There was an excellent article in the New York Times discussing the issues homeowners and landowners are facing when signing oil & gas leases- Learning Too Late of the Perils in Oil & Gas Leases.
The Times reviewed 111,000 oil & gas leases from Ohio, Pennsylvania, New York Texas and West Virginia. It found many of the leases contained very unfavorable terms for landowners and homeowners who sign up with drilling companies. Many of the issues pertain to the potential environmental problems that may happen once drilling commences or even after work is finished at the property.
Concerns identified included:
- less than half the leases compensate for water contamination;
- many lack language to protect against livestock and crop damage;
- grant driller broad rights to build road, store chemicals and even leave waste in place once drilling has ceased.
Not discussed in the article are other issues that need to be considered by landowners when negotiating leases.
First, even if the lease contains language which entitles the landowner to compensation if environmental contamination or other property damage occurs, does the company really have the resources to pay? Its possible the corporate structure is established to prevent liability from flowing to the parent corporation.
Second, what happens if you neighbors sue you claiming environmental contamination, nuisance or property damage? Does the lease provide any guarantee that your attorney costs will be paid?
Landowners are constantly hearing about the opportunities associated with the Marcellus and Utica shale deposits. However, are they protecting themselves properly in the event something goes wrong?