Though there are a number of issues surrounding the subject of fracking operations and real estate, one of the most prominent is the ownership of oil and gas rights. Landowners who find themselves on or near a fracking site are often faced with making critical decisions about the future of their property, including selling or leasing the rights to oil and gas deposits, or protecting their land from environmental damage.
It’s important that you’re knowledgeable about this area of oil and gas drilling since resource rights is a competitive process. As a real estate professional, your role is to assure that your client receives a fair price for his or her land and/or rights, while simultaneously making yourself and your client financially better off. Read on for more information about how to best represent your client in a resource rights transaction.
The first step is to do a little investigating. Check records at the county office or call old clients and get an idea of the timeframe of the offer, any counter-offer, etc. There might be hidden information that you don’t know about yet. In addition, if your client is buying rights, confirm that they are there in their entirety. If they want to keep a portion of them, consult a lawyer.
Another effective investigative strategy is to review the lease. Make sure the client knows exactly what he or she is giving up or getting. Due to the complicated nature of this business deal, the client may not fully understand what is going on. Try to make it as simple as possible for the client to understand all of the processes involved in the transaction.
When negotiating buying or selling rights between a client and the oil and gas company, there are a number of negotiation tactics you can use:
- Keep Your Cool: It’s best to not be too enthusiastic. As exciting as it may be, you don’t want your client to come across as too eager. Negotiating gas rights is no different than any other type of negotiation. They might shoot you an offer to test the waters and see how much your client is willing to accept, but this may not always be the best offer.
- Consider Their Offer Thoroughly: Take into account what they are offering your client, what everyone else was offered, as well as other factors. If you don’t think the offer is up to par, you can always advise that your client decline the offer. Often the company will come back with another offer. See how much they are willing to pay.
- Brush Up On The Value of Resource Rights: It’s important that you have a general idea of what the rights are worth. Once you have the knowledge, YOU have the negotiating power and your client subsequently gets what he or she wants. The more you know, the more the pendulum swings in your favor.
It’s important to remember that you are dealing with your client’s property, therefore, what he or she says goes. This can become frustrating, especially when there is a fantastic offer on the table and your client decides that he or she doesn’t want his or her property torn apart by the heavy machinery. Each client will have different priorities, and some may have a sentimental attachment to the land that may cause him or her to pass on a great deal. You can advise him or her on how great the deal is, but you don’t want to slip into the realm of steering his or her decision-making.
To learn more how you can represent your clients in the Marcellus Shale region, check out our course, Drilling Down the Facts about Marcellus Shale.