Lucrative Mineral Rights Driving Force to Find Rightful Heirs

- Lucrative Mineral Rights Driving Force to Find Rightful Heirs

Tuesday, August 30, 2011
Knight Ridder/Tribune Business News
by Jeremy Boren, The Pittsburgh Tribune-Review

Imagine winning the lottery without buying a ticket.

It was much like that for Glenn Pore when the Fayette County retiree accepted an energy company's offer to pay him and 10 relatives thousands of dollars to lease mineral rights beneath farmland his ancestors plowed a century ago.

"I was shocked to find out that I had any oil and gas rights," said Pore, 77, of Fairhope. "Remember, I don't own the land."

That doesn't matter.

In Pennsylvania, property owners can sell surface property but retain control of minerals. That includes natural gas trapped in the mile-deep Marcellus shale formation that was out of reach until the technology behind hydraulic fracturing evolved enough to extract it.

Mineral rights stick to the branches of a family tree no matter how many times the surface property sells. The rush to make money from the lucrative gas reserve includes a cadre of genealogists, title experts and landmen the energy companies hire to hunt down living heirs of last century's business-savvy relatives.

"They were old-time farmers, and they owned a bunch of land between Perryopolis and Arnold City," Pore said. "I thought they never left me anything, until this."

Pore's share, passed down from his great-grandmother, amounted to 5 percent, netting him $2,300 for a five-year lease but potentially much more from 14 percent in royalties if the firm drills a productive well. He plans to pass on the lease in his will so it can benefit his two children and six grandchildren.

"People are either really excited or really skeptical," said David Szuhay of Szuhay and Associates, a Robinson-based consultant to oil and gas companies. "When I call, I try to quickly mention great-grandpa Joe Flanagan, and if that name clicks, they're listening."

The larger number of eligible descendants, the smaller their shares.

"We've had cases that have gone down to 1/512th of a share," said Lester Greevy, a Lycoming County lawyer who specializes in estate planning and elder law. "They had a family tree that was eight feet long."

Finding family members spread across five or six generations comes with high stakes.

Relatives can sue an energy company for millions of dollars if it drills a well and takes natural gas without permission from everyone who owns a portion of the mineral rights.

"There is a line of cases in Pennsylvania where if you take somebody's gas, and you don't have a lease with them, they can become a partner in the well," said Harry Klodowski Jr., an attorney in Pine. "They certainly don't want to give them 50 percent of a well, when it could be 18 percent."

A typical title search before a home purchase goes back 60 years, said John Ward, a Greensburg attorney. Oil and gas searches reach back to about 1860, the year Abraham Lincoln was elected president.

Ward said drilling companies want to make deals quickly before regulations or scrutiny threaten profits. He advises clients to ensure firms accept responsibility for tracking down relatives and agree to pay royalties even if someone isn't found.

In 2006, state lawmakers enacted the Dormant Oil and Gas Act to address the problem of missing heirs. It allows the missing person's share to be put into escrow after a rigorous search.

"I like to think of ourselves as genealogists in reverse," said Dave Fittros, owner of Identifax Research Service in Clarksburg, W.Va., who works for energy companies. "Genealogists start with you and go backwards. We start with someone in 1894 and come forward."

Fittros' firm checks cemetery records, marriage certificates, death notices, genealogy websites, deeds and many other records to find family members. In one case, it took 2 1/2 years to find a man with the last name of White who moved as a child from West Virginia to California and was the sole heir to a natural gas well that later generated up to $20,000 a month.

Generally, people work with a genealogist to learn about family roots for religious reasons, medical issues or simply because they're proud of their heritage, said Elissa Powell, owner of Powell Genealogical Services in Marshall.

Searching for heirs who might benefit from an ancestor's mineral rights has created business opportunities for her and her industry as the Marcellus shale boom grows.

"That's the glamorous side of it," Powell said. "I enjoy the thrill of the hunt."

Szuhay of Robinson said energy companies typically go to the trouble of dealing with so many heirs because the cost of routing a mile-long horizontal drilling operation around a property can be high. Those who refuse probably won't get another chance, he said.

He advised family members to sign with large companies capable of drilling wells and generating royalties, rather than taking a high-dollar, up-front payment from an investment firm.

"There is so much work that goes into it before a well can be drilled," said Szuhay, whose 25-year business grew from a one-man operation to 60 employees and four offices thanks to Marcellus shale. "We want families to be happy they signed a lease."

(c)2011 The Pittsburgh Tribune-Review (Greensburg, Pa.). Distributed by MCT Information Services.

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EXCO Resources Announces Expiration of Shareholder Rights Plan

- EXCO Resources Announces Expiration of Shareholder Rights Plan



Aug 22, 2011

EXCO Resources (NYSE:XCO) announced that its Board of Directors has determine to accelerate the expiration date of its shareholder rights plans from the close of business on January 24, 2012 to the close of business on September 30, 2011.

In January, the company adopted a shareholder rights plan at the direction of the Special Committee of the Board of Directors to enhance the ability to conduct a thorough, deliberative process of exploring the Company's strategic alternatives.

In light of the recent conclusion of the strategic review process, the Board determined that parties who had also previously entered into a confidentiality agreement containing standstill provisions in connection with the strategic review process will be afforded the opportunity to enter into new agreements that would permit the purchase of additional shares of the company's common stock.

The new standstill agreements would expire on September 30, 2011.

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Total Awarded Tanzania Tanganyika O&G Rights -TPDC

- Total Awarded Tanzania Tanganyika O&G Rights -TPDC

Tuesday, August 16, 2011
Dow Jones Newswires
by Nicholas Bariyo

Tanzania's state oil company, Tanzania Petroleum Development Corp., has awarded rights to explore for oil and gas in its Lake Tanganyika Rift Basin to France's Total E&P Activities Petrolieres, with further negotiations and details on a production sharing agreement to follow, TPDC announced Tuesday.

"Total has shown itself to be able to comply with the minimum work commitment and has superior technical as well as financial capability over the other bidders to undertake exploration in the Lake Tanganyika North area," TPDC said. Total beat at least four other companies.

The Lake Tanganyika Rift Basin is part of the western arm of the East African rift valley, where at least a billion barrels of oil have been discovered in neighboring Uganda.

The Lake Tanganyika rift basin is divided into two blocks. Total will operate the northern block. The Southern block was awarded to Australia's Beach Energy in 2008.

Next year, Tanzania will open another bidding round for at least 13 blocks sitting between 1,200 meters and 3,500 meters of water depth off its coast in the Indian Ocean.

However, in recent months, licensing and exploration activities off the Tanzanian coast have been overshadowed by disputes between mainland Tanzania and the semi-autonomous archipelago of Zanzibar over the control of oil and gas in around five blocks near the isles.

Currently, Tanzania has licensed 12 deepwater blocks and recent exploration works have encountered at least 7.5 trillion cubic feet of natural gas. The country is yet to discover commercial oil reserves.

At the moment, there are no production projections Tanganyika project since no discoveries have been made, and formal exploration has yet to commence.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Property, Mineral Rights In Conflict

- Property, Mineral Rights In Conflict

Wednesday, July 06, 2011
Knight Ridder/Tribune Business News
by Ry Rivard, Charleston Daily Mail, W.Va.

In a case that may give West Virginia landowners a stronger bargaining chip in dealings with natural gas companies, a Marion County man is suing two of the state's largest gas producers to pay up or get off his land.

Richard Cain argues that gas producers don't have a right to put large Marcellus shale wells on his land in order to get at gas on his neighbors' property. If Cain prevails, it could become more difficult and expensive for gas companies to place multi-acre Marcellus well pads.

David McMahon, a lawyer who co-founded the West Virginia Surface Owners' Rights Organization, filed the lawsuit last week in Marion County Circuit Court. Cain is suing XTO Energy, a division of Exxon Mobil, and Glenville-based Waco Oil and Gas.

The lawsuit argues XTO can't take over up to 36 acres of Cain's 105-acre property just to put in Marcellus shale wells. The plans make Cain, a 61-year-old farmer and crane operator, "heart sick," McMahon said in a telephone interview last week.

Cain bought the land in 1989 to eventually give to his children. But he only owns the top of the land -- more than a century ago, the mineral rights had been sold off.

The law gives mineral owners the right to come on a surface owner's land to get at coal, gas or oil beneath. Cain doesn't dispute that companies can use his land to get gas from beneath his 105 acres or even from the other 33 acres near him that were part of an original 138-acre tract.

But Cain argues the law doesn't give XTO or Waco the right to use his land as staging area for several large well pads that will drain gas from hundreds and hundreds of acres around his property that the companies have the mineral rights to.

The companies "do not have any rights at all to use his surface to drill horizontal wells to, or to explore for or produce gas from, any neighboring mineral tracts," the lawsuit reads.

A spokesman for XTO said the company does not comment on pending litigation. Waco did not return a phone call Friday afternoon seeking comment.

Cain's case arises mostly because of a change in technologies. Traditionally, drillers were using vertical gas wells with a relatively small footprint. These vertical wells were like straws and didn't draw gas from very far away.

But now drillers are building pads with several acre footprints and wells that run horizontally underground for nearly a mile apiece. Cain's case is testing whether these horizontal wells should be treated differently in the eyes of the law.

According to the lawsuit, XTO has received approval for one 12-acre well pad on the southwest corner of Cain's land. From it, at least three and up to six horizontal wells will be drilled underground.

XTO plans to put two more pads on his land. If the two pads disturb the same 12 acres as the first one, nearly 40 percent of Cain's land will have been taken without his permission.

None of the underground wells on the first well pad will drain much of Cain's gas, according to the lawsuit. Instead, the three wells will travel underground away from the corner of his land for 5,500 feet, 4,600 feet and 3,300 feet.

Even though XTO may be getting little gas from Cain's property, there could be advantages to its putting wells there. Companies drill down nearly a mile before they turn horizontally through the shale formation from where they get gas. These vertical legs also need room, though, because they slope a bit before become horizontal and run through the shale -- so moving the well pad on the surface even slightly can hurt companies by giving them less access to the profitable gas.

McMahon alleges XTO is shifting the burden of the multi-acre well pads to Cain's property.

If Cain prevails, companies that don't own surface rights will have to spend more time negotiating.

Plus, there's the cost. Under state law, the companies have to pay surface owners for lost income, expenses and damages. But McMahon said the formula in law isn't enough for the loss Cain faces.

"I think that the value shouldn't just be what it's worth to the seller, but what it's worth to the buyer, who is the driller in this case, and I think it's $25,000 a well in this case to the buyer," McMahon said.

The lawsuit also gives a look at the dealings between reluctant surface owners and companies eager to drill.

XTO began efforts to use Cain's land in June 2010, according to the lawsuit.

Cain "delayed as much as he could" to see if lawmakers would pass new rules in Charleston that could clarify or even add to his rights. They didn't.

An XTO agent didn't give Cain any say on where the company would locate its wells or its access roads. But, according to the lawsuit, an agent suggested XTO could pay Cain several thousand dollars for each pad -- the highest offer being $12,000.

An XTO agent also told Cain, "We will leave you a little," the lawsuit said.

On April 5 of this year, Cain sent XTO a letter that read, "You do not have permission to enter this property" to develop horizontal wells that would primarily take his neighbor's gas.

On April 14, XTO replied that they didn't need his permission.

When Cain went to his land April 17, he found part of his property had been cleared and his timber had been cut down.

Copyright (c) 2011, Charleston Daily Mail, W.Va.

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Landowners Lose Cash, Rights in Some Drilling Deals

- Landowners Lose Cash, Rights in Some Drilling Deals

Tuesday, June 21, 2011
Vindicator, Youngstown, Ohio
by Karl Henkel

Gas and oil drilling is a quickly growing industry, but Mahoning Valley landowners looking to capitalize should proceed with caution, according to a local lawyer and a nonprofit oil and gas leasing organization.

Many oil businesses, including Oklahoma City-based Chesapeake Energy Corp., one of the largest oil companies in the U.S., are using a newer tactic which, while perfectly legal, potentially could cost landowners thousands of dollars.

The most popular oil or gas drilling agreements -- the kind signed with Columbiana County residents -- are giving way to a new strategy: mineral-rights purchases.

Instead of lease agreements, which could net landowners thousands of dollars a month plus royalties, a mineral-rights purchase would forfeit land rights and any royalties, said Alan D. Wenger, an attorney for the Youngstown law firm of Harrington, Hoppe & Mitchell.

Wenger helped draft an April contract between Chesapeake and the Associated Landowners of the Ohio Valley, a nonprofit organization that seeks to educate and protect landowner rights.

Potential royalties are as high as 15 percent to 20 percent in the Mahoning Valley.

Wenger said the difference between signing leases, which under Chesapeake are often five-year deals with a potential three-year extension, and a mineral-rights purchase amounts to thousands of dollars per acre, per month.

The mineral-rights purchases are generally one-time payments of $2,500 an acre.

"Deciding how to benefit from potential mineral development is a personal decision," said Scott Rotruck, vice president of corporate development for Chesapeake. "Some risk-tolerant mineral owners prefer to lease their minerals, potentially receiving a bonus payment and then royalty payments over time, while others who are more risk-averse prefer to sell their mineral rights outright and receive their compensation up front."

Wenger said oftentimes it won't be a large oil company that tries to purchase mineral rights; a smaller company such as Oklahoma City-based MC Mineral Co. LLC, which is actually a subsidiary of Chesapeake, would be the purchaser.

By acquiring mineral rights, the oil company becomes the beneficiary of any royalties negotiated under a previously-signed lease, which equates to about 12.5 percent.

"Given the shale developments of the last year around here, the companies that are actively exploring for shale development or speculating and trying to get rights are trying to take advantage of existing leases," Wenger said.

MC Mineral, in a letter to a Mahoning County resident that was acquired by The Vindicator, clearly states it "is interested in purchasing, not leasing" oil and gas minerals.

One problem though, said Bob Rea, president of ALOV, is that landowners will lose control of their property.

"They can put a drill wherever they want and they have no recourse," Rea said. "If you sell mineral rights, they have full access to your property."

And selling mineral rights potentially could decrease land and property value.

Patti Mika, Real Living real-estate agent, says it may be too early to tell the true impact on values. Mika said she recently sold about 50 acres to owners who think the land will eventually net a large reward, but that normally homeowners aren't interested in owning mineral rights.

"People that want that house, it's an extra bonus if they have the mineral rights because they get a royalty," she said.

Landowners who know they have current leases with other oil companies have a couple of options.

They can try to get a dormant lease legally terminated. It's not easy and the process can vary depending on the terms of the lease. Some agreements state that if an oil well becomes dry, the lease terminates, but others state that as long as oil companies continue to pay the amount outlined in the agreement, the contract remains valid. A lease can even continue beyond its current term. It's called "held by production," Wenger said.

In the case of mineral-rights ownership, if it's been more than 20 years and a landowner gives a 30-day public notice, an affidavit can be filed to take back mineral rights. If the gas or oil company responds within 30 days, the next step is likely a lawsuit.

In either scenario, Wenger said most landowners don't understand the differences between leasing and selling, the latter of which is significantly more beneficial to the gas or oil company.

"They're really kind of playing into the greed or the need for cash," Wenger said. "Or they're trying to get the folks that have acreage around here to sell it for what looks like a nice piece of cash."

Copyright (c) 2011, Vindicator, Youngstown, Ohio

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Justice Dept Claims EPA Did Not Violate Range's Due Process Rights

Justice Dept Claims EPA Did Not Violate Range's Due Process Rights

Tuesday, May 10, 2011
Fort Worth Star-Telegram, Texas
by Jack Z. Smith

The Justice Departments contends in court papers filed Monday that the Environmental Protection Agency did not violate Range Resources' constitutional right of due process when it issued a Dec. 7 emergency order against the company related to methane contamination of two residential water wells in Parker County.

Range's due-process argument is "without merit," the department said, arguing that the Fort Worth-based natural gas producer "seeks to curtail the EPA's emergency powers" under the federal Safe Drinking Water Act "in a manner that would seriously harm EPA's ability ... to address risks to underground sources of drinking water and public water systems."

The department filed a 31-page brief in a Dallas federal court where Senior Judge Royal Furgeson is considering a Justice Department complaint, filed Jan. 20, contending that Range failed to comply with three of six provisions in the EPA order. The department is asking Furgeson to deny Range's motion to dismiss the complaint.

Range has also filed an appeal with the 5th U.S. Circuit Court of Appeals in New Orleans.

The department said Range is entitled only to a hearing on whether it complied with the emergency order and "whether any civil penalties should be assessed." Fines could be $16,500 per day per violation.

In its Dec. 7 order, EPA said Range "caused or contributed" to the methane contamination of the water wells, likely from two nearby Range gas wells. Methane is the chief component of natural gas.

Range's wells were drilled more than a mile deep into the Barnett Shale, far below the water wells, which are roughly 200 feet deep.

Range spokesman Matt Pitzarella said late Monday that the company is reviewing the Justice Department's brief and that its "position remains the same": that it did not cause the water wells' contamination.

Range argues that the EPA's findings represent "sheer guesswork" based on "threadbare-thin" reasoning. It noted that EPA enforcement official John Blevins, who signed the emergency order, later backtracked somewhat, saying in a sworn deposition that Range "may" have caused or contributed to the wells' contamination.

Range argues that "there is 5,500 feet of the earth's strata separating the bottom of the private water wells from the subsurface horizontal sections" of its gas wells. The company contends that the EPA "does not even set forth a theory how gas could migrate from Range's wells to the aquifer."

The Texas Railroad Commission found March 29 that the Range gas wells did not cause the contamination. Its members said they agreed with its staff hearing examiners, as well as with Range and its consultants, that the gas in the water wells likely migrated from the shallow Strawn geological formation, into which some gas wells were drilled in the early 1980s.

Copyright (c) 2011, Fort Worth Star-Telegram, Texas. Distributed by McClatchy-Tribune Information Services.

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Unclear Ownership of Mineral Rights May Hurt Ohio's Revenue Hopes

Unclear Ownership of Mineral Rights May Hurt Ohio's Revenue Hopes

Monday, May 09, 2011
The Columbus Dispatch, Ohio
by Spencer Hunt

Plans to make millions of dollars by opening up state parks to drilling could be limited by the relatively small amount of natural-gas rights Ohio actually owns.

Of the 115,300 acres of state parks, the Ohio Department of Natural Resources estimates that it owns the gas rights for 34,590 acres. That's less than one-third of the state park land that could be opened to drilling if lawmakers approve one of several proposals.

In many cases, the state doesn't know who owns the natural-gas rights, said Gene Wells, real-estate administrator for the Ohio Department of Natural Resources. Access to natural gas is covered by mineral rights.

"Some of these lands were purchased in the 1920s," Wells said. "It was not an issue back then to clearly identify what our mineral interests were."

It's definitely an issue now.

Eager to tap natural gas in the deeply buried Marcellus and Utica shale deposits in Ohio, energy companies are offering landowners as much as $1,500 an acre for the mineral rights. Gov. John Kasich and Natural Resources officials say that the proceeds from drilling would help whittle down a $560 million maintenance backlog at state parks.

Landowners lease access to the mineral rights and collect royalty payments from any gas the wells produce.

But if the state doesn't own the rights, it can't make any money.

In many cases, there are old leases that give companies "surface access." This could force the state to allow drilling despite having no mineral rights or chance of royalties.

Wells and Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, said leaseholders could argue that they have the legal rights to drill in some of the state's parks right now.

"It's always been the case that that possibility existed," Stewart said.

Environmental advocates who oppose such drilling say that fact raises a red flag.

"Drilling in state parks is going to make more headaches than money for the state," said Jennifer Miller, spokeswoman for the Ohio chapter of the Sierra Club. "It's just a plain bad idea."

Some of the mineral-rights owners are well-known. Wells said the Army Corps of Engineers holds the rights to thousands of acres, mostly for parks centered on reservoirs, including Alum Creek State Park in central Ohio.

Wells said the federal agency has told him it will not allow drilling. Corps officials did not return calls for comment.

Columbia Gas Transmission Corp. holds leases on much of the mineral rights beneath Mohican, Malabar Farm and Hocking Hills state parks. The company currently uses old wells in the parks as storage sites for natural gas, Wells said.

In an email, the company said it has not subleased rights to drill into the Utica shale beneath any of its storage sites at state parks. The company wrote that it has subleased mineral rights beneath natural-gas storage areas across the United States to oil and gas companies.

In many cases, Wells said, Natural Resources doesn't know who holds the mineral rights or what lease agreements might still apply to sites. To find out, the state would have to perform title searches in county recorder offices statewide.

For example, the state owns the surface rights to 627.5 acres in Tar Hollow State Park, but it has no idea who holds the mineral rights.

"On a case-by-case basis, we'd have to look at the (ownership) history and go from there on what we would allow," Wells said.

Most of the mineral rights that state parks officials have confirmed are concentrated in Salt Fork State Park in Guernsey County. The 20,756-acre state park is surrounded by oil and gas wells.

It's unclear how much money the state could make if it opened state parks to drilling, but Stewart said the income would be substantial.

"It is 34,000 acres," he said. "That's a lot of acreage."

Sen. Keith Faber, a Celina Republican who co-sponsored one of the bills that would allow drilling on public lands, said he would support drilling no matter how much the state stands to make.

"Just because the state doesn't get the money, you shouldn't limit the drilling," said Faber, the second-highest-ranking Republican in the state Senate. "Ohio still benefits from a vibrant oil and gas industry and from the jobs that are created."

Jack Shaner, a lobbyist with the Ohio Environmental Council, said the risks of pollution and ecological harm outweigh the potential economic benefits.

"I think most Ohioans would be outraged to learn that the state may not be able to control what goes on in our parks," Shaner said.

"Instead of figuring ways to allow the industry to scheme their way into our parks, the door should be firmly closed."

Copyright (c) 2011, The Columbus Dispatch, Ohio. Distributed by McClatchy-Tribune Information Services.

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