A story in the Towanda Daily Review reveals that Chesapeake has mortgaged the mineral rights on over 1,000 leased properties in Bradford County, PA. In a couple of cases the minerals mortgages have prevented property owners from taking a mortgage on their home.
While the Chesapeake mortgage is technically on the mineral rights, in most cases there is no separation between mineral and surface rights so the mortgage is filed on the property as a whole. And most property owners aren’t aware that gas companies can – and do – mortgage the minerals from right beneath their feet.
Chesapeake, of course, says mortgaging mineral rights shouldn’t have any effect on the landowner’s right to get loans or mortgages.
Appalachia Midstream Services, a subsidiary of Chesapeake Energy, has jumped into the game too, mortgaging the pipeline rights of way on over 2,000 properties in Bradford County.
What is Chesapeake going to do with the $5 billion line of credit it received? According to a written statement from Brian Grove, the company will fulfill its obligations to leased landowners and …. stockholders.
Landowners who have not leased will want to make sure that their lease agreements stipulate that minerals may not be mortgaged without express permission (if ever).
What’s next: slicing and dicing mineral mortgages to create “rock solid” credit default investments?
You can read James Loewenstein’s excellent reporting here.
Thanks, Sue-- this is very interesting. And, of course, one of the things that Chesapeake is doing with its money is funding a $1 billion Venture Capital fund (with T Boone Pickens) to "stimulate demand for natural gas" through innovative new technology. Because what we should be doing now is STIMULATING DEMAND for fossil fuels, eh?ReplyDelete
Tulipmania by any other name...
this is how demand is "stimulated". perhaps the money being spent to "green" buildings in NYC (i.e., convert them from oil to gas) should be followed more closely. in this climate, how are NYSERDA and the utilities funding this conversion? really wondering about francis j. murray's statement about "new sources of funding" being sought to expand the program: http://www.nytimes.com/2011/07/24/realestate/10000-buildings-get-the-word-on-dirty-fuel.html?_r=1&scp=1&sq=natural+gas+apartment+building&st=cseReplyDelete
A term lease is not a true term lease. Everyone must remember that your lease is a SALE when your leased acerage is caught in a production unit. when the sale is been recorded then the gas company may barrow against it's interest holdings. If the gas company has "assigned" the lease the gas company may not have the majority hold of the lease. Carol FrenchReplyDelete
It seems that a lot of people are caught up in this mess. Hmm, I think landowners need to be keener on seeking legal counsel before signing anything related to the lease. It's hard to go out once you sign a deal that will put you on the wrong end of a situation.ReplyDelete