Extending leases ... still

Chesapeake is still trying to extend leases in NY by any means possible, and that means invoking “force majeure”. Force Majeure was originally intended to protect contractors from being held responsible when they couldn’t complete work due to events beyond their control – things like floods, hurricanes, tornadoes.

Now they are using the force majeure clause in leases to shift their economic risk onto the landowner, says attorney Chris Denton. Companies claim that they cannot drill because NY does not allow hydro-fracking.  If they can successfully extend the leases, that transfers economic risk to the landowner by trapping him in a lease at a market price that made sense five years ago.

The truth is that there is nothing preventing companies from drilling. But that isn’t stopping Chesapeake from filing lease extensions.

“They bring them in batches of 30 to 40,” says Cortland County clerk Elizabeth Larkin. But she’s not accepting lease extensions because they are not signed by the landowners – and she may be the only county clerk to refuse filing the documents.

“They say that they need to extend the leases because of force majeure, or they claim that the original lease gives them an option to renew,” Larkin said in a phone conversation a couple weeks ago. But an option to renew is a lot different than an automatic renewal or extension, she says, and so far Larkin has refused to file the extensions. The county attorney is backing her up.

When landmen began filing the leases years ago Larkin felt optimistic about the gas rush. She hoped the companies would strike it rich and the county would see some economic benefit. But now … “I’m not against drilling,” she clarifies, “but I am very disheartened by how dishonest they [gas companies] are. How can we trust them to protect our water when they don’t even care about the landowners? These extensions just aren’t right.”

Larkin hopes that other county clerks will take a similar stand, but acknowledges that it’s hard to refuse recording a document when each one brings in much needed cash to the county. Every lease extension she refuses costs Cortland County $20 – “and I’ve refused hundreds,” Larkin said.

Force majeure isn’t the only Ace companies have up their sleeves. According to attorney Joe Heath, energy companies are now crafting leases that contain a non-termination clause. The law, he said, protects gas companies, not landowners.