May 18, 2011
Landowners dispute gas lease extensions
Seminar details tactics energy companies use to extend leases beyond original durations
Energy companies are employing more and more tactics to extend expiring natural gas leases, landowners learned at an informational meeting Tuesday.
County Clerk Elizabeth Larkin told a crowd of about 60 that she is rejecting hundreds of lease extension documents gas companies are attempting to file, because they lack the landowners’ signatures.
Whether the sought after extensions are valid, remains to be seen as many landowners are arguing that they do not want their leases extended.
Larkin said she will continue to reject the extensions.
“If you’re going to convey an interest in real property, real property law says that the landowner has to acknowledge the lease, has to sign the lease,” Larkin said.
But the lease extensions continue to flow into the office without the landowners’ signatures.
Larkin was part of a three-member informational panel at the Cortland County Office Building auditorium. Onondaga Nation Lawyer Joe Heath and a Virgil landowner Mike Bosetti, who successfully terminated his lease, also sat on the panel.
Some residents were surprised by what they heard, unaware until the meeting that their gas leases may not simply expire at the end of the term, and may actually provide loopholes where landowners are trapped into leases they wish to end.
One such loophole occurs when residents, seeking to terminate their leases, contact the gas companies and actually open a window for the gas companies to then extend their leases.
According to the state general obligations law, which governs how gas leases are terminated, the landowner must notify all gas companies with an interest in the land, within 30 days after a lease termination date, calling for the lease to end. But doing so opens a 30-day window for the gas company to file an affidavit in the county clerk’s office stating the lease is not terminated.
The news that a lease could be so easily extended by gas companies, came as a surprise to Homer resident Patricia Martinez de la Vega Mansilla.
Mansilla said she is trying to get out of a lease on her property that she recently acquired. Since Mansilla is not the original landowner, she had to contact the gas company with a copy of her deed to show she is the person to contact regarding the lease.
Mansilla has since responded to a “force majeure” letter to contest the company’s claim the lease is extended, but now she worries the lease will not end in December as she hopes.
“I didn’t realize they could file an affidavit with no conditions, to automatically extend the lease,” Mansilla said.
Mansilla will wait until the lease ends at the end of the year and hopes to have a legal opinion by then about whether she should send the letter within the 30-day timeframe.
Heath is awaiting an opinion from the state Attorney General about the best way to end gas leases.
“We are trying to get an opinion from the Attorney General whether it is safe to do nothing when the lease is over, or whether or not they have to take that risk,” Heath said after the meeting.
Heath detailed a list of what he calls fraudulent practices on the part of gas companies that he has brought to the attention of the state Attorney General in an attempt to get laws written that would protect landowners.
Heath pointed to the tactics gas company representatives, known as ‘landmen’, use when trying to get leases signed. For example, landmen will deny that the process of hydraulic fracturing, the method of injecting high quantities of chemically-treated water into the shale to extract gas, can increase the radioactivity of groundwater, even though that has been documented to occur, he said.
Heath also pointed to force majeure letters which the gas companies are sending out to landowners to effectively extend their leases, saying these letters are, in the opinion of many lawyers, not valid.
The force majeure letters contend that the moratorium placed on high volume hydraulic fracturing last year and endorsed by Gov. Andrew Cuomo this year, was a force outside the industry’s control that effectively ceased gas exploration. Therefore, the companies argue for a right to extend leases beyond their agreed upon termination dates.
Most in the audience Tuesday had received such letters.
Binghamton residents Jack and Sonja Stanbro, who own leased land in Cortland County, left Tuesday’s seminar planning to send a reply contesting the force majeure letter they received.
“As far as I’m concerned, we don’t have a lease because they never paid us,” Jack Stanbro said, adding Chesapeake promised him $3,000 an acre before the moratorium went into effect but he was never paid.
The Stanbros said if sending the letter through the proper channels does not end the lease, they may have to seek legal counsel.
Town of Caroline resident Edie Spaulding came to the seminar to learn more about her options for ending a lease. Spaulding said she has received a delay rental check, a check that comes close to the lease termination date that, when cashed, automatically extends the lease.
The sum is considerable, over $4,000, she said.
“Those checks will not be cashed,” Spaulding said, adding she wants “out of” the lease because her property is in the Ithaca watershed.
Heath said landowners must respond to force majeure letters, and he urges people to understand their leases are “complicated legal documents that don’t necessarily end when the date says they do.”
Heath directed people to the website for the local group Gas Drilling Awareness for Cortland County: http://gdacc.wordpress.com, which defines examples of standard lease terminology and also provides sample letters for people to use when responding to gas companies.
Bosetti said he was surprised to hear of so many different issues landowners have been faced with.
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