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OFBF helps property owners deal with oil, gas well issues

Published Mar. 29, 2010 | Discuss this article on Facebook
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Farmers have expressed concern about bad lease agreements with oil and gas companies.

Buckeye Farm News

Gas and oil companies have been trying to find more sources of energy in Ohio and approaching property owners about putting up wells on their land. While property owners can receive monthly royalty checks in exchange for allowing the wells, they need to be aware of some potential problems, said Larry Gearhardt, OFBF’s senior director of legal and local affairs.

Gearhardt said that over the past year he has noticed an increase in the number of phone calls from Ohio Farm Bureau members asking whether they should put up an oil or gas well or describing problems with their contracts.

“The frustration with the oil and gas companies is that they have a lease form that is one of the worst lease agreements I’ve seen for members. It’s written 100 percent in favor of the gas and oil companies without protection for the landowners,” he said.

In Lawrence County, there have been so many complaints about a gas company that Farm Bureau has set up a Q&A session next month with landowners and an attorney who specializes in these types of disputes.

Joyce Payne, an OFBF state board member, said county Farm Bureau members and others approached her, asking for help from Farm Bureau. Their problems included not receiving royalty checks at all, being paid for only some of their wells and having their wells shut off. Since 2002 Payne has owned a well and been part-owner of a second one. She said problems started when the gas company was bought out by another. For more than three months, she didn’t receive her royalty checks, and company officials said the money went to her neighbors instead and they needed time to readjust.“I’m not sure if it’s right or not,” Payne said. “There’s no way to check. They need readable meters and accountability.”

Property owners often can’t figure out what their royalties should be, Gearhardt said. A typical lease agreement calls for the landowner receiving one-eighth of proceeds.

Because the well is usually surrounded by a fence, landowners can’t see the gauge. And even if they could, the gauges are so complicated that it takes an expert to read them, he said.

Gearhardt recommended that property owners contact an attorney before signing a lease agreement. He also said landowners should see if their neighbors have also been approached by a company and try to negotiate the terms of an agreement as a unit.

“A lot of lease agreements are written so they give companies free range to go all over the farm and run pipelines across the property,” he said. “Sometimes when you think you’re signing up for only one well, you’re not because it’s hidden in the language. You want to make sure the language includes repairs for damages. You can’t tell what you’re going to get unless a trained eye looks at it. One time I found 36 issues that were bad and it was just a two or three page contract.”



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