A coalition could simply be a group of neighbors who meet regularly to share information and create a “united front” when dealing with landmen or gas companies. One big benefit of a larger coalition is being able to deal directly with gas company representatives rather than middlemen such as landmen.
A key reason to form a landowner coalition from the gas company’s perspective is to have access to large contiguous blocks of acres. In some cases, a small group of landowners with solid blocks of contiguous acres could be in a better position to negotiate with a gas company than a larger landowner coalition that is spread out with large “holes” of land within their membership acreage. Contiguous acreage is one of the KEY factors in a successful coalition.
Advantages of landowner coalitions include:
• Large, contiguous blocks of property are attractive to gas companies.
• A landowner coalition can have better bargaining power with gas companies and possibly result in higher signing bonuses, royalties, and better lease terms.
• A landowner coalition can help spread risks/dilute the differences between high value land and low value land.
• A landowner coalition can have more resources and tools available within the membership to help achieve the coalition goals.
• A landowner coalition can easily share information and help provide educational sessions to the general public.
• By nature of organizing, a landowner coalition is a grassroots organization that helps to build a community and get neighbors talking to neighbors.
• A well organized coalitions with a large number of volunteers can help spread the workload needed to put a good lease together with contiguous acres.
Disadvantages of landowner coalitions include:
• It can take a significant of time, energy, and possibly money to form a landowner coalition. However, strategies can be implemented to address these issues…this is one of the reasons this website was developed – to share these different strategies to help you form a coalition and so your group can be successful!
• It will be difficult to develop a lease that will meet all needs of every member of the coalition, so by the very nature of a coalition, there will need to be ways to build in compromises for the overall lease.
• Becoming part of a coalition that is too large without large numbers of contiguous acres may not be as advantageous as participating in a small group with blocks of contiguous acres. One way to solve this issue is to work with your membership and get every member to make an effort to recruit friends and neighbors so as to keep building contiguous blocks of acreage. A little effort by each member in this area can yield substantial results!
• In the event you’re property gets compulsory integrated before your group lease is signed, there could be advantages to forming your own LLC and leasing your property to your own LLC.
• Most landowner coalitions are free or may charge a small fee to help cover expenses in starting a group. However, there will usually be some sort of fee that needs to be paid to the attorney team working on the group lease. This attorney fee can be structured is a variety of ways, but the most common fee structure currently is $20 per acre. This fee is not charged until the group lease is signed and the fee comes out of the signing bonus the landowner will receive so there is no out of pocket expense. For a larger landowner, a fee of $20 per acre may seem to add up, however, in the overall scheme of things, this attorney fee is well worth the amount and a strong argument could be made that the landowner will be far better off in terms of higher signing bonuses and royalties by signing a group lease versus trying to negotiate with a landman by themselves. The $20 per acre fee is really a bargain and not a disadvantage.
• One key point with and landowner coalition, be sure that you are not obligated to sign a lease or any legal documents until after an offer is received by a gas company. Some leasing “consultants” are asking people to sign up with them, promising not to sign with anyone else. Unless there is a solid offer at hand or you have the opportunity to make a decision on the offer being presented, you should not sign anything. At some point, the coalition will need to get a firm commitment from its members to help facilitate negotiations, and you should have all options available up to that point. A good landowner coalition will keep their membership well informed so none of these things will be a surprise at the end.
All in all, the landowner coalitions are by far and above the way to go when deciding to lease your land.