An oil and gas lease can have a long-term impact on your property. And because of all the implications of these leases, land owners should get the advice of an attorney before signing such a lease. This was advice that Judge Tim Grendell from Geauga County gave to the group at the Food and Agriculture Committee breakfast meeting in Gustavus recently.
Grendell said there are high pressure sales tactics being used by people wanting landowners to sign leases on the land. For example, some sales people are telling land owners that the lease they want them to sign is state or government "approved." As he pointed out, there is no "standard" form or government approved lease.
These leases are all negotiable, and landowners should deal directly with drillers. Apparently there are a number of salespeople that represent brokers talking to landowners. These often are smooth-talking salespeople who want land owners to lease for a small dollar amount per acre, like $50. Then they sell these leases to drillers for a much higher amount and pocket the difference.
In this area, the upfront money that should be offered is negotiable and averages from $2,000 to $3,000 an acre. Land owners need to know what is possible and need to stay in touch with neighbors about these leases.
Leases should say what the landowner share will be if gas or oil is found. The usual compensation is a one-eight royalty amount.
Other things Grendell indicated a lease should include are a requirement that drilling be done within a set period, such as one year. The number of wells on the land should be restricted and there should be a lease termination time.
Landowners should not allow any of their water supply to be used in the drilling or "fracking" process. Well locations should be determined by the landowner and safety features, such as fencing and screening, should be specified. They should also be paid for "surface rights" because these wells can take several acres in the drilling process and completion.
The landowner should require a "shut in" fee, which says they will get paid even if the well is shut down.
Before drilling begins, landowner water supplies should be tested for both quantities and contamination. One of the biggest problems with drilling is water contamination caused by improper installation of the well casing and the cementing of the casing.
Grendell said that leases should protect the land owners and they should be very careful before signing a lease. He suggested dealing directly with a driller is preferred, rather than some middle man or broker. They tend to take more advantage of land owners.
Studies indicate we have huge quantities of gas and oil down in the Marcellus and Utica shales far below us. To be able to safely tap those deposits can have a huge impact on our economy. They can help us get away from so much imported oil and gas. But tapping into them must be done safely, and the landowner must be treated fairly.
Parker is an independent agricultural writer and works with the local Farm Bureau Board