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Understand oil and gas before signing fracking contract
 
By Michele F. Mihaljevich
Indiana Correspondent

ST. CLAIRSVILLE, Ohio – Landowners in eastern Ohio, where gas and oil extraction – known as fracking – has been underway for about 10 years, should consider several factors before making decisions on royalty payments and leases for their properties, an Ohio State University extension educator said.
For example, they should keep an eye on demand and pricing for crude oil and natural gas, noted Dan Lima, agriculture and natural resources extension educator in Belmont County. In Ohio, crude oil production has been trending down while natural gas has been rising. “If you know trends are going up and you’re in a county such as Jefferson that’s a very dry gas area, if you’re selling your mineral interests at this point, you’re probably going to get a lot better offer. (There are) different options for different times. Just know what the markets are doing.”
With fracking, a high-pressure hydraulic force is applied into an oil and gas well to fracture the underground shale rock formations, according to OSU extension. The pressure is applied with a mixture of sand, water and chemical additives. The sand serves as a propping agent, which holds the fractured shale rock open allowing natural gas and oil to flow up the well.
Lima and Gwynn Stewart, community development extension educator in Noble County, participated in a Sept. 22 presentation on shale development during the virtual Farm Science Review. The in-person event was canceled due to the coronavirus pandemic.
When gas and oil company officials started contacting landowners in eastern Ohio around 2010 about leasing, those landowners had to quickly learn energy industry jargon, Lima said. “When we talk about oil and gas leasing, typically a company will come up to you and say, ‘hey, you know, in the next 5-10 year window, I would like exclusive rights to develop this land for fracking for oil and gas development. I will give you x amount per acre that you own.’”
The landowner receives “bonus money” from a lease, he said. A landowner can also receive royalty payments for acreage used in production.
Landowners may sell some or all of their mineral rights and royalties, Lima said. “It’s not that there’s a right answer or a wrong answer,” he stated. “But there is a best answer depending on the situation that you’re in. Those situations can change but understanding your options is going to be pivotal to making a good decision for yourself. You should absolutely talk to a lawyer. You don’t ever want to sign something without a lawyer’s eyes on it.”
Easements have been needed for placement of pipelines in the area, Lima said. An easement contract between company and landowner should include agreement on such things as the depth of the pipes, access to and from the easement area, the substances going through the pipes, any additional above or below surface structures on the easement and restoration of the site after construction.
Since 2011, more than $74 billion has been invested in the area, Stewart said. The investment includes gas and liquid pipelines, processors, refineries and power generators. In addition, in the Appalachian basin, 3,500 miles of pipeline have been constructed. More than $300 million was invested in roads in eight eastern Ohio counties – Belmont, Carroll, Columbiana, Guernsey, Harrison, Jefferson, Monroe and Noble – from 2011-2018. The counties have seen had 640 miles of road improvements, she said.
Twelve natural gas power plants – a $10 billion investment – are operating, under construction or in the planning stages in the state, Stewart pointed out. Once all are completed, they could serve 9.8 million households and provide more than 6,700 jobs.
Fracking hasn’t been without problems. In one instance, an explosion at a Belmont County fracking site in February 2018 forced residents within a 1-mile radius to leave their homes for weeks. The resulting methane leak was one of the largest ever recorded in the United States, according to a study in the Proceedings of the National Academy of Sciences.
10/13/2020