Wednesday, May 28, 2008

Landowners getting trampled in gas rights rush

Stories of fast-talking industry representatives using scare tactics to strong-arm people into signing lowball leases are popping up in rural areas and suburbs from New York to West Virginia to parts of Indiana and Texas. All sit atop largely untapped natural gas deposits made suddenly viable — and valuable — by soaring prices and improved drilling techniques.

Castle and his father thought they were getting a windfall when they signed a $5-an-acre lease with a small Michigan company and promise of 12.5 percent royalties for the gas rights to 800 acres they own near Rowlesburg in northern West Virginia. The process started when a landman — an industry term for a person who secures mineral rights — knocked on their door.

"They're very nice people, the ones that come around. You thought you could trust them," said Castle, who adds that he was warned to sign or drillers would siphon the gas beneath his property without paying him a dime.

His feelings of trust evaporated when rival companies started offering $350 an acre and royalties as high as 15 percent.

But Decker held out and formed a pool with other landowners that has grown to more than 40,000 acres. The approach worked: Decker's group agreed to a five-year deal that pays $2,411 an acre and a 15 percent royalty.

"There just aren't a lot of savvy landowners out there," McDivitt said of the calls he gets regularly. "Some of them are just, 'Hey, we just had some slick-talking guy who's just been pounding on us, but we don't understand.'"

Read on the Newsvine.

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