Published: Saturday, October 22, 2011, 9:00 PM – The Cleveland Plain Dealer, John Funk
Ohio Land Owners Rights When it Comes to Oil & Gas Leases
The boom in gas wells that turned Pittsburgh into “the new Houston,” made rich men out of poor farmers and spawned an environmental backlash has reached Ohio.
Land men, including free-wheeling shysters as well as legitimate gas and oil company employees, are swarming Ohio’s eastern counties, clogging county courthouses with their property record searches and pestering busy farmers.
Their objective: to tie up as much acreage as possible by persuading landowners to sign five-year leases granting them the right to drill for oil and gas in the rock known as Utica and Marcellus shale, buried thousands of feet below.
Geological experts have estimated that the gas-and-oil-rich shale may lie under 5 million acres of rural Ohio landscape and the deposits could contain energy equivalent to billions of barrels of oil.
The implications for Ohio’s economy are tremendous, but so are the challenges for landowners, many of them poor farmers who must first sort through the thorny offers of oil companies, and then wrestle the financial decisions of sudden wealth.
Legal advice lacking
Adding to the confusion, however, is that land men present farmers with contracts that are never written in simple English. And it has become evident to the farm bureau and the Extension service that few Ohio attorneys are experts about oil and gas contracts.
“I have a list of six or seven attorneys for farmers to consider,” Arnold said. “And I have another list of attorney-to-attorney referrals,” he said “This type of law is so new, there is just a handful of attorneys who understand it.”
Both Arnold and the Extension service recommend Columbus attorney Richard Emens as a man land owners can trust.
Emens, with 60 years experience in oil and gas contract law, is considered the dean of the practice. He was instrumental in drafting Ohio’s first comprehensive oil and gas law and has turned out for many of the OSU or farm bureau workshops.
In an interview last week, hoarse from speaking at a landowner leasing workshop the night before, Emens made it clear that he is not negotiating lease contracts. But Emens has advised several groups of landowners who have banded together to deal with the drilling companies.
These groups coalesced when individual farmers grew tired of the pressure from land men offering “standard contracts.” “There is no such thing as a standard or model lease,” Emens said. “A lot of oil and gas companies would like you to think that.”
Many industry contracts contain provisions that would give gas and oil companies too much latitude — for example, to build roads and pipelines on a farmer’s property, to take water from ponds or to inject waste water into existing wells, all without an owner’s consent or without paying anything additional.
Emens said he addressed more than 4,500 landowners in the last 14 months about what to look for in the contracts the oil and gas representatives are offering.
Not all landowner groups evolved spontaneously.
Cleveland attorney Glenn Krassen of Bricker & Eckler has been working for six weeks trying to organize a five-county landowners group modeled somewhat on the Northeast Ohio Public Energy Council, or NOPEC, which negotiates gas and electric contracts on behalf of more than 100 communities.
“We want to combine as much acreage as possible and then negotiate with the oil companies to get the most favorable contracts,” he said. “It’s not just about the money. It’s about leasing provisions that will protect the family farms.”
Krassen described the leasing pressures on farmers as “the Wild West.” Some early contracts offered them were just one page, he said.
And worse, he said, there are independent brokers operating who are actually working for themselves rather that any company.
“They will lease you for $100 dollars per acre and flip the contract for $1,000 per acre,” he said.