Appalachian Cautions Landowners to Obtain Professional Guidance Before Signing an Oil & Gas Lease
July 18, 2008
Due to recent field experience, where landowners who had agreed to sell their land subsequently signed standard oil and gas contracts and thereby lost their buyers, Appalachian Land & Conservation Services president Josh First issued the following statement:
"No one supports oil and gas extraction more than me. That is because, as a career conservationist, I know that the financial value realized by the landowner (assuming they are also the owner of the subsurface rights) from leases and royalties paid on producing wells can provide the financial returns necessary for a landowner to permanently conserve their land through conservation easements or bargain sales to state and federal conservation agencies.
"However, proposed industry leases are uniformly one-sided in favor of both the initial leasing company and any subsequent lease holders. Industry leases heavily favor the companies in order to provide them with maximum flexibility and potential use of necessary land, and resources on it (such as rock, soil and water) to extract and market oil and natural gas. In Pennsylvania the leases proposed by industry are slowly improving, including addenda that better protect some of the basic interests of the landowner. Not all proposed leases are the same, and not all addenda are the same, nor are they always attached and incorporated correctly to the lease. Many terms are subject to negotiation depending upon the location of the land in relation to known gas fields or infrastructure.
"Landowners should not attempt to negotiate leases themselves unless they have extensive experience with the operations and practices of the oil and gas industry. Landowners can substantially devalue their property's resale value if they sign away too many rights, and especially those rights that would influence the quality of life of the next owner.
"It is strongly recommended that landowners obtain quality advice or representation before signing a lease. Attorneys take payment up front for work they do. Expect to pay $2750 and more to have an attorney help you with your lease; not all attorneys are familiar with oil and gas leases or with extraction and marketing operations. Consultants are usually paid a portion out of the proceeds and\or potential royalties of the lease payment to the landowner, so they do not get paid unless the landowner gets paid, or unless the landowner receives royalties.
"Appalachian serves as a consultant on oil and gas leasing to landowners across central and eastern Pennsylvania, and we can recommend other consultants as well as attorneys in whom we have confidence."