An oil and gas lease can be a financially rewarding agreement for a property owner. However, it’s important to remember that these types of leases come with a significant number of stipulations and consequences. The following guide explores several things you should know before signing an oil and gas lease.
1. Know the Value of Your Mineral Rights
When signing an oil and gas lease on a property you own, it’s important to remember that you are giving up access to all fossil fuel resources under your property. In some cases, the property may contain resources that are vastly larger than what an oil and gas lease indicates. In many cases, oil and gas exploration companies will understate the number of resources underneath your property. This allows them to pursue the lease for a lower rate than they would be able to otherwise.
To make sure you’re receiving a fair price for an oil and gas lease, it’s essential to have an independent oil exploration auditor verify the findings of a company. Without this verification, you could potentially be giving up millions of dollars in leasing rights.
2. Consider the Impact to Land Value
It’s also important to understand how oil and gas drilling can impact the future value of your land. In most cases, an oil and gas lease will be valid for 10 to 30 years. However, this can vary based on a wide variety of factors. During the period of the lease, it’s essential to understand that there will be negative changes to your property, both above and underground.
Damage above ground could include increased erosion, higher levels of noise, dust, volatile organic compounds in the air, higher levels of vehicle traffic, unsightly equipment, and more. Underground damage can be even more significant. If you’re in a rural area and rely on well water for drinking and home use, oil drilling (such as fracking) can potentially cause pollution of a water table. If the water table on your property is polluted, it may not be possible ever to use water from your property again.
Many oil drilling companies do not disclose fracking chemicals. Because of this, it’s not possible to know the specific chemicals being used to break up rock masses containing oil. However, some common chemicals include methanol, hydrogen peroxide, and acetic acid. These chemicals help draw oil out of the rocks, but they can also make groundwater extremely toxic.
3. Delaying Drilling Could Mean You Miss Out
That being said, there can be consequences to delaying an oil and gas lease. Since oil and gas are liquids, they can travel horizontally underground, similar to the water table. If you have neighbors near your land, an oil and gas exploration company can potentially leech resources from under your property by drilling on the property of a neighbor. If this happens, the oil and gas resources on your property will be depleted without you gaining any advantage. To avoid the risk of this happening, it’s a good idea to consult with an oil and gas exploration lawyer before signing any lease.