Oil and gas leasing

Several people attended the oil and gas leasing information meeting last week, but in case you missed it, I would like to share some of the information presented.

The oil companies are starting to drill again, after a layoff and so it is important to be informed.

Do you know what an orphan well is? An improperly abandoned oil and gas well on your property may be a hazard to the environment and your health and safety. Recognizing an "orphan" or abandoned well and what can be done to properly plug it is important.

The Ohio Department of Natural Resources Mineral Resources Management has a technical services support section to answer questions, such as "how will I know if I have a leaking abandoned oil and gas well on my property?" "Who is responsible for plugging oil and gas wells in Ohio?" "What is the orphan well program? "What happens after a complaint is filed?" "How long does it take the orphan well program to plug a well once a complaint is filed?" "Why am I asked to sign a landowner waiver?" And other questions can be answered by contacting the ODNR at 614-265-7059 or go online to ohiodnr.com
You probably knew there was an oil and gas field enforcement provided by the state of Ohio. They respond to citizens' complaints about oil spills, gas leaks, brine disposal, safety, idle wells and well or tank fires. They have several regional offices. The one closest to our area is in Cambridge. You may contact them at 740-439-9079

Larry Gebhart, attorney for the Ohio Farm Bureau, said there are 14 inspectors in the state. The main point he brought out over and over is that you are the one responsible to enforce the lease. It is between you and the company, not the state of Ohio. And you should always have a back up energy source when you have a well. Limit the scope. The more you can limit the more you can protect your interest.

The leverage you have depends on how much they want to drill. Everything is negotiable.

The lease should of course be fair to both parties. Your lease should include the payment for an attorney to review the actual lease before signing. You should also specify which acreage they can use. The lease should include the set period of time and can be limited from a few months to 10 years or more. They are usually for a 2- to 5-year period. If there is a delay in drilling a rental fee per acre should be established and you can ask for a rental fee in advance. The percentage of your payment for an oil and gas lease is usually one-eighth of the production. You can ask for interest money if the payments are not made on time. You can also look up copies of the production records of each well.

You can establish a set time for commencement of a second well or lease termination, since 15 percent of wells drilled are dry holes. If they shut in a well, make some provision for payment until the termination of the lease.

You should not allow storage tanks or storage of brine without a separate agreement semis could be running in and out of your property to dispose of these items.

A typical lease provides for 200,000 to 400,000 cubic feet of free gas for the property owner. Usually for one house. If you use more than the free amount you should negotiate a payment such as the wellhead price rather than retail price. The landowner is required to install and hook up for the free gas connection, some land owners may wish to include an option to buy the unproductive well, which makes them responsible for the plugging and other liabilities.

There may be a clause to allow the oil and gas company to sell, trade, sublet or transfer the lease to another firm. You should ask for a written right of approval before assignment and the right to say no.

You may want to ask for damages to crops, drainage, water supplies, fences and timber. Multiple owners must each sign the lease many more items maybe necessary in each situation. The main thing is check references, stay in communication, check with other well owners, remove lease from title if terminated, limit the scope and good luck.

Jo Hoeust from the Division of Mineral Resources Management, was present to answer questions. He stated that the division was formed in 1955. The big oil boom in our state was in 1965. The first oil well in the state of Ohio was drilled in 1814 in Noble County and was 465 feet.

There are now 16,966 producing wells in 42 counties in the state. They run from 200 feet to 12,000-ft. deep wells, in 13 formations.

In 2006, 952 new wells were drilled. The shallowest was 400 feet in Lorain County and the deepest was 7,800 feet in Tuscarawas county. Muskingum County had 52 new wells drilled. The total value across the state was $1,700,449. The early 80s was the only time the value was over a billion.

Jill Lane, of the Hopewell Oil and Gas Company, was also present at the meeting. They have been in business for 25 years. She stated that the average length of a lease was about 20 years and most items mentioned by Larry Gearhart were in their leases. They try to stay in the same area to drill and unitize if the well is close to a property line. She said you should call someone they had drilled for in the past to get references. They are drilling in Licking County at this time. She had a copy of their lease which she handed out to anyone interested to review.

Farm Bureau provides these meetings for our members to keep them informed.

Ruth Mclaughlin in the information chairperson for the Muskingum County Farm Bureau. She can be reached at 740-674-4777.