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Post date: September 10 2008

***consumer Alert*** Attorney General Cuomo Cautions Consumers About The Potential Pitfalls Of Oil & Gas Leases

ALBANY, N.Y. (September 10, 2008) – Attorney General Cuomo today warned landowners of potential perils and strong-arm tactics when dealing with oil and gas exploration companies. His office released new materials and guidelines to protect consumers and ensure they get the best deal for their land should they choose to become involved in an oil or gas exploration lease.

The Attorney General’s Office has become aware of potentially misleading or improper tactics used by certain exploration and development companies to obtain leases from landowners. The office is investigating a significant number of complaints from landowners regarding these tactics and urges anyone who believes they have been defrauded by an unscrupulous representative of a gas exploration company to contact his office at 800-771-7755. A new downloadable tip sheet and brochure can be found online here.

To educate landowners on the issue and ensure they are getting the best value for their land in a gas or oil exploration lease, representatives from the Attorney General’s Office will be taking part in a Landowners’ Rights Forum on September 16 in Binghamton with Assemblywoman Donna Lupardo and Field Advisory for the New York State Farm Bureau Lindsay Wickham. The Attorney General’s Office has conducted and is planning future similar forums throughout the state.

In the first decade of the 21st Century, gas exploration has evolved from a predominately regional operation into a large-scale business, attracting national and global companies. As a result, production of natural gas has significantly increased. This evolution is a direct result of higher natural gas prices coupled with improvements in both gas exploration and extraction technologies. These advancements have furthered the exploration and extraction of natural gas from two formations that had been previously difficult to tap: the Trentron-Black River and Marcellus Shale.

“If done properly, including implementing the adequate environmental safeguards, increased natural gas production can be mutually beneficial to the landowners, the economy, and all New Yorkers,” said Attorney General Cuomo. “However, in the event New York landowners are approached and asked to sign a lease by a gas exploration company or their agents, they should proceed cautiously, as the process can be rife with potential peril. Consumers must be aware so they do not fall victim to any abusive or misleading tactics. Gas exploration companies and the government must be vigilant to protect both the environment and landowners’ rights throughout the process.”

Typically, landowners who enter into an oil and gas lease are approached by a “landman” – a person directly or indirectly representing a gas operator. The landman’s primary goal is to secure leases on as large an area as possible. Landmen may approach landowners at their homes or businesses, or may contact landowners preliminarily by telephone before meeting with them in person.

An oil and gas lease is a written instrument where the landowner (the “lessor”) grants to a business (the “lessee”) the right to extract oil and natural gas from beneath a landowner’s property. The rights and obligations of the landowner and business are detailed in the lease, as in many other types of leases. In most cases, landowners will be bound to the terms and conditions included for the duration of the lease. This means that the rights and obligations set forth in the lease are connected to the landowner’s land.

For this reason, and because oil and gas leases are extremely complex, Attorney General Cuomo strongly recommends that before signing a lease, landowners should contact an attorney to secure professional, personalized advice in this important transaction.

Landowners thinking about signing an oil and gas lease should consider the following:

  • Review each term and condition of the lease with your attorney.
  • Ask all necessary questions to ensure that you understand all terms and conditions on the lease.
  • Obtain in writing all promises and conditions, and make sure those written promises are part of the lease.
  • Negotiate as you may get better terms than those initially offered to you.
  • Search for and negotiate with more than one gas operator.
  • There is strength in numbers. Consider negotiating your lease together with a group of neighbors or interested parties.
  • Obtain copies of the lease you sign and a copy of the lease signed by both you and the gas operator to make sure it reflects the agreement reached with the landman.
  • The right to cancel is yours for three business days after signing the lease. But to cancel, you must comply strictly with all requirements (consult your attorney).

The Landowners’ Rights Forum will take place September 16 at 7 p.m. at Broome Community College’s Baldwin Gymnasium on 907 Upper Front St. #1 in Binghamton. To RSVP, call 607-721-8771.