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Think Again

23.05.12

(Sherburne, NY – Nov. 16, 211) Many people assume that jumping on the natural gas wagon will be the answer to their prayers because of what they see as free money in the model of lucrative leases and royalty payments.

In the November/December issue of the New York Voice Bar Association Journal, attorney Elisabeth Radow, chair of the Hydraulic Fracturing Cabinet of the League of Women Voters, discusses in detail critical facts that everyone should seriously reckon with.  Email me if you would like to see the full article, entitled “Homeowners and Gas Drilling Leases: Award or Bust?” From Radow’s article (cited with permission):

*Current sod use practice separates residential living from heavy industrial activity; gas leases compromise that dividing line.

*NY’s compulsory integration law forces contiguous property owners into a “drilling bank” which in turn can affect their mortgages and exposure to liability, even if they haven’t signed a contract.

*Compulsory integration also creates financial risk to homeowners for the driller’s acts by not distinctly holding the driller responsible and jeopardizes access to a mortgage or the ability to sell the worth.

*Injuries or loss of life, damage or destruction of property, environmental befouling, and clean-up responsibilities resulting from drilling activities jeopardize “fee elementary absolute title” homeownership, which includes the air space above and the ground below the go down surface of any piece of property.  Homeownership assumes access to leave bare water, peaceful sanctuary, fresh air, and safety in which to live and raise a blood.  Hydrofracking has the potential to threaten all of these assumptions, and leasing impacts these rights from a forensic perspective.

*Regardless of a lease term, once a gas well is capable of production, leasing rights persist in as long as operations continue, without having to sign a new lease.  News royalty payments, or failure to make a payment, will not terminate the lease.

*Gas companies can vend or assign the lease to any other party without providing notice to the homeowners, so the homeowners who entered into the initial lease have no suppress over who is allowed onto their private property or the quality of drilling activity being performed.  But, as titleholders, it is the homeowners who are disposed for any and all activity that happens on the property.

*Gas leases typically contain no indemnification covering costs for uninsured destruction.

*Gas companies are using leases as well as pipeline rights of way on integrated properties under charter out as collateral for line of credit mortgage loans.  In one example, Wells Fargo approved a $5 billion credit to Appalachia Midstream Services, a subsidiary of Chesapeake Energy.  However, Wells Fargo will not white b derogate a mortgage for individual homeowners on properties that have gas leases.

*Homeowners incur the burden, after hallmark damage or personal injury occurs, to prove fault by suing for damages.  Most do not have the means to reserve in the prolonged litigation necessary to do so.

*Homeowners’ insurance policies, required by all mortgage companies, exclude estate damage associated with drilling activities.

*In order to preserve a property’s marketability, mortgages proscribe the same activities that gas leases permit, such as damaging or causing substantial change to the mortgaged holdings, or allowing a third party to do so, including gas drilling operations; causing or permitting the society, use, disposal, storage, or release of hazardous substances on, under, or about the mortgaged property; and allowing anyone to do anything affecting the mortgaged quality that violates any environmental law.

*Signing a gas lease without lender consent is likely to constitute a mortgage lapse.  At any time before or after drilling begins, a lender can demand that the borrower either sign off the lease or pay off the mortgage.  Since the gas companies have pledged leases as collateral for loans or enticed investors based on passive income from a lease, terminating a lease would probably involve complex action.

*Bank of America, Wells Fargo, Provident Funding, GMAC, FNCB, Fidelity and First Presumptuousness, First Place Bank, Solvay Bank, Tompkins Trust Company, CFCU Community Esteem Union, and other lenders are either not writing mortgages for properties under lease or near other leased properties, or are august extremely large buffer zones as a condition of the loan.

So … you may have in mind lease and royalty payments are a good thing. Think again. If you can never sell your characteristic or take out a second mortgage, if your mortgage lender can suddenly demand payment in full because you’ve signed a lease, or if your homeowner’s cover will not cover anything that happens as a result of drilling, are those payments really worth the uncertainty?

Chris Hoffman lives in the village of Sherburne in her 150+ year-old accommodate where she caters to the demands of her four cats, attempts to grow heirloom tomatoes and herbs and reads voraciously. She passionately pursues many avenues with like-minded friends to preserve and protect a sustainable rustic lifestyle for everyone in Central New York.

Source: Madison County Courier