Landowners in Athens County have recently been approached aggressively to sign leases for their mineral rights so that gas and oil can be extracted from under their land. The technology used for this, known as horizontal hydro-fracking, is highly controversial due to its potential adverse effects on the environment, specifically on the air and our water resources, and due to the lack of proper regulation and oversight.
At the meeting for landowners on Nov. 29, held by local attorney John Lavelle and Cunningham Energy at the Athens County fairgrounds, Lavelle presented a draft of a supposedly “landowner friendly” mineral rights lease. With their talk about a “window of opportunity” and the claim that “no better lease” would be available to landowners, it appears that Cunninghan Energy and Lavelle are creating artificial pressure to talk people into leasing their mineral rights. On Tuesday, Dec. 6, Lavelle and Cunningham will hold another such meeting.
Too Vague Language
While it is understandable that some landowners may feel that this is a great opportunity, we should all remember that hastily made decisions are usually no good decisions. Landowners should be very careful with what they sign and ask for improvements where necessary. Landowners who are considering leasing need to get their own independent attorney, best one who understands oil and gas law. The following examples do not constitute any legal advice; they are merely intended as a common-sense contribution to the discussion about the leasing contracts.
Anybody interested in signing a lease for drilling on their land should make sure that the contract they sign really protects them. Otherwise they may be in for a surprise down the road. There are some exemplary lease drafts out there, such as the Harvard Law School contract. Compared to such leases, the language in the Lavelle lease draft is very vague. For instance, reclamation clause (Addendum, §2) simply requires the company to “keep the premises in a neat and clean condition” but does not specify what “clean up the lease premises and remove all debris” actually entails, which raises the question if and how such language would be enforced in a trial.
A recent New York Times article describes the ordeal of a family in northeastern Pennsylvania, who discovered after the drilling was done that the Company did not haul away the toxic drilling sludge but left it there and merely covered it with dirt and grass seeds (see http://www.nytimes.com/2011/12/02/us/drilling-down-fighting-over-oil-and-gas-well-leases.html). The family may have found their premises in a neat and clean condition, yet their water ended up contaminated. They discovered that the terms of their contract were too vague to have any legal recourse.
Fresh Water and Waste Water Issues
With regard to fresh water sources, the Lavelle lease draft states that damages should be corrected by the company (Addendum, §5 and 15) and that such damage would be determined through testing according to EPA standards for potable non-transient use (§25g). However, it fails to be specific about any contaminants and it also does not require the company to disclose the type and volume of chemicals used in the fracking process, which makes it very hard if not impossible to test for those chemicals. Possible contamination could easily fall through the net of the EPA standards. Additionally, it does not define the time span of testing, nor does it define the radius of the testing area.
Size and time limitation of storage ponds for waste water are not defined in the lease, either. Although the lease requires a lining for waste water impoundments, it does not recognize and deal with the fact that sludge pond liners can eventually leak and contaminate the ground water, a bitter lesson not only learned by the above mentioned family in northern Pennsylvania, but by many landowners across the country with post-drilling water contamination from cracked well casing, spills, or leaking sludge ponds (see, for instance “EPA Finds Compound Used in Fracking in Wyoming Aquifer” ).
DRill Pads and Other Issues
The size and location of drill pads and access routes is rather vaguely defined, as well. While §12 of the Addendum asks for a mutual agreement on the locations, it also establishes that the landowner “shall not unreasonably withhold, delay,
or condition consent to such locations.” In effect, this leaves it to the company to determine the locations singlehandedly because the company can simply claim that the locations they pick are necessary and that the landowner’s objections are unreasonable.
The draft lease also does not address issues such as air quality, which can be quite diminished due to flaring and gas releases if the drilling company does not use a closed capturing system. Nor does is deal with potential failures of the well casing, which can lead to serious groundwater contamination. Research by a Cornell University team has shown that a good portion – up to three quarters – of all cement casings may eventually fail and leak. Cement casings of the drilling wells can thus arguably be called the weak link of fracking.
These are just some examples. They should give us pause and make us think about our options. The best option, at this point, is not to lease and to ask for a state-wide moratorium on fracking until proper regulations are in place.
For more information on reasonable leases that protect the landowners, please see:
- Landowner Toolkit (via Look Before You Lease)
- Homeowners and Gas Drilling Leases: Boon or Bust? (via NEOGAP)
- Natural Gas Drilling Could be Boon for Landowners, But Be Cautious (via OSU Extension)
- Fact Sheet Horizontal Hydrofracking (via Ohio Environmental Council)