Editor’s Note: This is the last of a four-part series about the economic factors of hydraulic fracturing.
In the midst of what seems to be a modern day gold rush, oil and gas companies have flocked to Southeast Ohio to profit from the natural resources that lay miles beneath the surface.
Although mineral companies are offering potentially life-changing sums for a signature on the dotted line, business strategist Paul Feezel said landowners are not treating mineral-rights leases as a business decision — making them vulnerable to the desires of the company.
“Athens is having way too many people jumping in too early,” Feezel said. “The old phrase ‘buyer beware’ just goes out the window.”
After living in Carroll County — the most-drilled county in Ohio — for decades, Feezel said he has seen three waves of leasing occur, each creating a heightened sense of urgency and forcing previous leasers to realize how little they received.
Don Wirtshafter, a local attorney, said the company-induced excitement has resulted in the majority of the land leased in Athens.
“The companies urge people to sign, making people feel like they will win if they are first in line,” Wirtshafter said.
The evolution of the mineral rights lease begins with a generic lease a mineral company presents when first entering an area. At this level, the royalties awarded to landowners are low and best serve the companies.
Feezel said the companies create a sense of urgency when selling the leases to landowners, causing them to rush into the decision so they do not miss out on the bounty.
“Would you play craps with your mortgage? Leasing your mineral rights is just like rolling the dice on a high stakes business decision,” Feezel said.
The next wave of leases is brought to the area by what the industry calls “land men,” or the oil and gas companies’ real-estate agents. These men become the middlemen between landowners and companies, offering slightly better deals and receiving a cut of the land’s resources and a fee for selling the lease itself.
Feezel, who owns an 80-acre farm, said he has received 15 different land-man leases from states outside of Ohio, refusing all of them.
He added that he would not consider local attorney John Lavelle’s contract to be a land-man lease because of the significant changes that are better for the landowners — including royalties set at 16 percent and a signing bonus of $2,500 per acre.
“His (lease) is definitely 20 times better than the original lease, but there are still some flaws,” Feezel said.
Heather Cantino, chairperson of the Buckeye Forest Council, said along with vague phrasing, both leases lack key environmental clauses that could keep the owner’s land, water and air safe from contamination.
“While there are some minimal protections in the amended Cunningham lease, many are vague and unenforceable,” Cantino said.
The final stage, the group lease, is the most landowner-friendly option because property owners come together and create their own terms to lease and negotiate with the company, Feezel said.
“This is where landowners finally see that, without their land, the companies have nothing,” Feezel said. “They take charge of their own destiny and get the best of both (worlds).”
Carroll County landowners in the third wave have received up to $5,000 an acre and 20 percent in royalties.
Though making sure landowners are knowledgeable about the language of a lease and the true value of their land is important, Feezel said people must take into account the change in quality of life that results.
“I see just as many out-of-state license plates as I do Ohio plates,” Feezel said. “Yes, there is economic activity, and yes, there is money. But our once-rural county really has become industrialized.”
Although landowners have received strong deals, Feezel said Carroll County is experiencing some of the environmental consequences of fracking, such as soil erosion and runoff.
Christine Hughes, owner of the Village Bakery & Café, said having the hustle and bustle of a city is not what residents want in Athens.
“People move here for Athens’ natural beauty,” Hughes said. “That would be in jeopardy.”
With a variety of mineral companies now selling their rights to different companies in Carroll County, Feezel said he is more confident than ever that, in the end, the companies win.
“Think about it. A company buys a landowner’s mineral rights for maybe $1,000 an acre. Then they sell it to another company for $12,000. That landowner’s land really was only a small piece of what they really earned,” he said.
Though the companies are the ones who see the big bucks, Feezel added that, if landowners understand that the later they sign, the more they will receive, they could gain more money than anticipated.
“It really is hit or miss for the landowner. Some really do make it big, but everyone has to make up their mind if betting on something like that is worth risking so much more,” he said.
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