Frequently Asked Questions
Q. Is there oil and natural gas under my property?
Answer
Depending on where you live, there is a considerable variation in the likelihood of encountering hydrocarbon deposits in the subsurface. By far the area of greatest oil and gas drilling activity is the eastern third of Ohio (from Cleveland eastward) also encompassing two thirds of Pennsylvania, all of West Virginia and parts of Kentucky and Tennessee.
A geologic consultant can give you a better idea of the probability of a successful well. Keep in mind that even if the available geological information indicates a good possibility for oil or gas under your property, there may be impediments to drilling. In urbanized areas, it may be impossible to acquire the necessary leases to form a drilling unit of sufficient acreage. In other places, the pipelines through which the gas is transported may be of such a great distance, that the cost of building the necessary connections to these pipelines (sales lines) is not justified by the anticipated natural gas reserves from the well(s). In other areas the gas is sour (high hydrogen sulfide, H2S), which would require having a "scrubber" installed, and this cannot be economically justified. In portions of Ohio the natural gas has a relatively high nitrogen content, which in turn lowers the energy content (Btu), and this brings a lower market price for the gas. Other areas are environmentally and ecologically sensitive. Extensive precautionary measures required for well drilling in these areas can be cost-prohibitive. Finally, market conditions vary extensively. The current market price of oil and gas represents a decline of approximately 60% from the peak price in the middle of summer 2008.
Depending on where you live, there is a considerable variation in the likelihood of encountering hydrocarbon deposits in the subsurface. By far the area of greatest oil and gas drilling activity is the eastern third of Ohio (from Cleveland eastward) also encompassing two thirds of Pennsylvania, all of West Virginia and parts of Kentucky and Tennessee.
A geologic consultant can give you a better idea of the probability of a successful well. Keep in mind that even if the available geological information indicates a good possibility for oil or gas under your property, there may be impediments to drilling. In urbanized areas, it may be impossible to acquire the necessary leases to form a drilling unit of sufficient acreage. In other places, the pipelines through which the gas is transported may be of such a great distance, that the cost of building the necessary connections to these pipelines (sales lines) is not justified by the anticipated natural gas reserves from the well(s). In other areas the gas is sour (high hydrogen sulfide, H2S), which would require having a "scrubber" installed, and this cannot be economically justified. In portions of Ohio the natural gas has a relatively high nitrogen content, which in turn lowers the energy content (Btu), and this brings a lower market price for the gas. Other areas are environmentally and ecologically sensitive. Extensive precautionary measures required for well drilling in these areas can be cost-prohibitive. Finally, market conditions vary extensively. The current market price of oil and gas represents a decline of approximately 60% from the peak price in the middle of summer 2008.
Q. What is driving the interest in gas drilling in the area?
Answer
Three factors are driving the interest: 1. The presence in the region of the Marcellus Shale formation and the natural gas reserves many believe it contains; 2. New technologies that make it possible to capture the gas; 3. The close proximity the formation has to the nation's largest natural gas market, which is the metropolitan corridor running from Boston to Washington, D.C.
Three factors are driving the interest: 1. The presence in the region of the Marcellus Shale formation and the natural gas reserves many believe it contains; 2. New technologies that make it possible to capture the gas; 3. The close proximity the formation has to the nation's largest natural gas market, which is the metropolitan corridor running from Boston to Washington, D.C.
Q. What are the different types of leases?
Answer
Leases can be either development or non-development. The difference is that a development lease will allow encroachment on the surface of the land for drilling and operating the well. A non-development lease is for use of the subsurface minerals only and no surface trespass is involved. Both types share equally in the landowner royalty of a unit, but non-development lessors typically do not receive as high of a royalty and a lower signing bonus.
Leases can be either development or non-development. The difference is that a development lease will allow encroachment on the surface of the land for drilling and operating the well. A non-development lease is for use of the subsurface minerals only and no surface trespass is involved. Both types share equally in the landowner royalty of a unit, but non-development lessors typically do not receive as high of a royalty and a lower signing bonus.
Q. How long does it take to drill a well?
Answer
Most horizontal wells can be drilled in about 3 to 4 months. After drilling, it may take several weeks to schedule work crews to complete the well for production. If there is no infrastructure for gas transport, wells could be shut-in for several months to years before it will actually go into production.
Most horizontal wells can be drilled in about 3 to 4 months. After drilling, it may take several weeks to schedule work crews to complete the well for production. If there is no infrastructure for gas transport, wells could be shut-in for several months to years before it will actually go into production.
Q. How disruptive is the drilling?
Answer
During the time that the well is being drilled, the rig must run 24 hours a day, seven days a week. There will be noise from the machinery, light from the rig tower at night and dust or mud from the site. Once the drilling is done, there will be some daylight-only operations during the completion stages. After the well is in production and the site has been restored, the area is essentially back to normal with a fenced in well pad site.
During the time that the well is being drilled, the rig must run 24 hours a day, seven days a week. There will be noise from the machinery, light from the rig tower at night and dust or mud from the site. Once the drilling is done, there will be some daylight-only operations during the completion stages. After the well is in production and the site has been restored, the area is essentially back to normal with a fenced in well pad site.
Q. Will my well water be harmed?
Answer
Each application to drill is examined on an individual basis by a governing body within the state where the gas well is being located. They determine the deepest source of underground drinking water. A casing plan is then designed to protect the aquifers that may be affected. Steel casing is installed in the well and cemented under the supervision of the governing body and there inspectors. In the rare instance that a water supply should become contaminated or diminished as a result of drilling, the law requires that the producing company replace the supply.
Each application to drill is examined on an individual basis by a governing body within the state where the gas well is being located. They determine the deepest source of underground drinking water. A casing plan is then designed to protect the aquifers that may be affected. Steel casing is installed in the well and cemented under the supervision of the governing body and there inspectors. In the rare instance that a water supply should become contaminated or diminished as a result of drilling, the law requires that the producing company replace the supply.
Q. What if my neighbors lease and I don’t want to?
Answer
Every state is different, but in Ohio if your property is needed to complete a drilling unit and you elect not to lease, there is a provision in Ohio law that allows the producing company to apply for a mandatory pooling order to meet state spacing regulations. If approved, mandatory pooling includes your property in the unit and you receive your proportionate share of the landowner royalty as though you had leased, but there is no lease agreement between you and the company. Historically, less than 2% of drilling applications have requested mandatory pooling.
Every state is different, but in Ohio if your property is needed to complete a drilling unit and you elect not to lease, there is a provision in Ohio law that allows the producing company to apply for a mandatory pooling order to meet state spacing regulations. If approved, mandatory pooling includes your property in the unit and you receive your proportionate share of the landowner royalty as though you had leased, but there is no lease agreement between you and the company. Historically, less than 2% of drilling applications have requested mandatory pooling.
Q. What rights do I have as surface owner if someone else owns the minerals?
Answer
The lease agreement defines the conditions that apply between the company and the mineral interest owner. Any other conditions relative to surface activity (i.e., location approval of wells, roads, tanks, damages, etc.) also have to be declared in the lease. Unless specifically declared otherwise, the interest of the mineral owner takes precedence over the surface occupant in cases of mineral severance.
The lease agreement defines the conditions that apply between the company and the mineral interest owner. Any other conditions relative to surface activity (i.e., location approval of wells, roads, tanks, damages, etc.) also have to be declared in the lease. Unless specifically declared otherwise, the interest of the mineral owner takes precedence over the surface occupant in cases of mineral severance.
Q. What rights do I have if the company does not fulfill its terms of the lease agreement?
Answer
Any dispute concerning the lease is a private matter between the lessor and lessee. Communication between the parties is always strongly encouraged. Most leases have a notification provision that must be followed to try and settle any conflict that cannot be otherwise resolved. If all else fails, legal assistance should be sought.
Any dispute concerning the lease is a private matter between the lessor and lessee. Communication between the parties is always strongly encouraged. Most leases have a notification provision that must be followed to try and settle any conflict that cannot be otherwise resolved. If all else fails, legal assistance should be sought.
Q. What if a landman is putting pressure on me to sign an oil and gas lease now?
Answer
Of course we cannot guarantee that waiting to execute a lease will not result in an operator or lessee losing interest in your minerals for the time being, but in the vast majority of cases, waiting to execute a lease until you have all of the facts regarding your specific situation greatly works to your benefit. Generally speaking, oil, gas and mineral leases almost always contain a primary term allowing oil and gas companies a specific amount of time to drill for and produce minerals, but also contain a habendum clause that allows the oil and gas companies to continue your lease in force and effect for so long as minerals are produced. Consequently, a mineral lease may hold your minerals for long-lasting periods of time (it is not unheard of for mineral leases to hold minerals for fifty-plus years) amplifying the importance of obtaining the best possible lease for your situation. Realize that frequently oil and gas companies are in competition for the right to your minerals. If a landman is pressuring you to execute something immediately, such pressure is quite possibly a result of the landman attempting to tie up the leasing rights to your minerals before you are approached by competition. In any event, executing a lease for your minerals is a business decision, so if you're feeling pressured to execute something quickly, take a moment to question why such pressure tactics are being employed.
Of course we cannot guarantee that waiting to execute a lease will not result in an operator or lessee losing interest in your minerals for the time being, but in the vast majority of cases, waiting to execute a lease until you have all of the facts regarding your specific situation greatly works to your benefit. Generally speaking, oil, gas and mineral leases almost always contain a primary term allowing oil and gas companies a specific amount of time to drill for and produce minerals, but also contain a habendum clause that allows the oil and gas companies to continue your lease in force and effect for so long as minerals are produced. Consequently, a mineral lease may hold your minerals for long-lasting periods of time (it is not unheard of for mineral leases to hold minerals for fifty-plus years) amplifying the importance of obtaining the best possible lease for your situation. Realize that frequently oil and gas companies are in competition for the right to your minerals. If a landman is pressuring you to execute something immediately, such pressure is quite possibly a result of the landman attempting to tie up the leasing rights to your minerals before you are approached by competition. In any event, executing a lease for your minerals is a business decision, so if you're feeling pressured to execute something quickly, take a moment to question why such pressure tactics are being employed.
Q. What is important about the terms in the oil and gas and mineral lease?
Answer
Remember that leases are provided on the terms of the oil and gas companies. In almost all cases, lease terms are negotiable. Production of minerals is a complex process, and lease clauses are frequently filled with very technical and confusing terms. Lease terms are numerous and complex, and the increase in the quality of technology is leading to more complex terms all the time. Undoubtedly, some convoluted lease terms are a function of the complexity of the process, but sometimes such clauses are written in a confusing manner by design so that the average mineral owner understands only a fraction of what the lease actually says.
Remember that leases are provided on the terms of the oil and gas companies. In almost all cases, lease terms are negotiable. Production of minerals is a complex process, and lease clauses are frequently filled with very technical and confusing terms. Lease terms are numerous and complex, and the increase in the quality of technology is leading to more complex terms all the time. Undoubtedly, some convoluted lease terms are a function of the complexity of the process, but sometimes such clauses are written in a confusing manner by design so that the average mineral owner understands only a fraction of what the lease actually says.
Q. How much more money will your firm get for me on my oil and gas lease?
Answer
Each situation is different, and a variety of factors play into each individual mineral owner's negotiations. We cannot, of course, guarantee that you will receive more money as a result of our representation, but the likelihood of receiving a better deal is substantially better if you are adequately represented by experienced oil and gas consultants.
Each situation is different, and a variety of factors play into each individual mineral owner's negotiations. We cannot, of course, guarantee that you will receive more money as a result of our representation, but the likelihood of receiving a better deal is substantially better if you are adequately represented by experienced oil and gas consultants.
Q. Will there be damage to the surface of my land when drilling for oil or gas starts? Is there anything I can do to protect my land from surface damage?
Answer
Surface damage is a necessary side effect from the production of minerals. While the drilling of wells results in different types of damages and the extent to which such damage may occur, we can generally negotiate terms into your lease to minimize damage and provide that operators must return your land to as close as possible to its original condition.
Surface damage is a necessary side effect from the production of minerals. While the drilling of wells results in different types of damages and the extent to which such damage may occur, we can generally negotiate terms into your lease to minimize damage and provide that operators must return your land to as close as possible to its original condition.
Q. I only own part of the minerals on my land. Do all the mineral owners have to agree on lease terms?
Answer
No, but it is generally better if mineral owners can combine acreage in an effort to offer as much acreage as possible for lease. We have experience putting together blocks of mineral acreage and negotiating the best possible leases for multiple parties. Nevertheless, even parties combining together to maximize their bargaining position do not necessarily have to agree on lease terms, and on some occasions mineral owners may actually desire to lease on different terms depending on amount and location of acreage or other circumstances.
No, but it is generally better if mineral owners can combine acreage in an effort to offer as much acreage as possible for lease. We have experience putting together blocks of mineral acreage and negotiating the best possible leases for multiple parties. Nevertheless, even parties combining together to maximize their bargaining position do not necessarily have to agree on lease terms, and on some occasions mineral owners may actually desire to lease on different terms depending on amount and location of acreage or other circumstances.
Q. What are the different ways I can make money from minerals under my land?
Answer
Mineral owners can sell or lease their minerals. Leased minerals generally result in an upfront bonus money payment, typically calculated on a per-acreage basis, for execution of the lease. In the event that minerals are produced, the leaseholders must then pay royalty payments for minerals produced to mineral owners subject to leases. If production is substantial, royalty payments may be very large and can continue for long periods of time, providing residual revenue for mineral owners for many years. Mineral owners can also sell their minerals outright, in which case they would receive an amount acceptable to buyer and seller and execute a deed to the minerals, very similarly to a sale of land. Minerals have various traits (bonus, royalty, developmental rights and rights to sign leases, among others) and sales of minerals may be for only some of these rights or the entire mineral estate. In the event that a mineral owner sells its entire right to the mineral estate, the owner would sell them on terms mutually acceptable to the owner and the buyer, and the mineral owner would have no future right to any money as a result of its former ownership of the minerals.
Mineral owners can sell or lease their minerals. Leased minerals generally result in an upfront bonus money payment, typically calculated on a per-acreage basis, for execution of the lease. In the event that minerals are produced, the leaseholders must then pay royalty payments for minerals produced to mineral owners subject to leases. If production is substantial, royalty payments may be very large and can continue for long periods of time, providing residual revenue for mineral owners for many years. Mineral owners can also sell their minerals outright, in which case they would receive an amount acceptable to buyer and seller and execute a deed to the minerals, very similarly to a sale of land. Minerals have various traits (bonus, royalty, developmental rights and rights to sign leases, among others) and sales of minerals may be for only some of these rights or the entire mineral estate. In the event that a mineral owner sells its entire right to the mineral estate, the owner would sell them on terms mutually acceptable to the owner and the buyer, and the mineral owner would have no future right to any money as a result of its former ownership of the minerals.
Q. I want to sell my land but would like to keep my minerals. What do I do?
Answer
Selling surface land and reserving some or all of the mineral estates is a common practice in Texas, and doing so is perfectly acceptable, but care must be used when constructing the paperwork surrounding the transaction. The fact that minerals will be reserved in the sale should be reflected in the sales contract and mentioned in any listing of the property for sale. Further, a clearly written mineral reservation must be correctly included in the deed for the sale of the surface land. Because of a confusing history of case law from Texas courts, additional care must be used if a fraction of the mineral estate is to be reserved. We strongly recommend always seeking competent legal counsel when reserving minerals pursuant to a sale of surface land.
Selling surface land and reserving some or all of the mineral estates is a common practice in Texas, and doing so is perfectly acceptable, but care must be used when constructing the paperwork surrounding the transaction. The fact that minerals will be reserved in the sale should be reflected in the sales contract and mentioned in any listing of the property for sale. Further, a clearly written mineral reservation must be correctly included in the deed for the sale of the surface land. Because of a confusing history of case law from Texas courts, additional care must be used if a fraction of the mineral estate is to be reserved. We strongly recommend always seeking competent legal counsel when reserving minerals pursuant to a sale of surface land.
Q. How do I find out if I own the minerals under my land?
Answer
This is a question commonly asked that is not always easy to answer. To properly determine whether a party owns minerals underneath a surface estate (and if so, what percentage of minerals are owned) an extensive search of the deed records in the county courthouse is required. Some lawyers will perform this service, and there are reputable land-services companies and professional landmen that will charge fees to determine mineral ownership. We recommend contacting an attorney if you have questions about paying fees to a party to determine your mineral ownership.
This is a question commonly asked that is not always easy to answer. To properly determine whether a party owns minerals underneath a surface estate (and if so, what percentage of minerals are owned) an extensive search of the deed records in the county courthouse is required. Some lawyers will perform this service, and there are reputable land-services companies and professional landmen that will charge fees to determine mineral ownership. We recommend contacting an attorney if you have questions about paying fees to a party to determine your mineral ownership.
Q. How will a gas lease affect ag-land preservation, conservation easements and other programs?
Answer
State law allows gas resource development without adversely impacting state agriculture preservation programs as long as no permanent buildings are constructed. The same holds true with the federal program CREP as long as the land is restored back to a farmable condition. A landowner must repay CREP money on any land that is not restored. The tax program Clean and Green allows land to contain a well head and access road without affecting program status. Prior to signing a lease, the landowner may negotiate for the company to pay any rollback taxes owed the government.
State law allows gas resource development without adversely impacting state agriculture preservation programs as long as no permanent buildings are constructed. The same holds true with the federal program CREP as long as the land is restored back to a farmable condition. A landowner must repay CREP money on any land that is not restored. The tax program Clean and Green allows land to contain a well head and access road without affecting program status. Prior to signing a lease, the landowner may negotiate for the company to pay any rollback taxes owed the government.
The general information contained on this page and on the rest of this website does not constitute legal advice and should not be relied upon, nor should it be used in place of advice received from a license attorney. None of the information contained on this website constitutes legal advice because they were not written for your reliance, nor are they necessarily applicable to the facts of your specific case, in the event that you have one.
