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WVU Extension Service educates landowners about oil and gas leases

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West Virginia University Extension Service organized and hosted a session for landowners regarding oil and gas leases at the Community and Education Center at the Habitat for Humanity Restore in Charleston on Thursday evening.

The session, titled "Look Before You Lease: Oil and Gas Lease Consideration for Landowners," featured two presenters, Clif Little, educator for Ohio State University Extension, and Peggy Hall, assistant professor and director of the OSU Extension Agricultural & Resource Law Program. During the presentation, the educators explained the leasing process, documents, provisions, clauses negotiation considerations and other issues that landowners might encounter if an oil or gas company is interested in their land.

Some of the important points they addressed for landowners included:

  • Leases are written in favor of the party presenting the lease.
  • Leases can be, and are expected to be, negotiable. If a company approaches you because they want resources on your property, they need your property in order to continue their business.
  • Verbal agreements are not legally enforceable; make sure everything agreed upon is in written form.
  • There are generally two time periods in a lease: the primary term and the secondary term. The primary term is the exploratory period, which typically lasts five years with a possible five-year extension; the secondary terms is the production period, which lasts until the well ceases production.
  • Common payment terms include: the bonus payment, which is usually paid upon signing the lease and is based on a dollar amount per acre; royalty payment, which is the landowner’s share for actual production of the resource; the shut-in payment, which is the amount paid if production is halted beyond the predetermined time period; and damages payments, which is the amount paid for harm to the land.
  • A leasing clause can include language that states that the land may only be used for gas storage or resource transportation, as opposed to using the land for its resources. Under these circumstances, the landowner will not receive royalty payments, but rather only a bonus payment.
  • It is important to obtain proper legal representation when you are presented with a lease.