Striking it rich in oil boom could be a mixed blessing
Gonzales Inquirer | Maren Minchew
March 16, 2012
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For centuries, many Texans have fantasized about striking oil on their property.
For many Gonzales area residents, this dream is becoming a reality thanks to the Eagle Ford Shale development.
Currently, shale production now provides 25 percent of America’s oil and gas supply, enabling the U.S. to pass Russia as the world’s largest producer of natural gas. This development is predicted to continue, meaning more Gonzales residents will continue to be approached by energy companies to explore for oil and natural gas on their land.
However, this blessing also brings with it the reality that landowners are often uncertain and confused when dealing with energy firms, and may need help in the process. The company will buy the land then turn around and sell to someone else for a major profit, and as a result may shortchange the landowners.
For some, there may be a downside to the ‘strike it rich’ dream of discovering black gold on your property. Corporations have notoriously confused landowners with industry jargon and negotiated terms of oil leases that may have seemed fair, but in fact were not.
An oil lease is an arrangement between the energy company and the landowner, which allows the firm to explore the land for oil in hopes to find enough for production in commercial quantities. In return property owners are paid a royalty that is specified in the terms of the lease. This commercial objective should be the first indicator that landowners need to protect their best interest.
Law firms believe it is vital for landowners to know and understand their rights in order to protect themselves when negotiating with oil companies. Attorney Charles A. Roberts says, “Residents need to be aware that they are in complete control of the situation, and that by hiring a lawyer to look out for their best interest they will be able to navigate through all of the corporate jargon and terms of the oil lease.”
Property owners also need to understand the difference between owning the land and owning mineral rights to the land. According to Roberts, owning mineral rights or interest means you will be paid a royalty by the oil company for all of the oil produced on your land, which is different than owning the surface of the land. Landowners may sell either their surface or mineral rights, or both. Seeking advice from an attorney will allow clarification of all of the confusing industry terms and give landowners peace of mind that they made the correct decision.
Earthworks, a national non-profit organization that is dedicated to protecting communities and the environment from the impacts of mineral and energy development, agrees that landowners must hire a good attorney not connected with the energy companies, who is knowledgeable about oil and gas issues.
Residents who wish to remain on their property also need to be aware of the consequences to their environment. Earthworks’ Sharon Wilson says, “Landowners need to understand that this is a heavy industrial process.”
Landowners should have their air and water tested by an independent lab regularly to provide proof should contamination occur. If their air or water becomes contaminated it can take years to get a settlement and the energy firms will require a non-disclosure agreement (NDA), which is essentially a gag order. These NDA’s are another reason landowners should protect themselves by hiring an expert lawyer to represent their best interest.
Roberts acknowledges that oil and gas on your property can be a blessing when handled correctly, “Thank the Lord for your good fortune and engage an oil and gas attorney to assist you in dealing with [an] oil company in negotiating the terms of an oil and gas lease. Don’t get greedy, but do not give up your property or mineral rights unless you are satisfied with all of the terms given by the oil company.”
Langley & Banack Inc., a South Texas law firm with more than 40 years of oil and gas legal experience, is one of the law firms which represent landowners.