Proceed with caution: oil and gas leases not always as they seem

On behalf of Rock Palermo of Veron, Bice, Palermo & Wilson, LLC posted in Oil and Gas on Dec 7, 2011.

Sometimes, landowners agree to lease their property to oil and gas companies for exploration or drilling because they get lulled into a sense of security by the smooth patter of the company's representatives. There are often glittering generalities made, coupled with smooth assurances and promises of a financial windfall. What could go wrong?

Unfortunately, a lot.

Louisiana residents should be aware that when landowners lease property to oil and gas companies, they sometimes get the short end of the stick. Sometimes that is because they did not understand what they were getting into and sometimes it is because the oil or gas company was less than forthcoming in negotiations. Either way, many landowners have benefitted from seeking independent counsel when they are dealing with an oil or gas company about the possibility of a lease. Having the advice of an attorney who understands landowners' rights can really be helpful.

For proof that oil and gas leases are not always what landowners are led to believe they are, look no further than a recent analysis of more than 111,000 oil and gas leases and related documents performed by the New York Times. That survey found that oftentimes, these lease agreements do not provide for damage done to water, livestock or crops. Most of them give the company, not the landowner, the right to decide where roads, equipment, storage facilities and other infrastructure items go. And frequently, there is not much documentation that would show that the landowner was informed of the environmental and health risks associated with this kind of activity.

Now, none of this is to say that you should never lease your property to an oil or gas company. Instead, it should be seen as a reason for why you should be careful. Always read every document you are given very carefully and do not be shy about asking questions if you do not understand something. And once again, oftentimes having the advice a lawyer who works for you rather than for the oil or gas company can give you a clearer picture.

Source: The New York Times, "Learning Too Late of the Perils in Gas Well Leases," Ian Urbina and Jo Craven McGinty, Dec. 1, 2011

Tags: Oil and Gas

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