September 22, 2011
Signing Drilling Leases, and Now Having Regrets
The New York Times reports that hundreds of New York State residents who signed leases allowing gas companies to drill deep into their properties with horizontal hydraulic fracturing have changed their minds and are trying to break or renegotiate their contracts. Some are opposed to the use of fracking to extract the natural gas, but many of the complaints involve discontent about the terms of the leases, and the disparate treatment of property owners depending upon their ability to drive harder bargains. An additional issue involves the ability of the gas companies to declare a force majeure event and extend the leases unilaterally. (A force majeure event is something that was not anticipated by the parties when they entered into the agreement, and which prevents the agreement from being fulfilled.) The force majeure event being cited by the gas companies in New York was the State’s repeated delays in releasing the environmental regulations and allowing the drilling to commence. The New York State Department of Environmental Conservation is now in the process of receiving public comments on proposed rules, and expects to begin issuing drilling permits next year. New York Times article, the New York attorney general’s office is working on an agreement involving one of the largest companies, Chesapeake Energy, and leaseholders numbering “in the hundreds” over letters invoking force majeure.