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Buying Land With A Gas Well

Buying Land With A Gas Well :::

Buying Land With A Gas Well

Oil and gas companies may approach landowners and offer leases (private contracts), which give the oil and gas companies the rights to explore and develop the oil and gas resources beneath the landowner's property. While a successful exploration and development program could yield substantial monetary compensation to a landowner, there are still many risks to consider. Carefully review any lease and consult with an oil and gas attorney for legal assistance. Before signing, negotiate changes to meet your needs and protect your interests. For more information, read the Landowner's Guide to Oil and Gas Leasing.

You may purchase a property with an existing oil and gas lease. Generally, oil and gas leases provide operators with access to properties giving the operator (lessor) the mineral rights to the property for the time period specified by the lease, regardless of who owns the property. If the property is sold to a new landowner, he/she is bound to the lease agreement made by the previous property owner. The landowner will acquire the mineral rights back at the end of their lease if the lessor does not explore further or does not drill a successful well. A lease's terms may be extended if a successful well is drilled and the lessor makes consistent royalty payments to the landowner from the well's production.

The compulsory integration process addresses landowners of an assigned spacing unit (an area allocated to a well) who have not entered voluntary lease agreements with the well operator. In addition, it protects landowners' correlative rights (fair access to a shared reservoir) by offering them three choices, at three different risk levels, for potential compensation for oil or gas production if the well is successful. This process only begins once DEC issues a well permit to the operator. Read the Landowner's Guide to Compulsory Integration Options for more information.

While DEC strongly discourages the operation of wells by persons who are not oil and gas professionals, landowners may encounter opportunities to operate oil or gas well(s). This may occur when oil and gas companies offer to sell or give a well to a landowner when the well is no longer commercially viable or when a landowner purchases a property on which non-commercially producing well(s) are located. The prospect of "free gas" may be enticing; however, landowners must understand that operation of any oil or gas well is a regulated activity that involves substantial financial and potential environmental and safety risk. DEC advises against connecting any residence or other occupied building to a well for home-use. While the main component of gas is methane, gas coming directly from a well may also contain propane and butane, in addition to water, since the gas has not been treated. Given this, the gas may not burn correctly in furnaces and other appliances compared to utility natural gas that has been treated. Landowners are encouraged to conduct research, contact trained professionals, and contact DEC to learn more about the operation of oil and gas wells in the state.

Landowners who intend to operate oil or gas wells must first register with DEC by submitting an Organizational Report. To legally transfer well responsibilities from an oil and gas company or previous landowner, a Request for Transfer of Well Responsibilities must be approved by DEC. Upon DEC approval of the transfer, the landowner becomes the well operator and is subject to the same laws and regulatory requirements as an oil and gas company. These requirements include, but are not limited to, well maintenance, reporting, and - at the end of the well's life - plugging. Well plugging costs vary but can easily total tens of thousands of dollars. Downhole (borehole) complications encountered during well plugging can drastically increase plugging costs. An operator's failure to comply with state statutory and regulatory requirements can result in significant f

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