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Landowners Unite For Oil and Gas Leases

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The recent Hollywood film Promised Land depicts Matt Damon as a salesman who knocks on the doors of Pennsylvania residents and entreats them to lease their land for oil and gas drilling. Increasingly though, here in Ohio, people are negotiating lease terms through big landowner groups. Ideastream’s Michelle Kanu introduces us to one businessman who helped amass the negotiating power of hundreds of landowners in Trumbull County.

Sunday, February 3, 2013 at 6:08 pm

At the R.D. Banks Chevrolet dealership in Champion Township, owner Russell Banks says business is booming.

In the last month alone he’s sold several new pick-ups to area farmers who recently received checks from leasing their land for natural gas drilling.

Banks shies away from calling himself a leader, but he and a few friends organized hundreds of neighbors to negotiate one of the largest oil and gas leasing deals in Trumbull County.

Banks: “It’s fun to help people. It’s kind of like a fever. When you start to help people it’s hard to stop.”

It all started a few years ago when Banks heard that many of his neighbors were being approached by so-called landmen to lease for drilling. Banks was sure he and his 200 acre farm would be contacted next, so he decided to meet with a few business owners in the area to compare notes.

Banks: “The four of us started talking, saying let’s find out what everybody’s talking about. Let’s make sure we’re communicating with each other to make sure we’re all getting a fair deal here because all of us were very naive on gas and oil.”

They did some research and found the Associated Landowners of the Ohio Valley, or ALOV. Banks says they called ALOV, and the leader told them to gather up more neighbors.

Banks: “Well, it was just like lighting a fire. And between the four of us—I still have my list. I sat down and wrote page after page of people that I knew…And before we knew it we had thousands of acres put together.”

In the end, some twenty-two hundred Trumbull County landowners entrusted 80,000 acres to the group. ALOV negotiated the final deal with BP that included a signing bonus of $3900 per acre.

Banks says the best part of the deal was that the lease terms protected the landowners’ drinking water and property.

ALOV’s attorney, Alan Wenger, says all of the negotiating efforts of landowner associations have helped change the terms of leasing in Ohio. Now, the leases are largely more favorable for the landowners.

Wenger: “The better negotiated language started filtering into more common usage and everyone’s bar was raised for, I think, the benefit of the lessors.”

The negotiating power of groups is spreading.

Dale Arnold is director of energy services with the Ohio Farm Bureau and regularly delivers seminars on drilling to farmers around the state. He says, in 2009 there were only a handful of landowner groups. Now he estimates there are over 40.

Arnold says there’s little—if any—monitoring of these groups by the state.

Arnold: “I have not heard of any serious complaints from local people in the community, and until that happens, you probably won’t see state government taking a look at the landowner association developments here in Ohio.”

But, that doesn’t sit well with some landowner advocates.

Michelle Decker heads up the environmental group Rural Action. She says oil and gas development is happening very quickly and she’d like the state to pay more attention to how the industry is impacting people.

Decker: “I don’t think we have all the infrastructure in place and I think that’s been one of the most difficult things about the emergence of this industry. We’ve been unprepared, and we’ve had not time to get prepared.”

Decker says it would be helpful if the state kept track of landowner groups and was active in helping people learn about and connect with them.

For Now, much of the leasing frenzy in Northeast Ohio has slowed since companies like Chesapeake and BP have gotten a foothold in the region, and most of the ALOV landowners have now received their signing bonuses from BP.

Russ Banks – the Trumbull County car dealer—recently got his check. The money’s nice, he says, but the experience of teaming up with his neighbors is even more satisfying.

Banks: “I would argue with anybody who said they could negotiate a better deal a more favorable deal for themselves, for the environment or for their community on their own than they could as a group like this.”

Banks says ALOV is now tying up loose ends with the leases, and after that the group plans to disband.

But attorney Alan Wenger doesn’t see landowner groups dying out anytime soon. Instead, he sees them taking on more of a lobbying role.

Wenger: “We need a voice for landowners and I believe these groups can provide that as we look at severance tax issues that are happening right now, tax policy, as well as development of better and up to date regulations.”

Wenger says he’s now working with landowner groups that have been approached about leasing their lands for pipelines to transport the gas.

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