What you don't know can hurt you regarding oil and gas leases for your property, former state Sen. Tim Grendell said.
Grendell, recently appointed judge of Geauga County Juvenile and Probate Court, held a meeting Thursday to inform landowners about things they need to consider before signing an oil and gas lease. He said oil companies and speculators are contacting landowners in northeast Ohio and he's conducted several such meetings to provide advice.
He stressed that he's not advocating for or against entering into an oil and gas lease, but that there are things property owners need to consider before signing a contract.
Grendell's main point – "everything is negotiable." Lease terms, up-front payment, royalties, screening and fencing are also subject to negotiation, regardless of what an oil company representative might say.
"There's no such thing as a standard form. There is no such thing as a government-approved form" Grendell said. While a contract template might be presented, changes can be made and are normally done as additions rather than drafting an entirely new contract.
That's partly to save attorney costs. One item on Grendell's list of things landowners should know is to have an attorney review contracts before signing.
Other things you should know:
• Require proper screening and fencing. Grendell said that driving through Chesterland, you can tell which property owners worked with an attorney and which didn't by the appearance of wells. He cited a well at Gilmour Academy as a good example of what can be done esthetically to soften the look of a well.
• Usual royalty compensation is 1/8th; however, that is negotiable. It's also based on the entire property pool, so if it's a 20-acre site and you own 10 acres, you can expect to get a royalties of about 1/16th. Free gas for the landowner is also a usual part of contracts.
• Require drilling within a year. Otherwise, companies can hold your mineral rights and wait five or six years before drilling. Meanwhile, the lease can be a blot on your property if you want to sell.
• Make sure the contract has indemnity of the landowner. Grendell said you don't want to be responsible for damages to a neighbor's property.
• Restrict the number of wells – usually one.
• You can control the location of the well on your property.
• Do not allow use of water, at least without compensation. Grendell said the hydro-fracturing process uses a lot of water and can be costly.
• Address termination of the contract. An often-used phrase of "paying quantities" leaves much open to interpretation, he said.
• Control access to the site. Grendell said some wells in Pennsylvania look like truck stops with the number of vehicles parked there.