Things to consider before you lease:
Your Property Rights
Do you have mineral rights to lease?
Are there mortgages, tenants or other owners to consider?
Are there existing leases on your property?
Your personal situation
How would the money affect your situation?
Should you consult with family, accountants, business partners or investment advisors?
What plans do you have for land?
Should you join a landowner group for bargaining power?
Who are they?
Will they be doing the drilling?
What is their reputation, experience and solvency?
Source: Harrington, Hoppe & Mitchell, Ltd.
By Grace Wyler
The natural-gas boom has finally hit Ohio, and energy companies have descended on the state’s eastern counties in the rush to snap up lucrative land in the Marcellus Shale natural-gas formation.
As leasing activity skyrockets, many landowners are being forced to weigh a potential windfall of cash bonuses and royalty payments against the high risks of natural-gas exploration.
“You have to be thinking about it, with all of the money they are throwing around,” said Lee Gabric, a Stark County landowner who has been approached by land companies to lease 150 acres of his land. “But you have to educate yourself — these leases can last forever.”
Gabric and his wife, Carolyn, were among 100 landowners who attended a seminar here Thursday, hosted by the Youngstown law firm Harrington, Hoppe & Mitchell.
The two-hour seminar — led by attorneys Alan Wenger, Chris Baronzzi and Bradley Allison — gave landowners a crash course in the legal issues associated with leasing mineral-property rights, emphasizing the importance of understanding the terms of any lease agreement.
Although the appeal of initial leasing bonuses — more than $6,000 per acre in some cases — may be tempting, the lawyers urged landowners to take the time to negotiate a favorable lease agreement that protects their assets.
“There is little in the law that regulates the relationship between the company and the landowner,” Wenger said. “It is all a matter of the contract; that is why the lease is so important.”
Wenger emphasized that an energy company’s initial lease offer is always open for negotiation, and landowners should take the time to make sure the agreement meets their individual needs.
Issues to watch for and consider include overly broad language, the length of the lease term, rents and royalty payments, environmental and property damage, leasing-unit size, liability and risk, he said.
“Play your cards because you’ve got them,” Wenger said. “You’ve got the shale; you’ve got the resource, and the demand is there.”
After a lease has been signed, there is little the landowner can do to terminate the agreement or change the terms, Allison added.
“Your lease is your point of control,” he said. “Once you sign the lease, it’s done; it’s no longer in your control.”
Allison urged landowners to take the leasing process seriously.
“This is your property; this is your heritage,” he said. “This could be the biggest deal you ever make.”