Trustees Announcement: Gas Lease Agreement Reached

The FUMC Board of Trustees is pleased to announce that we have successfully concluded negotiations with the Chesapeake Energy Company for a three-year mineral rights gas lease for our church property. These negotiations have been ongoing for several months and have been kept quiet out of necessity due to their sensitive nature. This message is both to inform the congregation of our progress and to offer a basic explanation of how we have been blessed.

Our church campus is approximately 15 acres, which is a substantial holding for our downtown area. The Board of Trustees was approached by representatives of the Chesapeake Energy with an offer of a signing bonus and production royalties for our mineral rights for gas only in the Barnett Shale play. Chesapeake holds exclusive mineral rights to DFW Airport and other local drilling sites that have the most direct access to our underground minerals.

The Board of Trustees voted to pursue negotiations with Chesapeake several months ago. With the very able assistance of Larry Watkins, a longtime member of our congregation and a landman for a competing energy company, we concluded our negotiations on Thursday, October 4, with the signing of a three-year contract. Chesapeake Energy was superb to work with and granted us several special clauses which we insisted upon in order to protect church property and mineral rights both currently and in the future. Mr. Watkins was invaluable to both the Trustees and to you the congregation for his expertise, professional knowledge and negotiating skills. We all owe him a tremendous debt of gratitude for his assistance.

We consider this mineral windfall to be a legacy from all those church members who have gone before us since 1866 who have donated, acquired, purchased, built, lovingly tended, and now passed down to us our 15-acre campus with intact mineral rights. The Board of Trustees is pleased to finally introduce and announce this unique and historic opportunity for our congregation.

Will there be surface drilling on church property?
No, absolutely not! We have special clauses added to the lease stipulating that this will never happen. All drilling will be done horizontally from remote drilling locations on airport property or other sites allowed by the City of Grapevine.

How deep will they drill?
Chesapeake has the rights to a geologic strata which is several thousand feet deep beneath our property. There will be no noise, vibration, surface damage, building settling, etc. In short, we won't even know that production is taking place.

Will we see any activity or equipment on church property?
No, we have special clauses prohibiting that from occurring. We did grant Chesapeake access to our surface area only for monitoring and testing purposes.

How long will this last?
That is a question only the Lord knows and every oil man wants to know, but we understand that production usually peaks for a while once it starts, then may decline and plateau for several years.

What if they hit oil?
Hallelujah! We get to negotiate another lease specifically for oil. Our current lease is specifically for natural gas only and within a certain depth strata. If they find gas deeper, we renegotiate.

What is this worth to the church?
We received a signing bonus of $89,482.44 - 90% of that was used as a principal reduction on our mortgage and 10% went to the Permanent Endowment Fund. Our contract also calls for 25% of the royalties when and if production is generated.

Should this affect my giving?
No. Your budget giving is directed to the church’s operating budget for administrative and ministry-related expenses. None of the proceeds from the mineral rights will go to the operating budget of the church.

What’s next?
Basically, our 15 acres are put together with other local mineral rights owners to form a 40 acre plot. Chesapeake will then drill horizontally from a remote location to tap the trapped natural gas under that plot. We will receive roughly 25% royalty for any gas production on 15/40ths of that plot. When and if royalties are received, the Administrative Board will decide on disposition of funds.

Is there any downside for the church?
Not that we and our experts can determine.

Return to the Board of Trustees Page...