Landowners Groups Pros and Cons

Many landowners looking to lease their land and profit from the increasing demand for drilling sites in the Marcellus Shale/Utica industry have either joined or formed what is referred to in the industry as a Landowners Group. A Landowners Group can fulfill many different aspects of the leasing process, including:

  • Information sharing – Groups can come together to share information as to what companies are looking to lease in their particular area, what the current rates are as far as land acreage, and any special terms or conditions to the leases. If you are thinking of joining a Landowners Group, it is important to find out whether your group is solely together for the purpose of sharing information or whether they are more directly involved in the bargaining process.
  • Marketing your land – Some landowner groups are not only working to share information, but to be more involved in the marketing of their land. This means seeking out and maximizing contiguous acres, acres of land that share a border, and making bid proposals to the various energy companies interested in leasing.
  • Collective bargaining – This is where the landowners have all signed off or guaranteed to accept any terms of leasing accepted by the majority of the group. This is beneficial to the energy companies, as it saves them many hours of individual negotiations and gives the landowners a very strong negotiating position with companies looking to lease land.When looking into a Landowners Group, it is important to know exactly how involved the group is in the negotiating process, whether there are any legal documents involved, and any costs or fees that you may incur as a part of that group. Although it may seem that a joining a Landowners Group may be in the landowners best interests, there are some drawbacks involved:
  • If involved in collective bargaining, all landowners will receive the average market value of the group. Therefore, if your land has a higher market value than those of the group, you may receive less in royalties.
  • Landowner groups, especially the larger ones, are out for the collective interest of the groups. The larger the group, the more people involved in the bargaining process. Therefore, the group may opt to pass on an agreement that may be beneficial to an individual landowner.
  • Contiguous blocks of land are essential to energy companies looking for drilling units. If your group does not have these blocks of land, it reduces the value for the group as a whole.

• Landowners Groups put the decision making in terms of land and leasing in the hands of the group. If there is dissension, or poor leadership, this can affect the entire groupʼs royalties.

Information is the key. Research local Landowners Groups in your area before you make any commitments. Take some time to look over the leasing processes and research your options before you make a commitment.

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