Shale Boom Brings Challenges to the Banking Industry

Residential mortgage lenders used to pay little attention to oil and gas leases. Then came the drilling boom in the Marcellus and Utica shales and a spate of negative publicity about the potential adverse effects of fracking. Our firm has been engaged in an ongoing project to review oil and gas leases in connection with loans secured by mortgages on residential properties. We advise our lender client regarding whether the lease contains sufficient protections for the borrower and the bank that the loan can or should be made. We also review requests from oil company lessees that the bank’s existing mortgage be subordinated to their leases.