let it cover your entire property,” she said.
Easements should have a defined termination plan and landowners should assure that regular inspections of the line continue. “Companies might stop doing that, which would signal the beginning of abandonment procedures,” said McDonald.
Contracts should also protect landowners from liability claims from a possible pipeline leak or explosion.

Wealth Management
Coalitions and landowners have been focused on compulsory integration, leases and easements of late, but how to manage future wealth and the accompanying tax implications from production are things that are coming soon. LaTourette said people could be receiving checks for easements already negotiated and signed.
NBT Bank Vice President and Trust Officer Dave Cahill reminded the audience that money received from leases or royalty payments is taxable as ordinary income. Each situation is different and could pose additional risk as well as potentially more reward. “Be sure you set aside the tax dollars for that,” he said.
Cahill described the differences between wills and living trusts and how to incorporate annuities into long-term investment portfolios. He said about 75 percent of Americans do not have a will at all, but should.
The subject of mineral rights and subsurface rights, and how they will be taxed under New York State tax law, was discussed. According to James C. Daniels, a certified public accountant and managing partner of Davidson Fox & Company, landowners should not have to pay property tax on production, only the natural gas company itself would pay.