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Transferring ownership of an exempt domestic well can be a tempting, but tricky, proposition that is experiencing an uptick in portions of the state.

Landowners having aged and/or underperforming oil and gas wells on their property are often approached by a leaseholder to see if they would be interested in purchasing the well, often to preserve “free gas” provisions for the home, or returning mineral rights retained in a lease to the landowner.

Landowners who take ownership of oil and gas wells on their property could have an opportunity to access low-cost energy supplies, but exempt domestic well owners need to have the resources to deal with new financial, risk management and regulatory responsibilities as well.

According to Ohio Farm Bureau Director of Energy Policy Dale Arnold, exempt domestic wells have been bought by farmers over the past several decades, particularly by animal husbandry, greenhouse and crop conditioning operations. 

Expansion of shale oil and gas production, as well as new activity in well decommissioning and removal efforts are generating an uptick in exempt domestic well offers. Arnold has been working with Farm Bureau members in eastern and north central Ohio as more of them are asking if purchase offers for wells on their property makes financial sense.

He cautions that there are significant issues to consider before working with an oil and gas company to transfer ownership of a well. These include:

• Ownership Responsibilities: Guidelines for exempt domestic well transactions and ownership are governed in Ohio Revised Code, Section 1509.01. New well owners will be responsible for maintaining safety, security, bonding, insurance, maintenance, environmental protection, recordkeeping, and annual reporting provisions.
• Jurisdiction and Authority: ODNR Division of Oil & Gas well inspectors will still inspect and enforce rules governing the well’s operation. More information on these provisions and contact information for your county’s well inspectors can be accessed via ODNR.
• Use Limitations: Natural gas from an exempt domestic well may only be used by the property owner where the well is located. It cannot be sold, transferred or used on any adjacent properties.
• Well History and Performance: Could this well deliver fuel requirements long term? Prior to purchase, landowners should take an independent look at the well’s drilling, completion, permit and production history by accessing ODNR’s Oil and Gas Well Database Explorer. All information is a matter of public record.
• Cost vs. Benefit: How much natural gas does your home use a year? An exempt domestic well could save a typical farm owner approximately $1,500, and sale of oil extracted from the well (to keep it operational only) could generate another $1,000 per year. However, landowners will incur new costs for maintaining and, eventually, decommissioning the well. Basic price for decommissioning a well, plugging it and making sure it’s environmentally sound is $25,000 – $45,000.

While many landowners see exempt domestic well provisions as a way to ensure that infrastructure works on their property and/or getting mineral rights fully returned to their control, there are several other legal options available. Conferring with a knowledgeable attorney is beneficial and important to ensure you understand your rights and obligations that may result from this type of transaction.