3a: Money and the Hundred-Year Plan

The Hundred-Year Plan

As you know, I've got this "Hundred-Year Plan" thing that I invented in my poor head to help me decide how to regard anything that happens here - that whatever we do, we should do it with the next hundred years in mind. It has three parts to it:

1. Physical Structure

So, the first leg of that "Hundred-Year Plan" tripod is the physical structure: let's secure the building, the barn, the land-use, the trees, and most importantly the water. That's why I was so determined that somebody with an interest in the Manse bought the property over by the spring (Dar).

That's why I'm so persistent that if it's possible the sill beams get repaired the right way and before they collapse, that the next roof is a long-term roof like a metal roof, that the spring cistern gets repaired with a permanent fix, etc etc.

2. Legal Structure

The second leg of that "Hundred-Year Plan" tripod is the legal structure - frankly I believe that, excepting internal family strife, the government is the largest threat to the place. Hence, the switch from the old trust to the new corporation.

In this country corporations have all the legal rights and privileges of individuals and all the governmental protections of institutions. In addition, they outlive any one person and aren't subject to the caprices of any one person. They endure.

3. Financial Structure

The third leg of that "Hundred-Year Plan" tripod is the financial structure: I spoke about that several years ago in earnest and it has cropped up in one form or another over the years - we all would like to see a large block of money that, properly invested, would accrue enough interest to satisfy the basic needs of the other two legs (physical and legal) in perpetuity. A Trust Fund, but one for the Merryall Manse Corporation.

It is this last part that for which I see an opprotunity with the non-surface-disturbance lease. If we can be assured that the property use remains intact, that the mission of the Merryall Manse, inc is unaffected, the amount of bonus money alone that they're offering us could fulfill this last part.

The Gas Lease has two financial components:

  1. The Bonus:This is a one-time payment upon lease signing. we've currently been offered as a first offer $3,500 an acre for a no-surface-disturbance lease. The going rate currently for land on which they can drill is $5,750/acre. I think we can negotiate for more than the $3,500/acre. I want to ask for at least $5,000/acre. $3,500/acre gets us 188,000 after taxes. $5,000/acre gets us $270,000 after taxes. If that amount of money was invested at 2% it would produce enough cash each year to keep the Manse financially stable and physically repaired in the Hundred-Year Plan.
  2. Royalties: This is speculation at its most extreme and we should in no way rely on these payments. It's not just how much gas is there, it's how fast it comes out, how much pipeline there is to move it, and what the current gas price is. Royalties are only paid when they pump gas, and there are lots of reasons why the well won't be producing.

However, there are two people, one of which I've met that are currently receiving $1,000 per acre per month on newly operational wells. Wells diminish in pressure in the first year, tending to settle out from a low of around $50 to a high of around $400 per acre per month for an excellently producing well in very good conditions like the Marcellus shale. Wells are predicted to last 20 years. However, there are 6 wells permitted on each pad, so they could produce 6 times the income, or the same income for 6 times as long.

With one operational well that works out to a possibility of:

Should royalties ever begin on our 88 acres, we would need a legal entity to manage the amounts of money coming in. The current legal entity of Merryall Manse, Inc, the non-profit, non-membership corporation is not suited to managing large amounts of money. I will explain this: see 3b Structures for Corporate and Legal considerations.