Update 1/17/2008
What a saga the Barnett Shale land rush has turned out to be. Every week another group of neighborhoods gets a record-breaking royalty amount. New leasing companies pop up. Gas leases and pad sites are flipped and traded. The big guys are buying up the little guys. What is typically handled in a gentlemanly manner has turned into what one industry insider describes as “a free for all”. It’s turned into quite a ride.
It’s taking a great deal of time and effort to get up to speed on all the factors involved in urban gas drilling and to follow the action. There are always more things to be learned. In June 2007, AHNA initiated a special Gas Lease Committee to respond to the lease letters which most of its members had begun to receive. Based on the experience of other neighborhoods, the AHNA Gas Lease Committee saw the value of affiliating with other contiguous neighborhoods, like Crestline Area Neighborhood Association, West Byers Neighborhood Association and North Hi Mount. The neighborhood groups decided to form a joint committee and hired attorney Parnell McGlinchey, a solo practicioner with oil and gas experience who lives in Arlington Heights, to help them. The group sponsored several informational meetings for neighbors during the summer.
Initially, there was confusion about conflicting offers that neighbors were receiving from various land companies, all of whom were ultimately selling their leases to Chesapeake Energy. The joint committee decided it was in the best interest of the neighborhoods to ask Chesapeake if they would negotiate directly with the neighborhoods, without the land men in the middle. In early August, members of the AHNA Gas Lease Committee met with three Chesapeake officials who agreed to address neighborhood concerns in the lease that would offered to the neighborhoods.
Because the standard leases being offered by the land men didn’t cover quality of life issues that are important to a neighborhood long term, the Joint Gas Lease Committee began working on a common lease form that neighbors interested in leasing could utilize. A proposed lease was drafted and presented to Chesapeake officials. Rather than negotiate on that proposed lease, Chesapeake’s leasing agents began sending out new lease offers to our neighbors with better economic terms but no quality of life terms. The negotiations with Chesapeake have not progressed since then.
On January 10, an informational meeting at Stripling Middle School featured Councilman Carter Burdette who has encouraged us from the beginning to take our time when considering the gas leases. About 200 people attended, only one of whom had signed a lease. After listening to the questions from the audience at the meeting, and being aware that the neighborhoods that have received more favorable lease terms had two or more energy companies competing for leases in the neighborhood, the joint committee met to develop a plan of action. Of interest is the recent experience of the Arlington neighbors who negotiated a lease through a closed bid process. The committee is considering various avenues to create competition so that the leases offered will satisfy neighbors’ expectations.
The joint committee has concluded that quality of life issues are as important as the economic terms in a gas lease. Some of those issues, such as location of pad sites, pipelines and truck traffic, may have direct impact on property values. The more the committee learns about the realities involved in drilling in the middle of an urban area, the more it wants to make sure to have provisions in the neighborhood gas lease to protect our neighbors. The gas leases that have been mailed do not address these quality of life issues, such as noise or truck traffic, the issues of mortgage subordination, transportation costs , or who receives the royalties from our alleys and public streets. The only way to address these in a legally binding contract is through a negotiated lease which means we’ve got to stick together for a little while longer.
Many of you are growing weary of hearing the same old refrain of “hang in there, we’re working on it.” Unfortunately, it’s a fact. Another common question is “how much longer?” It’s safe to say it will be months, not weeks, but hopefully not too many more months. As Councilman Burdette and attorney/speaker Bob West noted at the January 10th meeting, other neighborhoods’ lease negotiations have stretch to a year or more. We have learned from their activities and hope to shorten that window. The joint committee is aware that waiting too long to finalize our negotiations could have potential negative repercussions.
There is immense strength in numbers. Before making a decision about signing anything, we encourage those of you who have not yet signed a lease to wait to see the protections offered in the lease being prepared by joint committee. Once the lease is available, you can use it to lease, negotiate your own deal, hire your own attorney, or simply decline to lease altogether. Despite what some of the land men tell you, you won’t be left behind if you don’t respond immediately. The gas isn’t going anywhere, and there is not need to rush to sign.
