Gas leases are now a hot topic in North Carolina. Many natural gas companies are contacting land owners, hoping that the owners will quickly sign leases to allow the companies to drill for gas on the owner’s property. Many landowners view these leases as an opportunity to make a quick profit. However, the gas companies pressure the landowners to sign the lease without first consulting an attorney. Often, these leases contain provisions that the landowner did not fully understand or that the company did not fully explain. You should not sign a gas or mineral lease without first talking to a licensed attorney!
In June 2012, the North Carolina General Assembly, passed legislation paving the way for natural gas extraction using a method of horizontal drilling and hydraulic fracturing known as “fracking.” Fracking injects pressurized water, sand, and a mixture of chemicals into rock formations to create cracks through the rock that release gas. More than 9,000 acres of land have already been leased in the state.
Drilling for oil and gas on your property is a serious and difficult decision. Before you sign an oil or gas lease, please read the list of definitions and tips below.
Oil and Gas Leases. An oil or gas lease is a legal document where a landowner grants an individual or company the right to extract oil or gas from beneath the landowners property. Courts generally find leases to be legally binding, so understand all the terms of the lease before signing.
Hydraulic fracturing or "fracking". This is a process in which water, sand and chemicals are injected deep underground to crack shale rock and release natural gas. Hydraulic fracturing often involves horizontal drilling where one or more horizontal drill shafts, which can extend up to two miles, and are drilled off an existing vertical shaft.
Fracking in North Carolina. Drilling in North Carolina cannot take place until the North Carolina Mining and Energy Commission establishes rules for fracking, no later than October 1, 2014. No company can drill unless it first obtains a permit from the North Carolina Department of Environment and Natural Resources, and they cannot issue permits for fracking until the General Assembly votes to allow it.
If you are considering leasing your land for oil and gas exploration here are some tips to take into consideration before signing a lease:
• Contact an attorney. Before you sign an oil or gas lease, ask an attorney to review it. If you do not know an attorney contact the North Carolina Bar Association at 1-800-662-7660.
• Contact your mortgage lender, conservation easement holder, or Farm Service Agency office. If you do have a mortgage loan, you could violate the terms of your mortgage by signing an oil or gas lease. If you have received federal farm program benefits, contact your Farm Agency office to find out if you face any restrictions. If your property is subject to a conservation easement, contact your holder to find out about any restrictions on signing a lease. Before you sign, talk to your lender and get approval.
• Check out the landman. Oil or gas leases are often offered by salesman called landmen. In North Carolina, anyone who contacts you to offer you an oil or gas lease is required to register with DENR and provide his or her contact information. TO check out an landman, visit http://portal.ncdenr.org/web/lr/registry-of-landmen or call 919-707-8605.
• Research the company. If you do lease your land to a company for gas and oil exploration, you'll be dealing with them for years to come. Before you sign a lease, check with the North Carolina Secretary of State's office at www.secretary.state.nc.us/corporations or call 919-807-2000. Also, ask your attorney to check out the company.
• Know the risks to your land and water supply. Exploring for gas or oil will likely disrupt and possibly damage your land, your home, your crops and your water supply. There are two different types of leases. A non-development lease allows oil or gas to be extracted, but does not allow access to the surface of the landowner's property for. A development lease allows access to the surface of the land for drilling and operating the well (this means they are allowed to clear trees, build roads, and construct a well pad and pipelines on your land. Each well pad will disturb 7 to 9 acres of land on average.
• Make sure your payment is reasonable. There are three kinds of payments;
- A bonus payment is made when the lease is signed, often based on the number of acres leased. North Carolina law requires that any bonus payment be made within 60 days of the lease being signed.
- Payment for surface damages to the property. North Carolina law requires landowners be paid for any damages to livestock, crops, timber, or personal property, as well as the existing water supply.
- Royalties which are a percentage of the proceeds of the sale of any oil or gas produced. North Carolina law requires that landowners be paid a minimum royalty of 12.5% for any oil or gas produced, without any deductions for costs.
• Make sure your payment covers damages and costs. The exploration may damage your land, home, crops and/or water supply, and you may also face unexpected costs. Provisions need to be broad enough to cover all types of damages or costs that you may face.
• Talk with your neighbors. You may want to consider negotiating your lease with your neighbors. By working together you may be able to get more favorable lease terms, including higher payments and better reimbursement.
• Get everything in writing and a copy of the lease. North Carolina law requires all leases and any assignments be recorded with the register of deeds for the county where the property is located. Know that when you sign a lease, it may continue for many years.
• Get a copy of your legal protections. If the landmen offer you a oil or gas lease, they are required by law to give you an copy of the North Carolina law that protects you. A detailed summary of these protections is available on the North Carolina Attorney General's Website at www.ncdoj.gov.
• Don't be pressured to sign, know your right to cancel. Take your time, don't let high pressure tactics force you to make a decision before you're ready. You have seven days to cancel it under North Carolina law without any penalty. To cancel your lease, send the company a written notice that you want to cancel.
• Where to turn for help. If you have questions about oil and gas leases, contact the North Carolina Cooperative Extension Service in your county. If you have questions about the regulation of oil and gas exploration in North Carolina contact DENR at www.ncdenr.org or call 919-707-8605 for help.
A1 Mountain Realty realizes how important your home and property are to you and we want to provide you with information that will keep you and your investment protected. Many times clients will buy a piece of real estate to hold on to or invest in and resell at a later date. We have several types of Ashe County NC Real Estate properties listed right now that meet this criteria! Or, you may be looking for a North Carolina mountain cabin for those family trips to the NC Mountains on a regular basis and we have homes that would be perfect for this also. Call A1 Mountain Realty at 336-846-4900 or take a look at our listings on our website www.a1mountainrealty.com. While on our website, view the Downtown West Jefferson webcam on the home page of our website.
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