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  • Chesapeake Energy (CHK -0.8%) has exploited little-known laws in Texas and at least three other states to force land owners to hand over drilling rights and sometimes forfeit profits, according to the latest Reuters special report on the company. Land brokers, land owners and lawyers say such deals are pushing ethical and legal limits. [View news story]
    Chesapeake is due criticism for some of their leasing practicies, but as a general rule it is much more cost efficient for Chesapeake or any oil company to negotiate and settle with the mineral owner rather than use the courts or regulatory agencys to obtain a drilling lease.
    The rest of the Reuters article is a hatchet job wrote by some one with no knowledge of the leasing process. If the companies are dealing with large tracts of land (160 acres or more) with few mineral owners than the leasing is pretty straightforward and simple. But, in the instances mentioned in the Reuters article, these are small tracts of land in metro areas, city lots or small acreages that are a small fraction of the total area to be leased.
    Imagine if your Great Grand Parents owned 160 acres near Dallas in the 1920's, they died leaving equal shares to 6 kids, your Grandad died leaving his share equally to 6 kids, your dad died leaving his share equally to you and your 3 brothers and sisters, you own 1.1 acres that you have platted and sold 5 small lots. Now you and your cousins have scattered all over the world and some have died. I forgot to mention that some of your kinfolk sold their mineral interest and others willed theirs to the Catholic Church. See the problem?
    Now enters the oil company who wants to find and lease mineral interest from all of these people. Therefore a method to allow the majority to benefit from their mineral ownership and allow the well to be drilled. This is an oversimplification but is a partial explanation of the difficulty in obtaining leases necessary before a well can be drilled.
    Oct 2 09:52 PM | 1 Like Like |Link to Comment
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