When Ohio’s oil-and-gas boom comes calling, Richland County farmer Robert Bevier says he and about 130 neighbors will be ready.
As chairman of the BEST (Best Efforts Stand Together) Land Association, Bevier says his group is ready to negotiate terms for oil and gas leases that would cover about 19,000 acres of privately owned land, most of it in northern Richland County. The only thing missing is a good offer.
“There’s none that we’d call serious,” Bevier said. “It’s just progressing its way across the state, and we’re on the western part of it.”
Energy companies eager to win rights to drill in the Utica shale are moving west from eastern Ohio counties. With tales of bonus payments now as high as $5,000 an acre in eastern Ohio, the number of ownership groups, and lawyers eager to represent them, is exploding.
“They are popping up all over the place,” said Dale Arnold, energy-policy director for the Ohio Farm Bureau Federation. “There are a lot of companies offering services.”Arnold is among a number of experts warning Ohioans to carefully consider offers, not only from drilling companies, but also from law firms and businesses that want to organize and represent landowners.
One big question is how much negotiators should be paid for their services. Arnold said compensation rates range from 1 to 7 percent of the bonuses that oil and gas companies pay landowners in return for signing leases. “It’s all across the board,” he said.
Energy companies are scrambling to secure rights to drill into Ohio’s Utica shale because horizontal drilling and hydraulic fracturing, or “fracking,” allow them to draw oil and gas from the tightly packed rock.
Although only a handful of such wells have been drilled in Ohio, geologists believe that the Utica shale contains a rich reservoir of natural gas, propane, butane and crude oil.
Energy companies focused on eastern Ohio first because it’s more likely to contain natural gas and oil in commercial quantities. Farther west, the shale is believed to contain more crude oil than gas.
Columbus lawyer J. Richard Emens said he is working with six groups, including the Mohican Basin Landowners Association, which covers property owners in Ashland, Coshocton, Holmes, Knox, Richland and Wayne counties.
Because groups represent large tracts, they are able to negotiate higher payments and better protections against pollution, water loss and property damage, Emens said. He said he typically collects “in the 1 percent range” from lease bonuses.
Bob Rea, a former Columbiana County farmer turned negotiator, said he charges 2.75 to 3 percent for his services. Rea said he has helped close several eastern Ohio lease deals that cover more than 100,000 acres.
Among other groups, Rea is working with the Holmes Energy Leasing Partnership, which was formed by Dr. Thomas Berg, a retired pediatrician. Berg said the group includes people who combined own about 5,000 acres in Holmes County.
Bob McClelland, an attorney with the Zanesville-based firm Graham & Graham, is working to form an ownership group that would include landowners in Muskingum, Perry, Coshocton, Morgan and Licking counties. His firm would collect 7.5 percent of the bonus payments.
McClelland said that rate is reasonable because his firm won’t accept bonus payments that are less than $3,500 an acre. He said the firm also will require that royalty payments, which are regular fees that energy companies pay to landowners, be no less than 16 percent of the value of the extracted oil and gas.
Pittsburgh-based Homeland Energy Ventures would collect 5 percent of the bonus payments and 5 percent of the royalty payments. That’s according to a contract available on the company’s website.
Emens called such contracts “unconscionable” because the negotiator gets payments that continue as long as the well produces oil and gas.
Homeland’s president, Jack Sordoni, didn’t return calls seeking comment.
Arnold said landowners need to ask the right questions before they sign a contract.
“You have to be just as diligent picking and choosing and enrolling in a negotiation group,” he said, “as you would signing a lease with an oil-and-gas broker.”http://www.dispatch.com/content/stories/local/2011/11/13/owners-unite-hire-lawyers.html