Some OH Landowners Get $5,800/Acre While Neighbors Get $4/Acre

contractA cautionary story for landowners comes from Columbiana County, Ohio. Some landowners, like Patrick and Jill McNicol, own land encumbered by old gas leases going back fifty years they knew nothing about. What does it mean? They’ll get $4 per acre for their land (and no royalties), while their neighbors will get $5,800 per acres and 12-20 percent royalties.

Is there any recourse for the McNicols? Maybe.

Jill McNicol, a veterinarian, and her husband Patrick, a high school math teacher, didn’t know about the storage field when Oklahoma City-based Chesapeake Energy swept through Columbiana County in the summer of 2010. The energy giant moved at lightening speed, nailing down as much promising shale terrain as possible.

The McNicols, who live on a rolling spread they call Cool Springs Farm with their two children, five dogs, some sturdy Connermara ponies and other animals, agreed on a signing bonus from Chesapeake. They were in line for more than $375,000 to lease the mineral rights under their 65 acres near the village of Leetonia, about 25 miles south of Youngstown. But the deal was on the condition that Chesapeake got clear title to the mineral rights.

When Chesapeake circled back for more thorough property research, it found that land in the Brinker region was encumbered by long-standing gas leases.

Those property owners outside the storage field received signing bonuses as high as $5,800 an acre for letting Chesapeake drill for oil and gas in the dark shale.

But deals with the McNicols and others inside the Brinker footprint were off. The McNicols remained tied to a lease held by Columbia Gas Transmission that pays about $4 an acre.

"If they drilled on our land, we would get 200 bucks, period. No royalties," Jill McNicol said.*

The old lease was made when only shallow gas drilling was around, and the McNicols question whether or not Columbia Gas has lived up to their obligations under the lease, so they’re going to sue to break the old lease agreement. So for landowners who face this situation, get a good lawyer and roll the dice—there’ nothing to lose.

*Cleveland (OH) The Plain Dealer (May 22, 2012) – Old natural gas leases block Columbiana County homeowners from making new deals