Beware The Allure Of Shale ‘Mailbox Money’

Originally published at EagleFordForum and GoHaynesvilleShale
Attorney Spotlight: Ben Elmore
By K. Daniel Glover

If a land man calls with an offer of “mailbox money” for the mineral rights on your property, read closely before signing on the dotted line. If you don’t, oil and gas lawyer Ben Elmore said the words above it may come back to haunt you.

Mailbox money is a slang term of the shale era. “You wake up one day and you get a call from a land man” promising $1,000 an acre and a 20 percent royalty on oil and gas production from your property, said Elmore, an attorney in the industry for 13 years who now works at WattBeckworth in Houston. “You don’t have to do anything if you don’t want to, and every month a check will come.”

A few years ago in Texas, he said, the average mineral owner was a 65-year-old widow – the kind of people who could use the money. But the fine print they didn’t read in their royalty deals back then may be making them miserable now.

“It’s a bad attitude to have,” Elmore said of people who sign for quick cash. “Mineral owners need to educate themselves about what they own. They need to educate themselves about the industry and how it works.”

Elmore, whose clients include both landowners and oil and gas companies, said understanding the law in Texas before signing is even more important now because the government is making it harder to bring lawsuits after the fact.

“They are streamlining the litigation process in the oil and gas context much like they have in the tort context,” he said, and mineral owners are feeling the brunt of it.

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A Law Practice Built On ‘All Things Marcellus’

Originally published at GoMarcellusShale
By K. Daniel Glover

For Pennsylvania attorney Douglas Clark, the Marcellus Shale is a family matter. His first clients in the oil and gas space were his in-laws and their neighbors in Wayne County, and he has built an entire business around representing rural landowners in the Keystone State who remind him of his parents and grandparents.

“It’s been a gift to represent them,” Clark told GoMarcellusShale in a telephone interview. “It’s unbelievably rewarding to work with these people and get them the benefits” of living on resource-rich land.

Clark, who also hosts the radio program “All Things Marcellus” on WTRW in Scranton, Pa., never planned to get into the shale legal business. After earning his law degree from the University of Akron in Ohio, he moved to northeastern Pennsylvania to practice civil defense law. Clark later worked for the Lackawanna County Public Defenders Office and then started his own firm, taking on a mix of cases.

But after representing his in-laws and neighbors for several months in 2007-2008, Clark sensed landowners were at a disadvantage in negotiating with oil and gas companies. Some landowners were signing leases for bonuses of $100 an acre, while others were getting as much as $750. This was before the boom ultimately drove the market price to $5,750 bonuses and royalties of 20-plus percent.

Clark believed he could help. He bought advertising space in the local PennySaver publication and was off to the shale leasing races. “It just took off,” he said of landowners lining up for expert advice.

Years later, Clark is still going strong as a solo attorney for landowners. He tackles well-site, storage and pipeline agreements across the state. Lately he is handling more royalty payments and estate plans. The latter includes issues such as transferring property and ensuring that gas companies calculate royalties appropriately.

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Your Friendly Neighborhood Oil And Gas Lawyer

Originally published at EagleFordForum and GoHaynesvilleShale
By K. Daniel Glover

Years ago in Burleson, Texas, a company eager to extract natural gas from the Barnett Shale entered negotiations with property owners who were just as eager to profit from the minerals beneath their suburban development.

For a while, the talks favored the neighborhood association. The company agreed in principle to pay bonuses of $27,200 an acre and royalties of 25.25 percent. But with more than 1,000 owners in the neighborhood association, progress was slow. The recession hit in October 2008, and in one day, the company dropped its offer to $5,000 an acre and 25 percent royalties.

The neighbors cried foul, but the company insisted that no firm deal had been signed. The dispute wasn’t settled for 1 1/2 years.

The case sticks in the mind of Fort Worth attorney Eric Camp because such “rooftop leasing” is becoming more common as shale plays like Eagle Ford and Haynesville emerge across America. Oil and gas operators learned to protect their interests, Camp said, but property owners don’t tend to follow legal news like corporate lawyers. As a result, property owners are more likely to be burned now.

“Nothing pains me more than watching groups in other parts of the country making the same mistakes,” Camp said.

Yet cases like the one involving the “Central Burleson Holdouts” are precisely why Camp chose oil and gas as his legal specialty. “It’s what I’m passionate about, what I enjoy, and so it’s easier to get motivated to go to work every day,” he said.

Camp chose the field after clerking for an East Texas law firm while at Southern Methodist University in Dallas. “After that first summer, I fell in love with the business and the clients,” he said. “… You’d have no idea they were millionaires – just really hard workers and entrepreneurial.”

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Sitting On Top Of The Shale World

Originally published at GoMarcellusShale
By K. Daniel Glover

Douglas Berkley Jr. was laboring in relative online marketing obscurity for a Pittsburgh newspaper when he discovered his passion for the shale business. Now he works for a company that is part of the shale space, and he runs a budding network of social media sites about it.

“I love everything about the industry,” Berkley told GoMarcellusShale. “I feel like I’m doing the country, the world, this area a service.”

Berkley is the marketing director at Somerset Regional Water Resources, a company that offers water and well-site support services and owes its existence to the Marcellus Shale. He has been at SRWR for two years, having transitioned into the shale business two years before that.

Berkley’s interest in the industry started as he read article after article about the shale boom while working at the Pittsburgh Tribune-Review. “You could see that there was something big coming,” he said, so Berkley pursued and landed a job at a shale-related startup.

He also has personal connections to shale: Although no drilling is occurring there, Berkley’s family owns land near the Marcellus region, and his hometown of Somerset, Pa., has benefited from that shale play.

The biggest benefit is jobs that pay enough to support families. This includes jobs for truck drivers, in front offices and in business development, which is one of Berkley’s responsibilities at SWSR.
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OPEC Rising

Originally published at IntellectualCapital.com
By K. Daniel Glover

Reform Party presidential candidate Patrick J. Buchanan speaks contemptuously of “a global conspiracy … to loot the American nation.” House Majority Whip Tom DeLay (R-TX) chides the Clinton administration for an energy policy that “puts America in the humiliating position of having to go groveling” for help. Liberal pundit Michael Kinsley condemns “a price-fixing conspiracy of textbook purity” and urges the government to regard the alleged profiteers as “criminal.”

That is just a sampling of the vitriol so prevalent in today’s world of ever-increasing gasoline prices, and much of that hostility is directed at one entity: the Organization of Petroleum Exporting Countries.

The 11-member cartel of oil-producing nations, on the verge of collapse when oil was selling for $10 a barrel not so long ago, suddenly finds itself as Public Enemy No. 1. The animosity is apparent along all points of the political spectrum and among consumers as well as policymakers. So loud has been the outcry that the House felt compelled to cast a purely symbolic vote March 22 to “send a message” to OPEC. The 382-38 vote was on a bill, ridiculed as “feel-good fluff” by some Democrats, requiring the White House to review OPEC pricing practices.

OPEC decided this week to boost oil production by 1.7 million barrels a day, nearly half the 4 million barrels a day in output its members had trimmed in the past year. If, as expected, that decision stabilizes the oil market and drive prices down, the anti-OPEC ire in America may ease.

But a seemingly ascendant OPEC, which could change its mind and cut oil production at later meetings, continues to pose diplomatic, political and potentially economic challenges for the United States. The question is whether U.S. policymakers can do anything to prevent OPEC from flexing its oligopolistic muscles — or whether they should even try.

The risks of oil diplomacy
On both questions, oil-industry observers and economists tend to agree: The United States has little, if any, ability to influence the decisions OPEC — whose membership consists of Saudi Arabia, Iran, Venezuela, Kuwait, the United Arab Emirates, Qatar, Iraq, Libya, Algeria, Nigeria and Indonesia — makes about how much oil to put on the market.
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The Strategy Behind Stockpiling Oil

Originally published at IntellectualCapital.com
By K. Daniel Glover

When Gwen Ifill quizzed Howard Metzenbaum about rising gas prices on a recent segment of PBS’ NewsHour with Jim Lehrer, the former Democratic senator and now chairman of the Consumer Federation of America was unwavering in his analysis of the issue. “[T]here’s only one solution” to the current “crisis,” he insisted: opening the spigot to the United States’ Strategic Petroleum Reserve and flooding the market with millions of barrels of oil every day to “break the hold that the Arab oil nations and the OPEC nations have on the American economy.”

Business Week congressional correspondent Lorraine Woellert, on the other hand, questioned such logic in a March 6 column rejecting the calls of then-presidential candidates Bill Bradley and John McCain to tap the reserve. The nation’s 565-million-barrel petroleum stockpile, she said, is “the nation’s first line of defense against an interruption in petroleum supply in a real emergency. But it’s of little use against a cartel of the world’s biggest crude producers when the world oil market tightens, as it will do from time to time.”

If the debate sounds familiar, that’s because it is. Ever since Congress created the Strategic Petroleum Reserve as part of the broader energy policy it adopted in 1975, lawmakers, lobbyists and the oil-hungry American public have bickered about the best time to use it. No consensus is likely now or ever, but some historical perspective may shed light on exactly what strategy Congress had in mind 25 years ago.

From oil producer to oil consumer
Although the petroleum reserve itself was born between the twin oil crises of the early and late 1970s, the idea itself did not originate amid crisis. (Former Interior Secretary Harold Ickes advocated one as early as 1944, as did Presidents Harry S. Truman and Dwight D. Eisenhower.) It was, however, based on fears of militarily and economically debilitating disruptions in the nation’s oil supply.

The potential for disruption was hardly a concern in the 1950s and for much of the 1960s. Petroleum booms in the Middle East glutted a worldwide oil market that had faced shortages just after World War II. America and other countries had access to an almost unlimited supply of oil for importation — so much so that the U.S. oilmen sought, and received, tax breaks, quotas on imports and assistance for oil exploration.

Days before he left office in 1959, though, Eisenhower invoked his authority to make the previously voluntary import quotas mandatory because of a concern that the growing supply of imports threatened national security. And by the late 1960s, oil industry observers began to predict a supply crisis.
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