Rising energy prices spur gas leasing among landowners who don't know how to get best deal

Here's a story that could be done by lots of rural journalists, and probably needs to be done by many, to keep their readers, viewers or listeners from getting taken. The Associated Press reports, "Unsuspecting property owners around the country are getting trampled in an old-fashioned land rush by natural gas companies and speculators trying to lock up long-ignored drilling rights quickly and cheaply. Stories of fast-talking industry representatives using scare tactics to strong-arm people into signing lowball leases are popping up in rural areas and suburbs from New York to West Virginia to parts of Indiana and Texas."

This is an old story in places familiar with oil and gas drilling, but rising energy prices have prompted leasing activity in many areas that are unfamiliar with it, or among landowners who haven't seen it in many years and lack working knowledge of the process -- knowledge that can help them get better deals and avoid unnecessary damage to their property if it is drilled. We first reported this April 8 in an item about gas leasing in Appalachia; the AP story (for which we could not find a reporter's byline or newspaper's credit line) also mentions the Illinois Basin, which extends into Indiana and Kentucky.

The story tells the cautionary tale of Brad Castle, a farmer and convenience-store owner in Rowlesburg, W.Va. Castle thought he had cut a good deal when he leased 800 acres for $5 an acre and the standard royalty of one-eighth of production, until more land agents showed up offering as much as $350 an acre. "There's got to be a law broke[n] somewhere," he told the reporter. We doubt it, though Castle does report a possible fraud, saying the leasing agent told him that drillers could get his gas without paying him anything. That may be true, but it certainly would be illegal.

In most states, landowners can form a pool that companies find more attractive for development and for which they are willing to pay higher prices. The story mentions a group of farmers in New York's Broome and Delaware counties that got $2,411 an acre and a 15 percent royalty for a five-year lease. Typically, such leases are renewable; they also can be renegotiable, if the landowner gets that right up front.

West Virginia lawyer David McMahon and the West Virginia Surface Owners' Rights Organization advise landowners to "take their time and refuse to be rushed into signing leases," AP reports. McMahon "also suggests rejecting standard leases in favor of documents containing protections against roads, potential pollutants such as saltwater injections, and use of depleted wells for gas storage. Herschel McDivitt, director of Indiana's Division of Oil and Gas, offers similar advice. "There just aren't a lot of savvy landowners out there," McDivitt said.

In Pennsylvania, Penn State horticulture specialist Thomas Murphy has organized a program to help landowners get the best deals. One session recently attracted a standing-room-only crowd of 1,200. For a report on his work, from Deborah Benedetti of Penn State Outreach magazine, click here. For Penn State's Web site on the subject, click here.