Welcome to the modern-day gold rush.
Five years ago, most sellers did not know (or care) if they owned their gas rights. Today, it’s a hot topic and can make or break a sale. The recent developments of fracking and horizontal drilling have made the Marcellus Shale region valuable not just in the oil and gas industry, but in real estate as well.
Marcellus Shale is a geological formation of shale rock that starts in New York and stretches through Pennsylvania, Ohio and West Virginia. Trapped between the rock’s pores, there’s enough natural gas to fuel the United States’ current usage for 14 years. This makes the land extremely valuable, and it’s your job as a real estate professional to understand gas rights, royalties, rules and regulations, so you can fully educate and protect your clients. We know it’s a complex topic, so here are 10 important things you should know about Marcellus Shale.
The drinking water is protected. The gas is extracted from beds that are typically 1 to 2 miles below the earth’s surface. All potential drinking water is found around 500 feet or less below the earth’s surface. So, there’s thousands of feet of rock that protect your client’s H2O.
Gas companies do not have the eminent domain. Landowners are able to keep their land and sell their gas rights to the oil and gas companies for large sums of money and royalty payments.They will still retain full ownership of the land on the surface as long as the only the rights are sold or leased to an operator.
Old, non-producing wells aren’t a lost cause. Keep this in mind because your client’s gas rights might not be worthless. Several things can be done to revive old wells and have them pumping again in no time.
Your clients are entitled to royalty payments, even if the well isn’t directly on their land. When a well is drilled, it extracts resources from the surrounding area. All landowners within the area designated for the well will receive royalty payments.
This region is booming with development. There’s a surplus of new, high-paying jobs that are directly related to the gas drilling industry. Roads are being paved, infrastructure is being put in place and new developments are on the rise to support the growing environment.
Stay in the know and up to date on industry trends. Real estate prices can rapidly change depending on the industry. If gas prices drop, the drilling might slow down and property values plummet. If gas prices go up and drilling heats up, land prices may rise. Be aware of current trends and try to predict the future. It’s a wild industry where anything can happen.
Companies can drill on your client’s land, but they can’t tear it up. The oil and gas companies who lease the land must be able to explore, drill and transport minerals, but they can’t tear up your client’s property. They are liable for any excessive damage done to the land.
Learn the lingo. Familiarize yourself with common terms of the oil and gas industry to show your clients the knowledge you have and better understand industry personnel. For example, OGIP means original gas in place and the amount of gas is quoted in cubic feet.
Inform your clients of possible risks. Though highly unlikely, a big risk is the restriction or ban of fracking. If fracking is banned in the Marcellus Shale region, it will no longer be profitable to drill wells there, which will have an affect on your clients.
Knowledge is power. Don’t make the mistake of being unprepared. If you aren’t sure on the details, don’t fake it. Hire an attorney who specializes in gas rights. Learn more about handling oil and gas rights in our new 3-hour elective course, Drilling Down to the Facts about Marcellus Shale.
Do you have any suggestions for real estate professionals working in the Marcellus Shale region? Share them in the comment section below.
