What would you do? Gas Well

[PA_MIKE]

I was dumb when I purchased my house. I agreed to 200mcf of well gas for 3 years. I should have agreed to lifetime gas. The seller split and kept several acres when we purchased the land. So the well sits on the previous owners property. We were told at the time of purchase verbally that they would agree to continue giving us the gas as long as the well is producing.

Well 3 years is up and she wants to charge me for the gas used in the future. What would you deem a fair price? Keep in mind that she gets it for free.

[rambler]

It'll be her call, it's her gas. What she has to pay for it doesn't matter. It's what you are willing to pay - price your other options, and be prepared with your options when you come to the table.

She was just a better horse trader than you. We all learn as we go through life.

Don't come to the table feeling she owes you anything. You'll only get more frustrated that way.

--->Paul

[copperkid3]

Originally Posted by PA_MIKE

I was dumb when I purchased my house. I agreed to 200mcf of well gas for 3 years. I should have agreed to lifetime gas. The seller split and kept several acres when we purchased the land. So the well sits on the previous owners property. We were told at the time of purchase verbally that they would agree to continue giving us the gas as long as the well is producing.

Well 3 years is up and she wants to charge me for the gas used in the future. What would you deem a fair price? Keep in mind that she gets it for free.

*************************************************
You ask the question in the heading: "What would you do?" But really, do you expect any other answer than the obvious? You stated that YOU agreed to 200mcf of well gas for 3 years, but are now complaining because she lived up to her original agreement and is now saying that it is going to cost you. Was the original agreement in writing? And if so, (which I'm feeling strongly that it was), then where did this "We were told at the time of purchase verbally that they would agree to continue giving us the gas as long as the well is producing".....come from? Certainly not in writing and certainly not part of the "original" deal. This is where a written contract that is drawn up and spelled out in entirety and then checked over by your lawyer would be cheap insurance (as well as cheaper fuel) comes in. In all fairness to your neighbor, she may have meant that once the 3 yrs obligation was up, that the gas would still be available to you.......but now it would cost you. You heard one thing, she said another. Over time, it may have "sounded" like you would continue to get "free gas".......but such cannot be the case; otherwise the agreement at the time of your original transaction would be 200mcf of well gas for the LIFE of the well!!!
Sorry, but I'm with rambler on this one......what she pays or doesn't pay for the gas has nothing to do with the situation; it's what you are willing to pay her for the continued convenience of receiving that gas - vs - what it is going to cost you to find a replacement source of fuel. Nothing more, nothing less. Start doing your homework and then start the negotiations with the neighbor......if you want to that is.

[SteveD(TX)]

Originally Posted by PA_MIKE

I was dumb when I purchased my house. I agreed to 200mcf of well gas for 3 years. I should have agreed to lifetime gas. The seller split and kept several acres when we purchased the land. So the well sits on the previous owners property. We were told at the time of purchase verbally that they would agree to continue giving us the gas as long as the well is producing.

Well 3 years is up and she wants to charge me for the gas used in the future. What would you deem a fair price? Keep in mind that she gets it for free.

At the very least you should be consulting with an attorney and not us. I'd need a whole lots more information before I could even comment, and even then it would be an unprofessional opinion.

[fantasymaker]

I would try to negotiate a lump sum deal for life time gas.You will get a better dealif you are really prepared to walk away from the deal.

[seedspreader]

Yeah, not enough information. You definitely need a lawyer.

Example: Who owns the gas rights on your land?

Legally, when a site is combined (for the purpose of meeting enough acreage) for a gas well, there is usually some consideration with the owner of the well.

Let me explain it this way: My church in Ohio owned 14 acres (almost 15) in Ohio you need at least 20 (could be 25, I don't remember precisely now) so we had to combine with our one neighbor. Then the line had to go through another neighbors land so he got in on the free gas deal and allowed them to place the storage tanks there. The well was on our land, the access drive used 95% of our land and about 5% of the first neighbor.

None of us owned the well and we all had rights to a certain amount of the gas, in perpetuity, it was tied to each our individual mineral rights and conveyed with whoever owned the OGM's.

I am not familiar with PA law, since I am new here, but do you own the OGM's on your property? If so, my bet is a lawyer would be able to argue that the initial contract was not negotiated correctly. Even if she owned it all as one piece and peeled off a certain amount to sell, if the OGM's went with that piece you may be entitled to SOMETHING.

But of course I ain't a lawyer and I don't even play one on TV.

[Michael W. Smith]

I'm confused. You agreed to get 200,000 cubic feet of gas for 3 years (I'm assuming that it was 200,000 cubic feet PER year, not for all 3 years?). Somewhere along the line, then even though you didn't take the lifetime gas, they told you verbally it wouldn't be a problem.

As for the land, was the land all one piece, (you bought a part of that), and they kept the rest? Is the lease or well an old one or a newer one? When you bought the property, did the oil and gas rights come with it or not?

In all legality of the situation, PA law does NOT let a landowner or owner of a gas well sell natural gas to a house. ONLY utility companies are legally able to sell natural gas to customers.

With the set up as is, if something would happen with your house concerning the natural gas, say for instance your house blew up, I think you could sue the person who is selling you the natural gas (even though you agreed to accept the gas, unless you have a written deal saying the gas well owner isn't responsible . . . . . ., but it still gets back to the fact that only gas COMPANIES can sell natural gas to customers.

Not only has the gas well owner set themselves up liability wise (would YOU want to be in their shoes with them selling you natural gas - an illegal act!) the issue now comes up, do you want to inform this person they can't legally sell gas to you, or do you prefer to be quiet and keep getting gas?

To continue getting gas, perhaps you could come up with a plan where you will pay $50.00 / month or $600.00 per year. Regardless that the gas well owner is getting free gas, doesn't mean you should get it for free too.

However, bear in mind, that if/when this person is found out to be charging for natural gas, (and this person isn't a natural gas company), they WILL be fined by the PUC (Public Utility Commission) and I'm guessing at that time you won't be getting anymore natural gas afterwards (unless the person just actually lets you have the gas, but there is still the liability issue.)

I know of what I speak, as my land is leased to a gas drilling company who has drilled 5 gas wells. However, there is an old well drilled years ago that once the production dropped and the company didn't find it "profitable" (in other words they didn't want to be responsible for the costs of plugging it), they sold it to the land owners. We have inherited it. While I could GIVE natural gas to the neighbor from this well of mine that I TOTALLY own, I couldn't CHARGE them for it - legally.

I guess you need to decide if you can live with getting natural gas illegally and if so, how much is it worth to you. (Ask your friends and neighbors how much their gas bill is! And I know both National Fuel and Columbia Gas have just increased their rates.)

And if you aren't okay with it or don't want to pay for it, what kind of new heating system are you going to put in - wood/coal burner, corn burner, pellet burner, outside wood burner, propane?

PM me if you have any more questions or want to discuss anything with me.

[PA_MIKE]

Let me clarify a little:

They split the farm in two. The seller kept the other half.

The well is on the other half.

It was 200MCF per year with me paying for my overages.

We originally wanted lifetime gas. They countered my offer with 3 years of free gas and accepted my low ball offer.

They verbally agreed to supply me with gas after the contract was up, as long as the well is producing.

I received a phone call advising me that I went over my allotment last year and stating that I owed them some money. No problem I mailed her a check.

Now I get a call stating that they want to lease me the additional land with free gas. This was their way around the legalities of charging me for the gas.

I offered them $500 a year. Since I have no use for the land. I can hardly maintain what I have. They said my offer was crazy. I asked them to counter and they said forget it.

I found a bunch of problems with the house that were not disclosed. For example the fridge and hot water tank went out the day after closing. But i did not pursue it.

The well company uses my private lane (owned by me and gated by me) to get the crude that the well also produces. Can I cut their lock off of it? Maybe I can use that as leverage?

I have a indoor wood boiler as a back up. I can heat off of it, but it is a pain in the butt. I was thinking about placing electric baseboard in as a back up. Then placing an outdoor wood boiler next year.

Any thoughts?

[Michael W. Smith]

Okay, I follow so far that the farm got split in two. The question though is do you own the gas rights for your part of the split up farm, or did they just sell you the land and they kept the gas rights?

It should say on your deed whether or not the gas rights come with it. If you don't know, go into the courthouse and look up your property and see if you own the gas rights. (Anyone in the deed and record department or in tax claim should be able to help you.)

The first problem is that you agreed to the 3 year gas arrangement. At that time, you should have done what you could to get lifetime gas. Being that is done and over with, that doesn't matter now. (Yeah, they agreed verbally to continue the gas, but you have no proof.) I'm assuming there wasn't any agreement after the 3 years on what would continue the gas offer.

The fridge, hot water tank, and other problems with the house are pretty much moot points. You bought the house as is. This has no bearing on the gas anyway.

Them wanting you to lease the land and get free gas is probably also a no-no. You really need to check at the courthouse and find the gas lease they signed. Is it an older well (drilled 25 years ago or more) or a recent one drilled in the last 15 years? If it's an old well, they probably get unlimited free gas. If it's a recent well, they probably get so much free gas (are they using gas in the house on their property? Most modern leases are listed as "gas for one dwelling", so if they are using gas and they are letting you use gas, they may be in violation of their contract with the gas company - although nothing will come out of it if they are.)

I have to admit $500.00 a year to lease the land (to get the gas) is a slap in the face. Again, have you talked to your friends and family on what their monthly gas bill is? You are in effect offering them $41.66 / month to heat your house. What it's going to come down to is, how much is it worth to you to continue to get gas? Whatever offer you do though, make sure it's for like a 10 or 20 year lease deal - not year to year unless you want to go through this every year.

No, you cannot use the gas company using your road / land to access the well as leverage. When they leased the land, they have complete rights to access their well. Even if you did buy the gas rights with the land, that won't help you concerning this. Again, does it not say on your property deed something about the gas lease or owning the gas rights?

Sorry to tell you, but the gas well owner has you over a barrell. It really doesn't matter to them if they lease you the land (giving you free gas or not), that is just extra money in addition to the monthly royalty checks they are getting. Again, it doesn't matter that they get the gas for free. They won't really care if they get money from you for the gas or not, because what gas you don't use each year, will just make their gas well last a little bit longer.

You are either going to have to pony up more money, or you are going to have to put in some new heat source.

In all honesty though, they would have been fools to sell you the gas and oil rights with your property. Most times, once a gas well is drilled, the original land owners sell the land without the mineral rights so they continue getting monthly royalty checks for a long time.

Again, please provide more information, and I'll try to help you or PM me. You really need tofind out if you bought the gas and oil rights with the property. If not, you still should find out what their gas lease says concerning how much free gas they get as well if it stipulates how many buildings they can supply gas to.

[texican]

Go to the county clerks office. Find the original leasing papers. Make sure that the free gas is actually included in the lease.

I'm only speaking of my own experience, and that's in Texas. However, most leases over the years have been 'boilerplate'... the same language... sometimes extra clauses thrown in...

Interpretations of the free gas clause can differ. I've found many variations. It's not necessary to have mineral rights in a unit, to get free gas. It's not necessary to have the physical well on your surface estate, to have free gas. Granted, having both is a slam dunk. Most free gas clauses state one household in the unit can have free gas.

You've got it now. Possessionary rights... If the previous owner sold out and moved, and you've got free gas rights, it might be dependent upon her to go to court to have you disconnected. Neither landowners or royalty owners can sell, market, or give away free gas, to whoever they please, on a whim. That is strictly up to the producer (gas company). If a person has free gas, the free gas right can be transferred, but in my experience, it's transferred with land. I tried to transfer the free gas rights my parents had, to one of my sisters, with zero luck. It was transferred, with the old home place, when we sold it.

I'd bypass everything, and get a copy of the original lease, and see what it says...

[Alice In TX/MO]

You really need an attorney with oil and gas lease experience.

Authority:
32 years of marriage to a petroleum engineer who has done everything from the land lease work to putting in the pipelines. I've been listening to the 'daily drilling report' a looooooooooooong time.

Get expert help or you will put yourself in a bind again.

[texican]

Looks like Michael and I were posting about the same time...

Get a copy of the lease in hand, get a magnifying glass and read the fine print... and be prepared to talk to an attorney.

Sounds like the 'owner' has a meter either on your usage, or the gas producer has a meter, limiting usage.

200MCF! I 'used' 700MCF in a day a few years back... someone drove a big rig where they weren't supposed to, over at the well site, and crushed my pipeline... it leaked that much. The switcher called and asked if I'd mind fixing my line, as it'd cost them around $5K in lost revenues. Sure, I fixed it, cause my gas pressure dropped to a miserable rate. They complained, but couldn't do anything but bark.

I know quite a few folks who get their gas free, not quite honestly. One of the local companies started streaming gas, condensate, and salt water......suddenly hundreds of folks called the local propane dealer and got large tanks installed...