Know the Drill Before Signing an Oil and Gas Exploration Lease

The great Ohio land grab has begun! As oil and gas companies flood into the eastern half of Ohio seeking prime real estate over the Utica shale formation — a dense layer of oil-and gas-rich rock thousands of feet below the topsoil — more and more landowners, especially farmers, are being approached by oil and gas company representatives, known as landmen, about leasing their land for exploration.

What should landowners do when the landman comes knocking? Before signing on the dotted line, they should do their homework and educate themselves about the leasing process.

“Knowledge is power and the more you know, the better you can negotiate and the better benefits you can achieve,” said Dale Arnold, director of Energy Policy for the Ohio Farm Bureau in a recent Buckeye Farm News article.

Landowners can find general information about oil and gas leases at the Ohio Department of Natural Resources’ website, which includes a glossary of common lease terminology, FAQs, and issues and questions landowners should discuss with the company before signing a lease, such as “free-gas” provisions and what type of drilling will take place.

Ohio Attorney General Mike DeWine also issued a list of tips for landowners contemplating lease agreements at his blog earlier this year. His recommendations included:

• Get to know the company — Ask for credentials, references and contact information from the representative of the company who contacts you and make sure that you know which company will do the actual oil and gas exploration.

• Check with your neighbors — Find out if your neighbors have been contacted and presented with similar proposals.

• Understand what your leasing — Make sure that you’re clear about what rights the company wishes to lease — oil rights, gas rights, coal rights or something else? Landowners do not have to lease all of their mineral rights.

• Get everything in writing and review everything before signing — Read the proposed lease and think about it before signing.

• Consult with an attorney knowledgeable about oil and gas law — Contact the local bar association for attorneys in your area and consider pooling resources with your neighbors to reduce legal fees.

Dale Arnold seconds the attorney general’s advice about seeking professional guidance before signing an oil and gas lease.

“The key is to take your time and get a local attorney who is working on your behalf,” said Arnold. “Many of these companies have a profit motive to get a specific number of people signed in a certain amount of time. They’re on a time commitment, but you as a landowner are not.”

Have you or someone you know been offered or signed an oil and gas lease? Do you have any tips or advice to share?

Photo obtained from: oilandgascommunity.com










Perspective: A Declaration of Interdependence

This week, I’m featuring a guest author, John Phipps, a farmer from Chrisman, Ill., TV host of "U.S. Farm Report" and Farm Journal columnist.

*Originally published July 27, 2011 in Top Producer


With our economy struggling to provide employment for all who want to work, references to "jobs" carry powerful overtones. Defenders of agriculture recognize this. They have manufactured a statistic that begs for verification: the number of jobs that "depend on" agriculture. This is usually asserted to be in the vicinity of 20 million.

Nailing down this factoid is tricky. While the Bureau of Labor Statistics is often cited as a source, it does not count "dependent jobs." According to econometricians at the Bureau of Economic Analysis who actually tabulate such numbers, employment in agriculture is about 740,000. So where do the rest come from?

Answer: Anywhere you want. Since farms link to food, for example, you can add any occupation that links to food in any way. It’s the ag equivalent of the "Six Degrees of Separation" game. But what exactly does "depend on" mean? Apparently, you can count occupations on both sides of the value chain.

Do you sell to farmers? You’re dependent. Do you buy from farmers? Ditto. I wonder why they stopped at 20 million.

Conveniently left unexplored is any comparison with other industries. Using the same methodology, how many jobs depend on the petroleum industry? On mining? Until both the definition and context of this number are made plain, it can fairly be seen as arbitrary.

But, setting aside the quality of this claim, there is, I believe, a larger and more hazardous aspect to flogging dependence on agriculture: It is exactly the wrong way to garner support.

Farmers have never been adept at empathizing with other ways of life. The many unique aspects of our work tend to make us think others don’t think and feel the way we do. But our feeling of dependence is a universal human sentiment.

Take our relationship to landowners. Most farmers share my unease with our dependence on the goodwill of someone else just to be able to farm land. Farmer "jobs" clearly depend on landowners. It is one reason we consistently pay "too much" for land—we are buying a chance to escape from that feeling of dependence.

So why do we imagine the rest of America enjoys being reminded that they are dependent on us? Gen. George Marshall said it best: "If you want a man to be for you, never let him feel he is dependent on you. Make him feel you are in some way dependent on him."

Wrong Approach. If I can spot this communication blunder, I am sure the media experts who include it in every "agvocacy" message are aware of it as well. This raises my suspicion that it is not meant as a message to others; it is meant to persuade farmers themselves.

We love to be the ones others are dependent on, and we love even more to hear it. So my rule of thumb is to assume the agvocates are looking to get into my mind/heart/pocket.

Like the misguided self-esteem-parenting scheme of a few years ago, this "bragvocacy" nugget is unhelpful to both our industry and those we serve. It hinders collaborative progress and better understanding of customer needs.

Economic transactions are basically exchanges of dependency. It is why they occur in the first place. My customers depend on me for corn; I depend on them for money. In a willing transaction, those accounts cancel each other out, not accrue in one direction.

Acknowledging our dependence on others does not diminish us. Those who refuse to recognize their reliance cannot prepare themselves for link failures and risk a rude economic shock.

Egocentric "job dependence" sloganeering taints our industry’s business connections with an insinuation of subservience. I prefer to see the interdependence of my farm within the global economy as a network of hard-won, high-value trust.









“Ups and Downs” Expected for Grain Markets

Farmers hoping for some consistency in the grain markets for the remainder of the year may be disappointed.

During a presentation at this year’s Farm Science Review, ag economist Dr. Matt Roberts told attendees to expect a tremendous amount of volatility during the upcoming months. He also emphasized that anyone involved in the commodity market should keep his or her attention on just about everything.

Many factors can affect whether the markets go up or down, including the state of the harvest, late planting, conditions at pollination, weather and one that you may not expect — world events.

Roberts said that it is estimated that there is a one in three or one in two chance that the U.S. could slip into another recession because of world events. He also stated that the Greek debt crisis is a contributing factor to the inconsistency of the grain markets and that if the global economy slips back into a recession, then the demand for grain and prices could decrease.

According to a Farm and Dairy article, German and European banks are some of the largest holders of the Greek debt and if they are not able to balance their books, then the residents in these countries could be affected. This would mean cutbacks in their budgets and more specifically, there could be less livestock to feed and therefore less grain needed.

This notion also holds true for China. If the European Union and the United States slip into a recession, it could mean that China may need less grain because its economy may not grow as quickly as it does today. This may mean fewer Chinese consumers would be able to afford the quality of food that they have now, which would mean less grain for livestock and possibly less soybeans for the rest of their diet.

There is some positive news that farmers can take from this — When there are economic doubts worldwide, people still lean toward America.

“When things go sideways in the world, people still put their trust in the U.S.,” said Roberts.

It will be interesting to see what the future holds for the grain markets. What do you think about the outlook for the remainder of the year? Will it affect you directly or do you know a farmer(s) who may be impacted by it?

Photo obtained from: oklahomafarmreport.com