MAP – Tompkins

The Marcellus Accountability Project
for Tompkins County


More Information on

Tompkins County Gas Leases


How to Find More Information on Gas Leases:

If you would like

(1) information on gas leases not shown on this map,

(2) to read the actual leases, or

(3) to look up gas leases by leaseholder name instead of tax parcel,

then you must visit the Tompkins County Clerk’s Office or the Tompkins County Assessment Office and use their public access computers. Click here for directions on how to find this information.

 

When Does a Lease Expire?

Gas leases declare a beginning date and a duration (usually 5 years), but there are several reasons why they may not expire on the expected date. Below are examples of typical language in gas leases and what we believe they mean. This should not be taken as expert legal advice; if you are thinking of signing a lease or are trying to interpret a current lease, it is crucial to get advice from a lawyer experienced with gas leasing.

One typical leasing clause states something like: "This Lease shall remain in force for a primary term of Five (5) years from [some date written here] (effective date) and for as long thereafter as prescribed payments are made, or for as long thereafter as operations are conducted on the Leasehold in search of or production of oil, gas, or their constituents, or for as long as a well capable of production is located on the Leasehold, or for as long as extended by provision herein."

What does all that mean? Let's take a look, piece by piece:

"This Lease shall remain in force for a primary term of Five (5) years from [some date written here] (effective date)...."
This is what most of us think of as the term of the lease—after five years (or three, or ten, depending on the lease) the lease is over. This is called the primary term.  But wait, read on....

"... and for as long thereafter as prescribed payments are made...."
(We are still researching this phrase, so the following answer is not certain; as we learn more, we will add to this explanation.) Some leaseholders are paid an annual sum (typically $5 per acre) called the "delay rental" starting a year after the lease is signed and continuing until royalty payments are made, if gas is produced. We believe this phrase allows the gas company to continue the lease on an annual basis by continuing to send checks to the leaseholder. If those checks are accepted by the leaseholder (that is, cashed or deposited at a bank), then the lease is extended on a "holdover basis." If the leaseholder wants the lease to terminate, then he or she should return the check to the company with a "no thank you, this lease is expired" letter.

"... or for as long thereafter as operations are conducted on the Leasehold in search of or production of oil, gas, or their constituents...."
The lease will continue past the primary term if the gas company is actually doing something related to gas production. There is nothing in law that specifies what level of activity is enough to keep a lease from expiring, but in New York there is an "implied covenant of good faith and fair dealing" requiring that level of activity to be something reasonable—more than trimming a twig or mowing a small patch of lawn, for example. Disputes between the leaseholder and the gas company on the level of activity required to continue the lease would have to be settled in court or through arbitration (some leases require arbitration). Note that if the land covered by the lease is part of a spacing unit (see Compulsory Integration) and any qualifying activity occurs anywhere in the spacing unit, then the lease continues. This provision is normally contained in a section of the lease titled "Unitization."

"... or for as long as a well capable of production is located on the Leasehold...."
As above, there is no legal definition of "a well capable of production," so disputes would have to be resolved in court or in arbitration. Also as above, if the leased land is part of a spacing unit and "a well capable of production" is located anywhere in the unit, the lease continues.

"... or for as long as extended by provision herein...."
Many leases have a statement about extending the primary term. Typical language is: "Lessee has the option to extend the primary term of this Lease for one additional term of five (5) years from the expiration of the primary term of this Lease...." This means that the gas company (the Lessee) can decide whether or not to take another term of five years (called the secondary term). The gas company has this option only once, at the end of the primary term. The leaseholder (the Lessor) has no control over whether or not the lease is renewed for a second term. The gas company typically has to pay the leaseholder the same amount it paid when the lease was originally signed.

Because very few of these extensions are recorded at the Clerk's Office, we cannot determine which leases recorded before 2005 are still in effect due to secondary terms or continued rental payments. Also, some leases recorded in 2005 had three-year primary terms that have "expired." We have removed these from the database, but they actually may be continuing in secondary terms. Active spacing units can be found on the DEC website; we plan to add these to our map in the future.

 

Force Majeure

Gas companies have begun to invoke an element of contracts called force majeure to claim that expiring leases should be automatically extended. They argue that the amount of time it is taking the DEC to produce the Supplemental Generic Environmental Impact Statement has prevented gas companies from fulfilling their leasing contracts because they haven't been allowed to drill in the Marcellus Shale. According to Wikipedia, force majeure "frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, or an event described by the legal term ‘act of God' (e.g., flooding, earthquakes, volcanoes), prevents one or both parties from fulfilling their obligations under the contract."

Very few people (perhaps including the oil and gas companies themselves) believe that the force majeure claim will hold up in court because (1) the gas companies could have drilled into other shale layers, and (2) the DEC has not prevented them from drilling into the Marcellus Shale. The companies are still free to do so as long as they conduct their own site-specific Environmental Impact Statement. The force majeure threat seems designed to scare leaseholders into renewing their leases now, under the belief that otherwise their lease will be extended without earning any additional money. If you have received a force majeure letter, please consult an attorney. You do not need to renew at this time.







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