Land Leasing FAQ

Many land owners are being approached by various oil and gas companies, with regards to leasing their land for drilling purposes. While individuals have the opportunity to earn money from these companies in exchange for leasing their land, most people have questions about protecting their assets while ensuring they receive the best possible offer.

Below are some commonly asked questions, with regards to land leasing. The content is for informational purposes only, and a qualified and reputable attorney should be contacted for specific information and applicable laws to individuals in various states.

Q. How do I know if there is Oil or Gas on my property, and who owns it?

While laws and regulations can vary from state to state, Pennsylvania law states that all surface and mineral rights belong to the landowner. According to the Pennsylvania Department of Environmental Protection if you own property, your deed may state ownership is “fee simple”; that means you own the surface and mineral deposits. Otherwise, someone else may own mineral properties on the tract. A thorough title search may discover different ownership rights to the mineral property. Otherwise, another party may have ownership of the surface and mineral deposits. In order to know for certain, you should visit your local Recorder of Deeds office in your county.

Determining whether or not there is actually oil or gas on your property is an entirely different matter. If you have been contacted by and oil or gas company, chances are that you have oil and gas on your property. You can contact a private oil and gas geologist to determine the likelihood, but be sure that the survey is conducted by a qualified consultant.

Q. Are there different types of leases for drilling?

Typically, and depending on where you live, there are two options. The first is considered a “development” lease, meaning that the lessee (or drilling company) has is allowed to encroach on the property for the purposes of developing the well site. This would include digging, the entry and exit of vehicles and machinery. With a development lease, the lessors (or property owners) receive free gas from the well that is located on the property. The second type of lease is known as a “non-development” lease, and is for use of the minerals under the surface only, with no property encroachment permitted. While royalties are paid to the landowner under both leases, property owners typically do not receive free gas with a non-development lease.

Q. Will the drilling of a well disrupt my day to day living?

During the initial phase of site preparation and drilling, there may be some disruption. Site preparation entails large machinery entering and exiting the site, and the initial well erection and drilling will operate 24 hours a day, 7 days per week. Therefore, there may be noise, dust, lighting and the like for the time that this process is going on. However, a typical well can be drilled within 10-14 days, at which time the site is restored and back to normal.

Q. I am planning to lease my property to an Oil and Gas company. What should I do next?

First and foremost, contact an attorney who specializes in oil and gas law. If you don’t know of a reputable attorney who specializes in oil and gas leases, contact your local bar association for a referral.

Use the services of an attorney to negotiate your lease payments.

Be sure to work with your attorney to negotiate a fair and reasonable royalty amount. Your attorney should be familiar with the laws and regulations of royalty payments; in Pennsylvania, for example, the minmum royalty paid to lessors is set at 1/8th of the value of the produced oil or gas. While royalty amounts can be negotiated, however, the aforementioned is law in the state of Pennsylvania.

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