Death, Taxes and Cabot Oil & Gas Corporation
It is often said that there are only two things inevitable in life: death and taxes. However, if you are a landowner in Ashland County, it seems as if there is a third inevitable in life right now: Cabot Oil & Gas Corporation’s proposed "Oil and Gas Lease Amendment and Ratification." Over the past months, our firm has seen a surge of landowners requesting that we review the terms of existing oil and gas leases covering their property because they have been contacted and received Cabot’s amendment proposal. It is important to know your rights and to do your due diligence before making a decision that may affect your land for multiple generations.
Although most existing oil and gas leases (yes, those executed in the 1950s and even before then) differ, albeit slightly in some instances, Cabot’s recent proposals do not. Since each Cabot proposal we see is almost identical to previous ones we have reviewed, we believe it is beneficial to identify a few of the key terms that Cabot is currently proposing so that when one finally arrives at your door, you will have a better understanding of what to do (including what to not do). Below are a few of the key items currently being proposed by Cabot:
- $25 per acre to sign the proposal;
- $15,000 for a well site on your property, on up to 7 acres of land;
- 5% royalty on all oil and gas substances but royalty payments will be subject to all associated taxes (i.e. ad valorem, severance, gross production, etc.); and,
- (The most important) Unitization of your oil and gas lease with other leases to form a larger size well unit. Most current leases in Ashland County do not allow companies to unitize your property with other farms, which is usually necessary for modern drilling. This is the big term that Cabot needs from the landowner and, in turn, this is your most prized bargaining chip.
In terms of the specific guidance we have provided to our clients, this advice has varied because each set of factual circumstances we encounter is different from the next. The most important thing is to review and understand the terms of your current oil and gas lease. Once you understand what terms your oil and gas rights are already subject to, then we can understand how the Cabot amendment will affect you for better or worse. If you have any questions regarding the Cabot proposal you recently have received, you should contact a CCJ Oil & Gas attorney for advice.