Frequently Asked Questions by Landowners
Q: Where can I find out if gas companies are leasing my area?
A: Contact your local cooperative extension office to find out. They can help you answer your questions and can give you more detailed information specific to your area.
Q: What should I do if I am asked to lease my land for gas drilling?
A: Get a copy of the lease from the gas company and have it reviewed before you sign anything on the spot. Ask an attorney to review the lease and explain its impact on you and your land.
Q: What is an addendum and why is it so important?
A: Leases are standard documents written up by the gas companies. You as a landowner, can protect your rights by taking the lease to an attorney and preparing an addendum that includes terms that you specify. It is not uncommon for a landowner to create an addendum with their attorney.
Q: Do I need to get an attorney involved? If so, what type of attorney?
A: YES. To protect your family and your land, it is highly recommended to seek advice of a professional. An attorney with experience in gas law is your best bet top get the most out of your gas lease agreement. You can ask your neighbors who they are using and get word of mouth recommendations.
Q: What is a landman?
A: A landman is an agent who works for a drilling company or who is contracted by a drilling company or broker. The mission of a landman is to negotiate the lowest possible lease price and most advantageous terms for the gas company. When you are approached by a landman, it is best to seek advice from a lawyer.
Q: My neighbor got more money than I did. Can I demand more royalties?
A: Unfortunately, the answer is probably “no.” A gas lease is a binding legal contract and once you sign, you are committed to the terms within the contract.
Q: I own a small piece of land, will the gas companies be interested in my small piece of land?
A: Yes, although you may never have a rig on your property, you may still be owed royalties based upon the number of acres you have in the unit.
Q: Should I join forces with my neighbors or go into the agreement alone?
A: This depends on what is important to you. If you and your neighbors have the same goals for land use, then you should join forces. However, if you and your neighbors have different goals for your land, you may want to negotiate on your own.
Q: If I sign a lease, how much will I get paid? When will I get paid?
A: It depends. You could receive a bonus from the gas company when you sign the lease. Royalty payments start when natural gas is extracted from your land. All payment types are negotiable. There are many different factors that determine the amount and manner of payments you will receive after signing a gas lease.
Q: The company that wants to lease my land is only offering a $10 per acre bonus. Should I accept the offer?
A: Never accept a first offer on the spot. Do your research and talk with your attorney to find the best solution for you. Try calling additional drilling companies to see their interest in your land.
Q: What is a drilling unit?
A: The area from which an actual well would draw its gas. The unit is designated by the company and based on the geology of the area. You and your neighbors in the unit share the royalty money from the gas well on a prorated basis based on acreage you have in the drilling unit.
Q: What is the law of capture? Does it mean my neighbor can take the gas out from under my land?
A: The Law of Capture states that is a well is drilled on a property, anything that comes up from that well belongs to the owner of that property.
Q: What is a right of first refusal?
A: A term in the lease you should insist on stead of the auto renewal option. The right of refusal gives the gas company the right to match any competitors offer for renewing the lease at the end of the primary term. As a landowner, you should not agree to the option to automatically renew.
Q: If I sign a lease allowing a company to drill and explore for gas on my land, does that also include storage and transportation of gas?
A: No, if a gas company wants to store gas on your property, you should be compensated for that separately. You and your attorney should make sure that provisions for storage and transmission of gas are not included in a standard gas lease unless the gas is transported from your drilling unit.
Q: My farmland is assessed under the clean and green program. How will gas leasing affect its status?
A: Clean and Green is an assessment that allows the landowner to pay lower real estate taxes. It is a state program that is administered at the county level. Depending on what county you live in, you may have to pay back taxes and if you allow gas exploration on your land. You will want an addendum stating the gas company will pay you for any back taxes you will have to pay as a result of gas leasing.
Q: How can I be sure my water supply won’t be contaminated if I allow drilling on my property?
A: A properly drilled well will ensure the protection of your fresh water supply. When a well is drilled, a steel casing is cemented in place to protect groundwater resources. If you are concerned, you can have a predrilling survey of your water supply done and then have your water tested again after a well is drilled. If there are any problems, you can file a complaint with the regional office of the Bureau of Oil and Gas Management.