Landowners determine impacts of oil and gas leasing negotiation efforts in survey

Results of a survey sent to 130 landowners in 19 Michigan counties determines their activities in oil and gas leasing and their sources of assistance information.

As of August of 2013, Michigan State University Extension had organized or assisted in a total of 52 public educational meetings with 5,581 attendees with an average of 107 attendees per meeting. A random sample of 130 people from 19 counties was selected from the meeting sign-in sheets to receive a written, follow-up confidential survey. The goal was to determine what, if anything, had occurred regarding oil and gas leasing on their property since they had attended an educational meeting. The surveys were mailed on August 20, 2013. When each survey was returned, it was given an i.d. number and the data entered and accumulated.

Participants were asked questions about the bonus, a cash payment that is paid to the mineral owner after lease signing. It is paid for each mineral acre in the lease. Following are the questions and aggregated answers.

What was the initial bonus payment offer? Some of the respondents chose not to answer this question while others stated that they had signed a confidentiality agreement and could not provide that information. For those who supplied an offer amount, the average initial offer was $51.34 per acre, with a range of $15 to more than $100.

Did the bonus payment increase due to lease negotiations? The survey compared the average initial bonus payment per acre offered to the bonus paid due to lease negotiations. Only the answers from those landowners who eventually signed a lease were included. Twenty nine percent of the respondents stated they did not sign a lease because either their income or other contract term goals were not met. Twenty-two percent of those who answered did not negotiate an increase, while 83 percent did negotiate for better terms. Negotiations lead to a bonus payment increase that averaged $34.89 per acre, or an increase of 68 percent.

How many acres of cropland do you own? The average of the participants surveyed reported cropland ownership of 323 acres.

Did you utilize MSU Extension oil and gas leasing resources? In addition to public educational meetings, MSU Extension created a web page that provided resource materials, including a webinar, a video, oil and gas newsletters, fact sheets and news articles to assist mineral owners to learn and understand the terms and conditions offered in an oil and gas lease contract. The web page included links to State of Michigan and other pertinent resources. Additionally, a quarterly electronic Oil and Gas Newsletter was created and offered at no cost to those who asked to receive it. Of the respondents, 78 percent stated they used MSU Extension resources when investigating the oil and gas leasing process. 22 percent stated they did not use MSU Extension resources.

Future articles will address the results of the remaining subject areas of the survey, such as the royalty and post production costs.

Other articles in this series

Landowner survey determines impacts of oil and gas leasing negotiation efforts Part 2: Lease royalty

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