Leasing Land for Energy Development to Be Discussed at Farm Science Review

August 16, 2012

LONDON, Ohio -- With rising energy prices, increasing concern for the environment and new energy policy, Ohio landowners are being approached to lease their farmland for energy production. But there are many things to consider and discuss before signing any documents, said Eric Romich, Ohio State University Extension field specialist for energy development. 

“Landowners are often presented with what is commonly referred to as a ‘standard energy lease,’ ” he said. “Typically, a lease provided to a landowner by a company representative will be a well-prepared document written from the company’s perspective.” 

Many of the terms written in those leases are negotiable, he said. Before negotiating a lease, landowners should seek legal counsel and explore all options to maximize their economic potential while preserving their land and natural resources. 

Romich and Clif Little, agriculture and natural resources educator with the Noble and Guernsey county offices of OSU Extension, will discuss this important issue for Ohio landowners during a session titled “Leasing land for energy development,” on Thursday, Sept. 20, from 11:30 a.m.-noon at the Gwynne Conservation Area during the upcoming Farm Science Review near London. 

“This session will analyze the typical leasing process and identify best practices for lease agreements related to the wind and oil and gas industries,” Romich said. “Because the presentation also covers wind leases, it should be of interest to all Ohio landowners.” 

While the interest in gas and oil leases from energy developers has been strong in the eastern part of Ohio due to the potential for horizontal drilling, or “fracking,” to release gas and oil trapped deep within the Marcellus and Utica shale formations, leases for wind energy projects have become increasingly popular in the western part of the state. 

According to OSU Extension, some of the issues landowners should consider building into energy leases include: 

  • Protecting groundwater resources. Any landowner considering a gas and oil lease should get their water supply tested by a third party and pay for the testing themselves to act as a baseline.
  • Air quality and noise could also be considerations, as well as “viewshed” issues — preserving the view from the home or the road.
  • The right for a company to construct a pipeline; to use surface or groundwater in the drilling process; to store water, gas or oil on the property; or to construct injection (disposal) wells should all be covered under separate agreements.
  • Landowners might want to consider including a non-development clause in their lease, which would prevent companies from constructing a drill pad on their land.
  • Specify that only oil and gas and their constituents, or wind, are included in the contract. This allows the landowner to maintain land rights to other resources that might be valuable years from now.
  • Include specifics about the location of any roads or structures the company can build on your land.
  • Make sure the lease term is clear and what type of activity could extend the lease.
  • Include a negotiations or arbitration clause in case questions come up in the future. Also, it is helpful to have a "commencement of operations" clause that requires a company to begin energy development activities within a certain time period after receiving a permit.

Those who cannot make Romich’s program have another opportunity earlier in the day to learn about leasing options. Steve Schumacher, agriculture and natural resources educator in the Belmont County office of OSU Extension, will present “Leasing farmland for oil and gas production in Ohio” on Thursday, Sept. 20, from 10-11 a.m. in the Small Farm Center tent at the Review. This hour-long presentation will offer a more detailed workshop specifically on oil and gas leases compared to Romich’s 30-minute presentation that offers more of an overview.

Farm Science Review is sponsored by Ohio State’s College of Food, Agricultural, and Environmental Sciences, OSU Extension, and the Ohio Agricultural Research and Development Center. Pre-show tickets are $5 at all OSU Extension county offices. Tickets are also available at local agribusinesses. Tickets are $8 at the gate. Children 5 and younger are admitted free. Hours are 8 a.m. to 5 p.m. Sept. 18-19 and 8 a.m. to 4 p.m. Sept. 20.

For more information, see http://fsr.osu.edu. For the latest news and updates, follow Farm Science Review on Twitter (@OhioStateFSR) and Facebook at http://www.facebook.com/FarmScienceReview.

Author(s): 
Kyle Sharp
Source(s): 
Eric S Romich