What a Landowner Needs to Know Before Signing an Oil and Gas Lease

Date: October 31, 2012
Time: 6-9 p.m.
Location: Olive Township Hall, 6480 136th Ave., Holland, MI 49424
Contact: Adam Kantrovich, 616-994-4580, akantrov@anr.msu.edu, Greg Ransford, 616-786-9996; Curtis Talley Jr., 231-873-2129

Recently, a number of companies have begun contacting landowners in many areas of the state in efforts to lease land for oil and natural gas exploration. Lease bonuses are being offered from $35 to $200/acre.

As a property owner, when you read the lease you are offered, do you understand what you have read? What do you need to know to determine if you want to sign a lease?

Some things to consider:

  • What does it mean my royalty will be paid based on net income?
  • What are the post-production costs the lease mentions? How do they reduce my royalty?
  • Is there an alternative to a 1/8 royalty? What royalties do other areas of the U.S. receive?
  • What state agency regulates the oil and gas industry to insure the wells are properly constructed?
  • Is compulsory pooling a bad thing for the landowner?
  • What is horizontal drilling and hydraulic fracturing? Are they safe?
  • Does “brine and other chemical disposal” mean there could be an injection well on my property?
  • What does it mean that I have to defend the title to my land?
  • If it’s an oil and gas lease, why does it say it includes helium, nitrogen and other gases?
  • How do I insure the land is reclaimed in the manner I wish?
  • Can I charge a fee for pipelines placed on the property? Can I charge for uses of the land surface, other than for the well site?

To address these questions, MSU Extension, Olive Township and Ottawa County Farm Bureau are sponsoring an informational meeting about negotiating an oil and gas lease and the oil and gas industry on Nov. 1, from 6- 9 p.m. at the Olive Township Hall 6480 136th Ave., Holland, Mich.There is a registration fee of $5 per person payable at the door.

When you sign an oil and gas lease, you have essentially “sold” a part of your property. Obtaining a good lease is a negotiation. Negotiating the lease can result in much more income to the landowner over the lifetime of the lease and insure the land is managed for oil and gas production in an acceptable manner. An oil/gas/mineral lease is an important legal document that can last for many years. A landowner has one opportunity to obtain a good lease and that is before it is signed. Negotiation of these terms may be a landowner’s first exposure to an oil and gas lease.

The presentation will include speakers from the Department of Environmental Quality, Oil, Gas and Minerals division and Michigan State University Extension, a representative from the oil and gas industry and an oil and gas attorney that represents private landowners. There will be a question and answer period for the speakers to answer questions. The meeting is open to the public and although no pre-registration is required, it would be helpful in preparing materials to know an estimated attendance number, so we are asking that you contact the Ottawa County MSU Extension office at 616-994-4540 by Oct. 31. Registration is also welcome at the door.

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