Sometimes, it really does pay to look a gift horse in the mouth...
When oil and gas landmen descended on the Little Traverse area last
summer with promises of easy riches in return for mineral leases and
signing bonuses, many landowners in Emmet, Charlevoix, Antrim and
Cheboygan counties took the bait.
Some even went out and borrowed money to purchase new cars, tractors
and other expensive items, or took out second mortgages on their homes
in anticipation of the cash and royalties they expected to receive
from their leased lands.
Then -- poof -- last fall, many of the signed, notarized contracts
were abruptly canceled, leaving hundreds of landowners holding a bag
of empty promises.
Thats the scenario laid out by David Petty, who characterizes himself
as a ticked off guy and a tree-hugger who got involved in the oil
and gas business as a broker a few years back to support his career as
an artist in Charlevoix County.
Being in this business and seeing what these oil and gas company
people did really ticked me off, says Petty, who is a bit player in
this unfolding drama, having 12 acres which were initially leased at
$650 per acre.
Petty is helping to organize a meeting at the Emmet County Fairgrounds
this Tuesday, Jan. 18 at 7 p.m. with Gaylord attorneys Susan Hlywa
Topp and Bill Rolinski, who are specialists in oil and gas leases and
environmental law. The meeting will acquaint landowners with their
rights, along with the obligations of the companies that signed
contracts. And of course, what legal actions one can take if a lease
has been voided. Hundreds of landowners are expected to attend.
Last year, Petty says, landowners in the region were promised anywhere
from $300 to $2,000 per acre for the right to drill for natural gas on
their property. Now, he says, some of those people are losing their
homes or have gotten themselves into debt and financial trouble
because they counted on lease money that never arrived.
A gold rush for gas mushroomed last March when a huge deposit was
discovered in a 12,000-foot well in Missaukee County. Petty says the
well initially delivered a whopping 2.5 million cubic feet of natural
gas per day.
The Missaukee well is located at the deep end of the Collingwood Shale
formation, a natural gas field which is said to be 40-45 feet thick
and spreading across much of Northern Michigan about 2 miles
underground. Its expensive to drill that deep, however; yet the
formation is only 5,000-6,000 feet deep in the
Emmet/Charlevoix/Cheboygan area. Thus, the rush by oil and gas landmen
to sign leases in the area last summer.
It was crawling up here with landmen promising to hand out $1 million
checks, Petty says.
Typically, the state auctions leases for $10-$30 per acre, Petty says,
but the frenzy over natural gas deposits around Emmet County sent some
offers into the $3,000-$5,000 per acre range. A report by Sheri
McWhirter in the Record-Eagle noted that energy companies spent $178
million at an auction of state land last year, more than seven times
the states previous auction record of $23.6 million set in 1981.
But then production at the Missaukee well dropped off to 800,000 cubic
feet of gas per day -- about the norm for such an operation, Petty
says. It was around that time that landowners started receiving
letters from the oil and gas companies stating that their leases had
In one published report, Petty notes that his own lease was voided
simply because he has a mortgage on his house. There was no company
name and no phone number on the letter I received, just an address.
Ive never heard this type of excuse for backing out of a lease.
Ninety percent of people who lease their mineral rights have
Tuesdays meeting will be the second gathering of disgruntled
landowners in the four-county area around Emmet, with some considering
the options for a lawsuit.
This is just speculation, but some might reckon that suing an oil and
gas company might not be an easy matter, given the barrels of cash
that go with such an enterprise and the ability to throw lawyers at
such an endeavor for nigh onto eternity.
But thats an option.
Oil and gas companies have been ripping people off since the first
well was discovered in Pennsylvania (back in the 1800s), says Petty.
Fortunately, the internet and the spread of information about your
rights as a landowner have made people a lot smarter about their
rights; and its making the oil and gas companies a lot more honest
than they used to be.
In the meantime, the next time someone knocks on your door offering
easy money in return for the right to drill for natural gas on your
land, you might want to get that money up front, in cash.
The gas leasing informational meeting with attorneys Susan Hlywa Topp
and Bill Rolinski takes place at the Emmet County Community Center at
the fairgrounds in Petoskey, Tuesday, Jan. 18, 7 p.m.