Cunningham Energy seeks to postpone lease bonus payments, attorney says

Posted: Sunday, March 11, 2012 5:56 pm | Updated: 7:16 am, Mon Mar 12, 2012.

By STEVE ROBB Messenger staff journalist

It is “very unlikely” that Cunningham Energy will be able to meet Thursday’s deadline for making lease bonus payments to Athens County landowners, but the company is seeking a time extension, according to an attorney who has negotiated oil and gas leases for hundreds of local property owners.

Attorney John Lavelle sent his clients a letter Friday updating them on the situation. Contacted Saturday by The Messenger, Lavelle declined to comment. However, The Messenger obtained a copy of the letter from a landowner.

Lavelle has said previously that he has negotiated about 500 leases with Cunningham for local property owners that include signing bonuses of $2,500 per acre for drill leases and $1,250 per acre for non-drill leases. Lavelle has said the bonuses for his clients total more than $100 million. Payment of the bonuses by this Thursday was required in order for the leases to take effect. The leases also call for payment of a 16 percent royalty.

“It is very unlikely the leases will be funded by March 15, 2012. The agreements will therefore expire by their own terms,” Lavelle writes in the Friday letter.

However, Lavelle also writes that Cunningham has presented the lease package to more than 130 “of the largest companies in the world” and is currently in “intense negotiations” with a joint venture partner which are expected to result in a purchase and sale agreement within the next seven to 10 days, with a closing within 45-60 days thereafter.

At a lease signing event last November at the Athens County Fairgrounds, Cunningham land manager Joseph Blackhurst said his company has only conducted vertical drilling in the past and that a joint venture partner working with Cunningham would be the one doing any horizontal drilling.

At the time, Blackhurst would not disclose the name of the joint venture partner, but said it is a well-known publicly traded company.

Lavelle’s letter, though, indicates that an agreement has not yet been reached with a partner.

Lavelle says in the letter that he was approached about extending all the lease agreements to May 18.

“I explained it would be a daunting task to secure the consent of over 500 lessors in a short time frame, but we would do everything possible to extend this opportunity to those who desire to participate,” Lavelle writes.

In exchange for the time extension, Cunningham has agreed to increase the 16 percent royalty to 16.5 percent, according to the letter.

Lavelle also provided his client with an amendment, developed by a Cunningham attorney, to extend Thursday’s deadline to May 18. The letter instructs the clients to return the signed document by Thursday in order to continue to be part of the lease proposal.

According to an affidavit that Blackhurst filed in the Athens County Recorder’s Office last December, Lavelle has a lease agreement with Cunningham for 362 acres of his own property.

“My wife and I plan to sign the amendment concerning our own acreage,” Lavelle says in Friday’s letter. “We play to stay with it until the conclusion.”

Link to Original Article: http://www.athensohiotoday.com/news/article_163c4ff4-6bc5-11e1-bfa8-001871e3ce6c.html

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One response to “Cunningham Energy seeks to postpone lease bonus payments, attorney says

  1. This Cunningham decision not to sign the leases aggregated by Lavelle illustrates how little control Athenians have in such matters, even with competent legal advice. Low natural gas prices, too much supply, a moderate winter, perhaps new questions about how to dispose of wastewater – all may help to explain why Cunningham has had trouble finding a corporate partner prepared to share the costs of shale gas/oil mining and to take responsibility for the various operational aspects of such mining.

    Groups like Look Before You Lease, SD-Frac, Sierra Club, Heather Cantino and her many strong allies, and others in Athens have worked hard to educate local officials and the general population about the dangers of shale gas mining. According to a student driven poll of over 350 mostly Athens residents reported just today in The Athens News, about half of the respondents opposed going ahead with fracking until there are adequate safety regulations in place. My guess is that, given the economic recession that still rages, the number is this high because of the educational efforts of the aforementioned groups.

    I also guess that when, for example, natural gas prices rise and infrastructure to move the gas is in place, Cunningham will find a corporate partner to move on with the drilling in Athens.

    In the meantime, from the perspective of about half of Athens, there is some additional time for residents to learn and think about and perhaps see implemented (to some extent) more adequate regulations than now exist. Though we probably should not count on much regulatory assistance from the state level. At the state level, we may well end up looking more like Pennsylvania (very supportive of gas/oil shale mining) than New York ( which continues to postpone final decisions on the matter).

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