Drill Rig (photo credit: Pennywise 2007)
Gas and oil companies have certainly made their presence known in the state of Ohio and surrounding area. It’s easy to see why- the Utica and Marcellus shale have the potential to provide a significant amount of energy for the foreseeable future.
In some cases, instead of outright buying the land that they need to drill on, some oil and gas exploration companies will try to lease land from the surrounding community, including residents and farmers. If you are approached by an oil or gas company in order to lease your land for drilling, what should you do?
First things first- are the oil companies talking to the right person?
Now it may sound a bit strange, but the oil and minerals underneath your front porch may not belong to you. You see, the ownership rights to your land is usually divided into two different things- surface rights and mineral rights. Essentially surface rights refer to the surface- as the name implies- the ground, the soil, etc. Mineral rights refer to the material that is beneath the surface- such as oil or natural gas deposits, minerals, etc. The people over at Mineral Web do a great job of explaining the difference- and what it means to you here.
So how do you know if you own the ability to lease both the surface ground, and the mineral rights beneath it? In most cases you do- but the place you want to check is the deed of sale for your property. It should state there if the mineral rights were not included in the sale, or if it was given or sold to another party. If you can’t find your deed, be sure to check with your local county recorder’s office or tax assessors office. They should be able to help you get in touch with the proper people to get a new copy.
Ok- I’ve determined that I own both the surface and mineral rights on my property- now what?
In a lot of cases the people approaching you about leasing your land won’t be actual oil or gas companies- they will be land or real estate companies acting on behalf of the oil or gas. They are doing something called speculation- essentially they will try to negotiate the lease and then resell it to the highest bidder in the oil and gas industry. Remember, they are in the business to make a profit- not to look out for your best interest. That is your job. So the best thing to do when a land company (or an oil company for that matter) approaches you is to contact an attorney you trust to help you find an attorney that specializes in contract law and negotiations. Trust me, most people- even the most intelligent can be overwhelmed by the contract negotiation process. It’s best to bring in the special teams before anything is discussed much less signed.
Isn’t it just about leasing my land and getting royalty payments from the oil company? What’s the big deal?
Well, in truth, leasing land and mineral rights to a land spectator and/or an oil company can affect your life in so many different ways- all of which need to be considered. A few of them may include- but are not limited to the following:
- Groundwater- if you use a well for water, or if you neighbors do, you might have to be connected to a municipal water system.
- That beautiful view of the hills that you and your family fell in love with? That might change to include oil wells and drill rigs.
- You and the oil company may have to contend neighbors who might not want drilling for oil in their neighborhood.
- Yes- in most cases you will make money and get royalty payments from the lease. However, it is your responsibility to make sure that you get paid. That’s why having a good and reputable attorney on your side is so imperative. The oil and gas company or speculating company will try and make sure that they get the most profitable contract for them. This is a business, after all. It’s your responsibility to make sure your interests are addressed properly.
- Allowing an oil or gas company to lease a portion of your land will most likely change the value of it. Whether it increases or decreases in value depends on a number of factors- including market forces, practices of the oil company (pollution, clean up, housekeeping practices, etc.) and how people view the process.
Remember, leasing the ground beneath your feet to an oil or gas company can be a long-term commitment- sometimes a decades-long commitment. If someone approaches you about leasing your land, make sure you are informed and have the resources in place to make sure you make the right decision for you and your family.