Leasing Your Mineral Rights & Fracking: Five Things You Should Know

Representatives from the Ohio Oil and Gas Association have been filtering into Bath Township asking to lease mineral rights from residents for drilling and fracturing, Township Administrator William Snow said.

The leases offer property owners upwards of $2,500 per acre of land, which sounds attractive, but what are the risks and benefits? And do you fully understand all the language in the lease?

Snow said no formal applications for drilling have been filed in the township.

In the meantime, here are five things you should know about your mineral rights and fracking:

1. The United States is the only country where property owners have mineral rights. This means the property owners own the rights to valuable rocks, minerals, oil or gas found on or within their property, according to geology.com.

In other countries, the government owns these minerals. Most states have laws that govern mining and drilling activity. However, Ohio's House Bill 278 gave exclusive authority to regulate the drilling of oil and gas wells to the Ohio Department of Natural Resources.

2. If you already have leased drilling rights for oil and gas, you also may have leased your mineral rights too. You cannot lease the same rights to two companies, Snow said.

Bath Township has already had several areas explored for oil and gas drilling in the shallower formation known as the Clinton Sandstone, Snow said. Drillers come to the township every year to drill down into this formation, OOGA Executive Vice President Tom Stewart said. The township has several active wells, and companies looking for Utica shale need 40-acre units to drill down 4,000 feet.

Drilling has been happening statewide for the last 80 to 90 years, according to OOGA and ODNR.

3. About 80 percent of the township is covered with home water wells, Snow said. When companies drill for shale, they use a hydraulic process (links to a PDF) that allows the natural gas trapped deep in the earth to be released, gathered and used.

With the high number of water wells, the concern about the fresh water source being polluted is legitimate, Snow said. If a homeowner signs a lease, Snow encourages them to have their water tested a week before the company starts drilling.

Stewart said nearly every well drilled in Bath Township has been hydraulically drilled, and it's been that way for the past 60 years.

4. There are two types of leases: development or non-development. A development lease includes access to the surface of land for drilling and operating a well. A non-development lease is for use of the minerals under the surface only.

Once a lease is signed, there is no way to break it, according to Buckeye Mineral Development LLC, a company that works with landowners to negotiate a fair lease. If a homeowner signs a five-year lease with a company, the homeowner will be paid the amount per acre in a lump sum. If the company doesn't come to drill in those five years, the lease is automatically renewed for another five years and the homeowner is paid again.

If the company drills on the leased land, the homeowner gets a royalty. As long as the well is producing, a lease can never be nullified, according to Buckeye Mineral.

Don't sign a lease with the word "negligence," in it, because if the company claims negligence, the homeowner has to prove it, Buckeye Mineral said.

5. ODNR encourages landowners to have an attorney look over a lease before signing. Check references with the selling company because homeowners may be in business with them for years.

The video attached to this article was produced by Chesapeake Energy and offers their explanation of the fracking process. Chesapeake Energy is one of the companies that drills in the area.

Sources:

• Bill Snow, Administrator
• Ohio Department of Natural Resources
• Geology.com
• Buckeye Mineral Development, via a homeowner meeting in Copley Township
• Ohio House of Representatives
• Tom Stewart, executive vice president of the Ohio Oil and Gas Association