N.Y. landowners given right to negotiate with natural gas company over false lease claims

Nick Rees Nov. 24, 2009, 4:36pm

Mario Cuomo (D)

ALBANY, N.Y. (Legal Newsline) - Attorney General Andrew Cuomo has
reached an agreement with a natural gas company that will allow
consumers misled into extending their natural gas leases with the
company to renegotiate their terms.

Fortuna Energy, Inc., will also pay $192,5000 to the state as part of
the settlement, which also stops Fortuna from employing common
misleading and deceptive industry tactics to secure lease from New
York landowners.

"Drilling companies will not be permitted to use misleading letters
and dubious legal claims to bully landowners," Cuomo said. "Many of
these companies use their size and extensive resources to manipulate
individual property owners who often cannot afford to hire a private
attorney. This land-grab practice must stop. Today's settlement is a
good first step, as Fortuna is the first company to agree to stop
these practices. My office will continue to investigate the activities
of other drilling companies to ensure that New Yorkers who were
wrongly pressured into lease extensions will have a chance to
renegotiate their leases."

Fortuna, one of the largest natural gas exploration companies in New
York, must obtain leases from landowners to be authorized to perform
its horizontal, high-volume hydraulic fracturing, called horizontal
drilling. These leases allow the company to conduct operations on the
landowners' properties. The leases generally expire after five years
if no operations on the property are ongoing.

Beginning in April 2009, Fortuna, sent letters to hundreds of
landowners whose natural gas leases with the company were set to
expire. The letters, which falsely stated that Fortuna had the right
to extend the leases without the permission of the landowners, claimed
that the leases contained provisions to put the leases on hold until
horizontal drilling permits could be obtained from the New York State
Department of Environmental Conservation. Most of the leases did not
actually contain such a provision.

The letters from Fortuna also instructed landowners that if a
three-year extension of the list, which carried a small percentage of
increase in royalty payments, was not agreed to, a notice would be
filed by the company with the appropriate county clerk of records
declaring that the term of the lease was halted. A lien would then be
obtained against the property, the letter continued. The lien would
prevent landowners from negotiating freely with other companies for
drilling rights.

Fortuna, as a result of the settlement, has agreed to rescind the
letters and will remove any liens placed on the lands of New York
property owners whose leases have expired and whose leases did not
clearly disclose that they could be extended.

Landowners who agreed to Fortuna's lease extension as outlined in the
letter will be given the opportunity to cancel that extension.

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