Most people purchase property either as an investment or on which to build their own home. However, some people purchase rural property in Ohio and other areas for the potential of securing oil and gas leases or leasing mineral rights to commercial companies.
In theory, when an individual owns a tract of land, they also own any natural resources underneath the soil, but they can lease those rights to others. However, leases for these resources are confusing and not always straightforward.
Whether you have inherited property that may have an existing lease on it or are considering purchasing land for development or future profit, it's important to understand your rights as a property owner when it comes to these potentially lucrative leases in Ohio.
What are oil and gas leases?
An oil or gas lease effectively allocates the legal right to extract resources from below ground to companies potentially interested in refining the oil or gas that exists there. They will typically bring in their own machinery and set it up to access and remove oil or gas deposits. From there, the company can store it in a different location or send it straight off for refinery treatment.
Oil or gas leases benefit everyone involved. They allow property owners to maintain their ownership rights to the land while also financially profiting from the lease paid by the company. Oil and gas companies profit from these leases because they do not have an obligation to purchase the land where they hope to extract fuel.
If the companies had to purchase every parcel of land from which they hoped to derive oil or gas, the cost would be prohibitive. Beyond that, they may have difficulty selling the land after they complete the extraction process.
Oil and gas leases, while complex, are incredibly useful
Unfortunately, there can be confusion surrounding oil and gas leases, how long they last, and how they impact ownership and use rights. The more you know about a potential lease, the better informed you are for important decisions. As a property owner or someone considering making a purchase in Ohio, you want to do your due diligence.
Determining whether there is an existing lease on your land is an important step if you find yourself approached by a representative from an oil or gas company. Knowing about those leases is also important if you intend to list the property for sale. It can impact the plans of a future owner for how they utilize the property, so being able to accurately disclose the status of the land is critical.
Whether you hope to purchase new land, sell an existing tract or even negotiate a new oil and gas lease with a company, make sure you understand your rights as an Ohio landowner and the potential complications involved with signing such a lease.