Preserve your farm through purchase of development rights if you have an expired oil and gas lease
Farmland owners should be prepared to sign an Affidavit of Non-Production at closing.
Purchase of Development Rights or PDR is a voluntary farmland preservation program that pays property owners to place a permanent agricultural conservation easement on their farmland. Property owners wanting to preserve their farmland through PDR need to be aware of the status of their mineral rights. PDR applications ask property owners to state who owns their mineral rights and if they are being leased or not.
The purpose of PDR is to preserve prime and unique farmland for food production. Only some counties and townships in Michigan actively participate in a PDR program. Contact your township office to find out if there is an active PDR program in your area.
Property owners can access the easements, leases and deeds on their property by contacting their County Register of Deeds Office or by hiring a title company to do a title search of their property. Property owners should request copies of all title documents. Title companies usually charge around $350 for this service.
Oil and gas leases are a significant concern for PDR programs because this lease conflicts with the purpose of the agricultural conservation easement. Oil and gas development requires disturbance of the soil to extract resources. Agricultural conservation easements prohibit the disturbance of the soil except for normal agricultural practices.
If an active oil and gas lease exists on the property, see the article, “Oil and gas leases can affect farmland owners’ purchase of development rights” from Michigan State University Extension. This article helps property owners understand why active oil and gas leases make it difficult to preserve their land through PDR.
If property owners find they have an expired oil and gas lease, PDR is possible if property owners can truthfully state to following:
- That the oil and gas company has not installed equipment on their property;
- And that oil and gas was never extracted on their property.
These statements are made through an Affidavit of Non-Production, which is prepared by the PDR Program or the title company and signed by the property owner(s) at the PDR closing. The Affidavit of Non-Production is then recorded with the agricultural conservation easement and other closing documents.
If a property-owner cannot truthfully make these statements, PDR is likely not possible on the property as most PDR Programs require title insurance without oil and gas lease exceptions.
Oil and gas leasing is complex. Legal assistance should be sought before a lease is signed. Michigan State University Extension has several educational oil and gas resources available for property owners online.