Know the Drill Before Signing an Oil and Gas Exploration Lease

The great Ohio land grab has begun! As oil and gas companies flood into the eastern half of Ohio seeking prime real estate over the Utica shale formation — a dense layer of oil-and gas-rich rock thousands of feet below the topsoil — more and more landowners, especially farmers, are being approached by oil and gas company representatives, known as landmen, about leasing their land for exploration.

What should landowners do when the landman comes knocking? Before signing on the dotted line, they should do their homework and educate themselves about the leasing process.

“Knowledge is power and the more you know, the better you can negotiate and the better benefits you can achieve,” said Dale Arnold, director of Energy Policy for the Ohio Farm Bureau in a recent Buckeye Farm News article.

Landowners can find general information about oil and gas leases at the Ohio Department of Natural Resources’ website, which includes a glossary of common lease terminology, FAQs, and issues and questions landowners should discuss with the company before signing a lease, such as “free-gas” provisions and what type of drilling will take place.

Ohio Attorney General Mike DeWine also issued a list of tips for landowners contemplating lease agreements at his blog earlier this year. His recommendations included:
  • Get to know the company — Ask for credentials, references and contact information from the representative of the company who contacts you and make sure that you know which company will do the actual oil and gas exploration.
  • Check with your neighbors — Find out if your neighbors have been contacted and presented with similar proposals.
  • Understand what your leasing — Make sure that you’re clear about what rights the company wishes to lease — oil rights, gas rights, coal rights or something else? Landowners do not have to lease all of their mineral rights.
  • Get everything in writing and review everything before signing — Read the proposed lease and think about it before signing.
  • Consult with an attorney knowledgeable about oil and gas law — Contact the local bar association for attorneys in your area and consider pooling resources with your neighbors to reduce legal fees.

Dale Arnold seconds the attorney general’s advice about seeking professional guidance before signing an oil and gas lease.

“The key is to take your time and get a local attorney who is working on your behalf,” said Arnold. “Many of these companies have a profit motive to get a specific number of people signed in a certain amount of time. They’re on a time commitment, but you as a landowner are not.”

Have you or someone you know been offered or signed an oil and gas lease? Do you have any tips or advice to share?

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