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How To Lease Your Land To An Oil Or Gas Drilling Company

oil and gas lease

If you own the mineral rights to your property and are in an area where oil and gas exploration is occurring or about to occur you can earn thousands of dollars for leasing the right to drill for oil or natural gas. In many cases no drilling will even occur on your property. In the case of shale gas, such as in the Marcellus shale and Barnett shale, a horizontal well or multiple wells, each in different directions may be drilled from an adjacent parcel to gather the natural gas. In some cases these wells or laterals can be several thousand feet long. Because they are tapping natural gas or oil from your own property you could be compensated.

Your first indication that oil and gas companies are interested in your land may come when you are approached to allow a seismic survey of your property. An oil or gas company may commission a survey of the underground rock formations using seismic equipment. You will be compensated for damage to your grass, crops, trees, etc as the necessary right of way is mowed for the seismic cables. You should contact a real estate attorney to assist you in signing the surface lease for seismic activity.

Mineral Rights and Oil and Gas Attorneys

If you are eventually contacted by an oil and gas company regarding leasing your mineral rights for exploration you should definitely contact an attorney specializing in oil and gas leases. There are many factors that determine how you will profit from the lease. Some leases pay a higher up front fee and lower royalties later. Many small companies will take the approach of offering smaller up front lease payments in exchange for higher oil and gas royalties later to save on up front expenses.

Leasing Different Depths

You have the option of signing an oil and gas lease only for certain depths. If the seismic survey indicated there could be a pocket of oil or gas at say 6000 feet and this is what the drilling company is interested in, you may negotiate a lease for 0 - 6500 feet, leaving the option open for another oil company to come in later and lease everything or part of the depths below that. This may be advantageous if the drilling company is small and does not have rigs or capital to exploit greater depths. A larger oil company may offer to lease the lower depths in the future and this type of lease leaves that option open.

Dividing Oil and Gas Royalty and Lease Money: Accountants

In addition to a good oil and gas attorney you should find a CPA that can help manage the division of royalty checks. Things like depreciation of the reserves are best handled by certified public accountants. Your will should be in order as well, since millions may be at stake.

Ensuring Your Interests and Property Rights

One of the biggest concerns landowners have when leasing their land is how drilling will affect the property. You have the right to specify a great number of small details that may save headaches and property damage over the life of the lease, which may last decades. You may be able to specify, (within reason) what kind of roads you want to the completed wells, what kind of gates and fences surrounding the well and tanks, and even how you will be compensated for pasture or fields that have be denuded by equipment when installing pipelines, etc. It is not uncommon for landowners to retain for personal use water wells that are drilled for use when an oil or gas well is drilled. A completed water well can cost several thousand dollars. Items like this are best negotiated through an oil and gas attorney.

New drilling methods, such as multiple wells from the same pad and strict environmental regulations mean that the impact from drilling is much less than earlier times. In the case of natural gas wells the footprint of the well may be as small as fifty by fifty feet. The biggest impact is usually that of new roads across the property and production personnel coming onto the property to check on the well daily or several times a month. 

For those persons living in states where shale gas drilling is a new activity, it may be hard to find a qualified oil and gas attorney to assist you in leasing your mineral rights. You may have to seek one that is out of your area but licensed to operate in your state.

 

Cheers.

    

 

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