Valley landowners, beware of drilling deals that could cost you thousands

By Karl Henkel

khenkel@vindy.com

COLUMBIANA

Gas and oil drilling is a quickly growing industry, but Mahoning Valley landowners looking to capitalize should proceed with caution, according to a local lawyer and a nonprofit oil and gas leasing organization.

Many oil businesses, including Oklahoma City-based Chesapeake Energy Corp., one of the largest oil companies in the U.S., are using a newer tactic which, while perfectly legal, could potentially cost landowners thousands of dollars.

The most popular oil or gas drilling agreements — the kind signed with Columbiana County residents — are giving way to a new strategy: mineral-rights purchases.

Instead of lease agreements, which could net landowners thousands of dollars a month, plus royalties, a mineral-rights purchase would forfeit land rights and any royalties, said Alan D. Wenger, an attorney for the Youngstown law firm of Harrington, Hoppe & Mitchell.

Wenger helped draft an April contract between Chesapeake and the Associated Landowners of the Ohio Valley, a nonprofit organization that seeks to educate and protect landowner rights.

Potential royalties are as high as 15 percent to 20 percent in the Mahoning Valley.

Wenger said the difference between signing a lease, which under Chesapeake are often five-year deals with a potential three-year extension, and a mineral-rights purchase, amounts to thousands of dollars per acre, per month.

The mineral-rights purchases are generally one-time payments of $2,500 an acre.

“Deciding how to benefit from potential mineral development is a personal decision,” said Scott Rotruck, vice president of corporate development for Chesapeake. “Some risk-tolerant mineral owners prefer to lease their minerals, potentially receiving a bonus payment and then royalty payments over time, while others who are more risk averse prefer to sell their mineral rights outright and receive their compensation up front.”

Read the full story Monday in The Vindicator and on Vindy.com.