The Southern Tier of New York and the Northern Tier of Pennsylvania have recently seen an unprecedented surge in gas leasing and gas exploration. Gas companies are interested in tapping into substantial gas reserves in the Marcellus shale formation that lies under our region, utilizing new hydraulic fracturing (“Hydro Fracking”) and horizontal drilling technologies.
Before a gas company can obtain any gas, they must first sign a lease with a landowner that will allow them to acquire the gas lying beneath the surface. However, once an oil and gas lease is recorded in the County Clerks’ Office, it can have an adverse impact on a landowner’s ability to sell or mortgage their property. A gas lease and the potential for a gas well raise additional legal issues, such as protecting the landowner’s water supply, securing payment of royalties and other contractual issues. It is imperative that a landowner obtain competent legal advice prior to signing an oil and gas lease.
The Hinman, Howard & Kattell Oil and Gas Practice Group has been actively involved in these developments, representing individual landowners, landowner coalitions, businesses, and not-for-profit organizations in lease negotiations. Our attorneys have negotiated and reviewed oil and gas leases on behalf of our clients for over 100 years and remain at the forefront of negotiations with oil and gas companies in the execution of leases to this day.
Oil and gas leasing also has the potential to impact landowners who choose not to sign a lease. Landowners who choose not to sign an oil and gas lease can be faced with involuntary inclusion in a drilling unit and the issue of “compulsory integration.” Hinman, Howard & Kattell has provided representation in compulsory integration hearings and has the experience to properly advise the unleased landowner on this issue.
Mortgage lenders have watched these developments with concern as they try to gauge the impact of gas leasing, severed mineral estates and drilling on their loan portfolios. We have helped our banking clients develop policies to address their concerns and review their customers leases on a case-by-case basis to assist them with the decision of whether or not to place a loan on property subject to a gas lease.
For many individuals and entities, the areas of tax and estate planning also coincide with oil and gas lease concerns. Hinman, Howard & Kattell brings exceptional depth to these areas with its ability to assist individuals and businesses in addressing the tax and estate planning consequences of oil and gas lease activities. Through the creation of trusts, limited liability companies, and other planning vehicles, we are able to limit potential liability of the landowner while passing on wealth created by oil and gas royalties to future generations. And if the situation calls for it, we also have experience in severing mineral estates from the surface of the land.
A gas lease can raise a number of additional legal concerns. The Oil and Gas Practice Group at Hinman, Howard & Kattell is able to draw upon the firm’s experience to assist clients with any additional consequences of leasing and exploration activity.