Marcellus Shale Seminar Outline For The Butler County Association of Realtors

Published on Friday, 17 June 2011 11:16 Written by Lawrence D. Brudy & Associates, Inc.

Location of the Marcellus & Utica Shale Formations

1. Marcellus - The states that the Marcellus Shale Formation can be found, are, New York, Ohio, Maryland, West Virginia, Virginia, New Jersey, Kentucky, Tennessee and Pennsylvania (and small parts of Canada)
2. Pennsylvania counties - Allegheny, Armstrong, Beaver, Bedford, Blair, Bradford, Butler, Cambria, Cameron, Carbon, Clarion, Centre, Clearfield, Clinton, Crawford, Elk, Erie, Fayette, Forest, Greene, Indiana, Jefferson, Lawrence, Luzerne, Lycoming, McKean, Mercer, Pike, Potter, Somerset, Sullivan, Susquehanna, Tioga, Venango, Warren, Washington, Wayne, Westmoreland and Wyoming (See enclosed map)
3. Utica - This Shale Formation lies below the Marcellus to a depth of another 2,000 feet and has a range west including Michigan, north as far as Quebec and through Pennsylvania, Marcellus and Utica Formations are considered “Deep” Gas

Listing and Selling Land

1. What Estate is to be listed and sold surface - Oil-gas-coal/coalbed methane (fireclay, limestone). Use of the OGM Addendum (See enclosed)
2. Valuation of surface and subsurface interests a severance of estates pricing for one or both, leased and unleased, bonus & royalty payments.
3. Oil & Gas lease assignments to the new buyer, reserve/free/house gas assignment from the subsurface owner to the surface owner. –Negotiable—Lessor with the well located on his/her property entitled to the gas, service connection, treatment, payment in lieu of, assignment can run with the land.
4. Important Properly Prepared Documents
   1. Deeds-make it clear in plain language what is to be conveyed or excepted and reserved [implied easements]
   2. Listing Agreement/Agreements of sale including the OGM Addendum
   3. Lease Assignments- Oil & Gas- Reserve Gas

Value of Certified Title Opinions

1. Determination of the marketability and development of subsurface interests
2. Buyers and sellers-confidence in what is being sold, excepted/reserved, purchased
3. Banks-financing and securitization in future royalty payments
4. Realtors- support for buyer & sellers clarification of the OGM Addendum elections
5. Gas exploration/development companies-reliance on the opinion for marketability and leasing

The Leasing Process from Start to Finish

1. What is or is not included in the lease – Bonus payment based on acreage, royalty payment based on unitization
2. Memorandum of lease- for recording and notice purposes-does not disclose specific terms embodied in the lease
3. Orders of Payment- provide net acreage, bonus payments, banking days 60-120 for the determination of oil & gas ownership [Warranty of Title]
4. Addendums- not recorded- used for the modification of lease terms. Specific to each landowner and leasehold company presence
5. Affidavits of Non-Production and Non-payment—used for determination of leases that have expired by term or lack of production (without recorded surrenders)
6. Division Order- executed by multiple landowners/Lessors of a specific tract of land under lease for Bonus/ Royalty/Delay Rental/Shut in Payments
7. Ratification Agreements- used with Division Orders confirming, recognizing and ratifying an existing oil & gas lease as to term, ownership and the percentage of payments.
8. Adding value to your land”
   1. Surface vs. nonsurface
   2. Mortgages
   3. Exception/reservation
   4. Conveyances of all or a portion of subsurface interests
   5. Estate Planning

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