What isn’t in your oil and gas lease

When you discovered that there was oil beneath your Ohio property, you may have imagined large royalty checks coming in monthly that would allow you to retire and live in luxury. However, the contracts used by oil and gas extraction companies are often complex. We at the law firm of Baker, Dublikar, Beck, Wiley & Mathews are well-versed in the information that every landowner should know before signing a contract with an energy company.

According to ProPublica, there is a lack of accountability and disclosure laws that allows oil companies to withhold money that belongs to you. One method that is often used involves expenses. The lease you are presented with may include a clause that makes you responsible for some expenses, which the company will deduct from your royalties. The lease may not have an explanation of the expenses, though, and you could be charged for fees that should not be your responsibility.

Even if the expenses are explained, you may believe that costs such as processing the crude oil and transporting it via pipeline or tanker truck are going to a third party. Many energy companies set up subsidiary companies to perform these functions, though. They then inflate the costs so that landowners end up with nearly all of their royalties going back into the company’s pockets. Another technique some companies use is to set up partnerships with other businesses so that the sale of the oil is primarily taken in trade. In that case, the official price of your oil would be so low, you would see very little in the way of royalties.

More information about landowners’ rights is available on our webpage.