Michigan State University Extension can help landowners understand mineral leases

Interest in leasing has increased and so has MSU Extension’s resources to help people navigate oil and gas leases.

Renewed interest in Michigan natural gas exploration and development rose dramatically during the spring of 2010. An exploratory oil and gas well discovered what could be a new natural gas deposit under the northern part of the state. This discovery in the Utica-Collingwood shale sparked a huge jump in bids to lease State of Michigan land at the May, 2010 leasing auction, raising $178 million. Bidders paid the state an average of $1,507 per acre for 118,000 acres across 22 counties, with one lease in Charlevoix County going for $5,500 per acre. By comparison, all previous state auctions since 1929 combined raised $190 million. These payments, known as “bonus” payments are a one-time incentive to lease the mineral rights. The oil and gas industry is very familiar with the State of Michigan standard lease and knows that in addition to paying the bonus, they will be paying a 1/6th royalty and complying with the terms and conditions of the state’s lease.

The increased interest in leasing carried over to private lands. MSU Extension (MSUE) began getting requests for information from landowners, who were being contacted, in some cases, by leasing agents (land men) from multiple oil and gas companies. Each company had its own standard lease, which most landowners found difficult to understand. Landowners were not only unsure about the meaning of the lease terms, but were also concerned what impact those terms would have on the environmental integrity of their property. Water aquifer quality, soil erosion and sediment creation, location of oil and gas wells relative to buildings, homes and agricultural operations and accidental environmental damage were some of the concerns. In addition to the on-site concerns, they were unsure of the impact the lease terms would have on their revenue potential under the various leases being offered.

MSUE field educators and specialists responded quickly. New and updated educational materials were developed and thousands of requests for information were addressed by county Extension offices.  Leasing workshops were conducted reaching 3,312 participants at 19 public meetings (174 per meeting average) during 2010.

During this rush of activity, MSUE field educators and specialists formed a team to exchange information and coordinate workshops and materials. Visit the team’s webpage at http://www.msue.msu.edu/oilandgas. The site brings together multiple sources of information into one place and offers a quarterly newsletter to provide continuing education to landowners and other stakeholders.

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