MILLERSBURG, Ohio — The oil and gas business is alive and well in Ohio, as new technology gains ground in energy development across the state.

Farmers will be playing a major role in community planning over the next several years, particularly as the state develops a more diversified energy portfolio, according to Dale Arnold, director of Energy for the Ohio Farm Bureau Federation. Arnold was recently a presenter at a meeting on oil and gas leasing issues, sponsored by Holmes County Farm Bureau.

He said energy will have an impact on public policy in the coming years. “Agriculture is going to be called on to meet 25 percent of the nation’s energy needs by 2025,” Arnold explained. “Farmers need to be involved in the planning process or they will be part of the menu.”

Oil and gas exploration in Ohio has been ongoing since the 1800s. But using 20th century technology, exploration companies were only getting 20-40 percent of the resources, according to Arnold.

Now the industry is using new technology to go after the rest of the resources in the field.

“We are seeing all kinds of technology out there,” Arnold said. “The current companies are not going away. The traditional, smaller vertical drilling technology is not going away. But we are seeing horizontal drilling units out there, which do leave a larger footprint.”

Arnold said the horizontal units can replace 8-10 vertical drilling units. But before landowners let any type of drilling unit on their land, they need to ask the right questions and they should make sure their deed is cleared under the Ohio Dormant Minerals Act. The Act defines the procedures used to declare the mineral interest on a parcel of land abandoned – and the mineral rights revert back to the owner of the property unless the leaseholder takes steps to protect the rights.

Also, Arnold recommends any orphan wells on a property be taken care of immediately. This requires plugging the well to prevent contamination of the groundwater or water well on the property.

“The technology may be changing, but the paperwork is still stuck in the 1990s,” Arnold explained. “Lease agreements are long-term and they are multi-generational.”

Arnold added everything in the lease is negotiable. “If the leasing agent says something can’t be done, you need to tell them the meeting is over,” he said. “The lease needs to accommodate the needs of your farm.”

First, landowners need to know who the leasing agent is representing.

“Get to know your leasing agent, and how they are related to the drilling company,” Arnold said.

“The more generations the leasing agent is away from the drilling company, the more speculative the lease activity is going to be.”

He added landowners also need to find out who is going to do the drilling, and where else they have drilled wells. “Ask for references from the landowners, find out if they are satisfied with the job the drilling company did,” he said.

“Are the producers easy to talk to and work with? Do they respond to questions and concerns promptly? Is restoration work completed promptly? Are royalties paid on time or are they delayed?”

Second, landowners should get to know their legal counsel. Do they have experience with complex leasing agreements and contracts used in energy- and utility-related issues? Are they familiar with different types of energy technology?

Are they experienced in negotiating and group agreements?

“For every dollar you spend now on legal counsel, you will save $15 on legal action down the road,” Arnold said.

He recommended landowners also have access to a good financial planner. Many times, the money received from the lease agreement will put them into a different tax bracket: “They are finding a lot more of the money is going to taxes,” Arnold said.

Some may consider joining a landowners’ group, but that also presents some challenges, according to Arnold. “Farmers are used to being part of groups such as cooperatives, but this in not like making bulk purchases for their farms,” he said.

Groups need to decide who will make the decisions, policies and procedures impacting the group. What kind of an enrollment policy does the group have and what exit provisions are in place for the group?

Finally, landowners need to know what kind of technology is going to be used.

“If you hear the words shale, deep well, Marcellus, Utica, directional or horizontal, a red flag should go up,” Arnold said. “Older-style lease agreements don’t cover these things.”

Arnold added the hydraulic fracturing, or “fracking,” process used in Ohio is different than that used in Pennsylvania, with water and sand comprising a majority of the compounds used, and the balance are products available over the counter in a pharmacy or hardware store.

“The concern is not what goes down the pipe, but what comes back up the pipe,” he said. “Before any drilling starts, have your water well tested for quality and quantity. If the company asks you to participate in a water-testing project, do it, but get a copy of the report and have an independent test done, as well. Also, check your septic tank, if there are any problems, they should be fixed now. You need to have a baseline.”