Oil and gas leasing – what do land owners need to know?

Curtis Talley Jr., Michigan State University Extension -

Since May 2010, there has been renewed interest by oil and gas companies to lease lands for oil and gas production across the state of Michigan. Many landowners are being contacted by oil and gas companies intent to lease their mineral rights, but have no

What do you need to know before you sign your lease? After reading the lease, many landowners are asking these questions:

  • What does it mean my royalty will be calculated in the pipeline based on net income? 
  • Is there an alternative to a 1/8 royalty? 
  • How does horizontal drilling and hydraulic fracturing affect me?
  • What royalty does the State of Michigan receive for its leases?
  • If I allow disposal of brine and other chemicals, how will it be disposed of?
  • What does it mean that I have to defend the title to my land?
  • If it’s an oil and gas lease, why does it say it includes helium, nitrogen and other gases? 
  • What are post production cost deductions? 
  • How do I insure the land is reclaimed in the manner I wish?  
  • How can I make sure my water quality is protected?
  • What is the difference between a flow line and a sales line?

When you sign an oil and gas lease, you have essentially sold a part of your property. Obtaining a good lease is a negotiation. Negotiating the lease can result in much more income to the landowner over the lifetime of the lease and insure the land is managed for oil and gas production in a manner that reduces the impact to current agricultural operations.

Michigan State University Extension is bringing farmers and agricultural professionals with interests in various, major agricultural commodities together to learn more about changes on the horizon that will challenge Michigan farmers, including what landowners need to know about oil and gas leasing.

The Michigan Ag Commodities Educational Expo will take place on Jan. 26, 2012, at the Lansing Center in Lansing, Mich. The Expo takes place from 9:00 a.m. to 3:30 p.m. The registration fee is $75 if paid by Jan. 5. After that, the fee is $90. You can register electronically by visiting http://bit.ly/MACEE, or you can register by contacting Megghan Honke at honkemeg@msu.edu or 517-353-3175, ext. 229.

This article was published by Michigan State University Extension. For more information, visit https://extension.msu.edu. To have a digest of information delivered straight to your email inbox, visit https://extension.msu.edu/newsletters. To contact an expert in your area, visit https://extension.msu.edu/experts, or call 888-MSUE4MI (888-678-3464).

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