Trumbull County landowners who signed a lease with BP should expect to have their signing bonuses no later than the end of October and as early as July.
That is, as long as there are no problems with their lease, which could affect 10 percent to 15 percent of them, attorneys with knowledge of the drilling business said Tuesday. Those issues would need to be remedied within 60 days before they can make good on the terms of their agreement.
The Oil and Gas team at Warren law firm Harrington, Hoppe and Mitchell discussed this issue, and many others, Tuesday at the Magnuson Grand Hotel Ballroom in Howland.
Tribune Chronicle / R. Michael Semple
A large group of Trumbull County landowners attend an oil and gas seminar at the Magnuson Grand Hotel Ballroom in Howland Tuesday morning.
Attorney Stephen Kocon told residents once their lease was signed, BP began researching their property title from its existing form all the way back to the federal land grant. In Trumbull County, that land grant would have been awarded in 1800.
Title researchers are ensuring there is no problem with land ownership or leasing rights. That process, said attorney Alan Wenger, has been more involved than BP expected.
For some, they will need to request title information from mortgage agencies or track down the old lease holders on leases that may be expired. Kocon said the process can sometimes be complex, and that oil and gas leasing laws are still young and many questions remain.
"But litigation should always be a last resort. It is lengthy, it is expensive, and its success is rarely guaranteed," he said.
Attorney Thomas Carey explained that the primary term for the BP lease is five years with a three-year renewal option. However, the lease remains in effect for as long as any well on the property remains in production, which could be up to 30 years.
Carey discussed mineral rights options as they apply to property. The landowner can sell their surface rights and keep all mineral rights, sell their surface rights and keep only certain mineral rights, or sell all or some mineral rights and keep their surface rights.
Previously, one sentence summed up the transfer of mineral rights, but he said lessors need to be clear about their mineral rights and what is being leased, including whether or not it is for shallow or deep well mineral resources.
Carey said the days of the one-sentence mineral rights agreement are over. He noted, though, that terms of the BP lease with Trumbull County residents is more specific and more stringent than Ohio Revised Code requires, and provides many more protections for the landowner.
Still, Wenger cautioned residents to be wary of landmen seeking to buy their royalties and corporations trying to get them to sign a lease agreement addendum that could give the lessee unfair land or mineral rights not included in the original agreement.
The process of unitization, or forming land into 640-acre drilling pad units is under way, Wenger said. Nearly every gas and oil lessor has been receiving requests from their leasing company like Chesapeake, BP, CONSOL and others, to expand the unit size to 1,280 acres.
Wenger said companies are citing efficiency as the reason for the requested expansion, but companies rarely need more than 160 acres to successfully extract minerals.
"I'm suspicious, and we all should be, that the reason ... is to get the most out of these leases when they flip them to other companies," Wenger said. "Don't sign them."
He said leasing companies frequently contract with outside companies to do water and seismic testing prior to drilling. Wenger encouraged residents to get their own water testing done as close to the actual drilling date as possible to protect themselves in the event of water contamination. He also said seismic testing company SEI may be coming around to conduct seismic testing on behalf of BP.
Companies like SEI are not legally under terms with the landowner and must obtain the landowner's permission to be on the property.
"Do not just sign any form of seismic testing permit that is put under your nose," he said.
Attorney George Millich discussed tax issues including selling mineral rights versus leasing them, and how that affects one's tax burdens, and how to alleviate some of those tax burdens through various safe harbors. Notably, for Trumbull County residents, Millich pointed out that farmers who sign a lease may compromise their Current Agricultural Use Value permit, since the land is no longer being used solely for agriculture.
"If there's one thing I want to leave you with it's that the government pretty much has a tax for any given situation you can think of," he said.
All attorneys urged resident to seek legal assistance.