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Before signing drilling lease, consider this

Peggy Utesch

It appears that gas drilling is moving to the north side of the Colorado River. As a board member of the Grand Valley Citizens Alliance, I am passionate about educating landowners because everyone has the right to make informed decisions. For people living along the Grand Hogback from Rifle to Peach Valley, I offer some food for thought.The land companies working to gather mineral leases have either been hired by a drilling company or are gathering leases with the intent to sell them. Either way, their job is to maximize their profit, not to benefit the mineral owner or protect the surface of the property.There are two types of leases that are negotiated to allow drilling – a mineral lease and a surface-use agreement. Although there can be some crossover, for this “top 10” discussion, I will focus on mineral leases. 1. Ask lots of questions, like for which energy company is the leasing company working or planning to sell your lease? Get all answers in writing, and then get “the other side of the story” before making a decision.2. The language of the lease is critical. There are numerous court cases across the state against companies like Barrett, Kerr McGee, Williams, Evergreen and Amoco because of deceptive lease language. Do not let the company write the lease. Hire a professional to write your lease so it says exactly what you want. It is well worth the money. 3. Accepting a quick signing bonus could cost you in the long run. Craft a thorough, inclusive lease rather than signing what industry gives you. Companies may employ other tactics to scare you, but be tough. You’re in the driver’s seat.4. Consider neighborhood meetings with the leasing company. Although you’ll want to negotiate an individual lease, gathering information collectively more often produces a better outcome. An attorney is also more affordable when the cost is shared.5. Don’t sign a lease with a “non-disclosure” clause. Keeping your lease terms private is your business; however, sharing information gives you and others more negotiating power.6. Companies can negotiate individual leases, then pool the leases into one of several types of “units.” If that happens, many of the stipulations in your lease may become void, and the lease term could become in perpetuity. Check your contract for “unionization” or “pooling” language and consider requesting it be removed or stipulate that your participation in a unit or pool requires renegotiation of the lease.7. Ask for inclusion of a “best environmental practices” clause in the lease, which may include lining and immediately reclaiming waste pits or noise mitigation and reduction of the ongoing emissions from condensate storage tanks.8. If you aren’t the surface owner, consider working with the surface owner before signing a lease. Mineral owners have more clout to negotiate surface use and can help protect a surface owner’s quality of life and livelihood.9. Whether you are or are not the surface owner, require that the drilling company provide water quality and quantity testing, before and after drilling, for all water wells and springs on the property. 10. Consider including breach of contract provisions, such as the operator paying all attorney fees if you prevail in a legal action, or adding penalty clauses for violations of the agreement.If you would like more information, a copy of GVCA’s resource guide, “Your Land, Your Rights,” or a list of attorneys and professional consultants who can help you negotiate, please call 876-0430, 285-2250 or (970) 256-7650. Good luck with your negotiations.Peggy Utesch is a board member of the Grand Valley Citizens Alliance.


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