Community

The Landman Cometh

By Joyce Hale |

When the oil and gas industry’s landman comes to town, he brings the smell of money and change. Not everyone in the gas patch cashes in or is interested in participating, but all will ultimately be impacted.

The landman’s task is to pursue all who own mineral rights in a designated unit of land — generally a 640-acre section — and negotiate a lease for drilling. Those who are accustomed to previous leases on long-held family property are probably savvy about protecting their interests; it is simply another business transaction to navigate. For others it will be a stressful period of confusion and/or high pressured dealings. The situation is complicated further when family members or neighboring mineral owners within the unit have conflicting values about land use and property rights. Some may be anxious to receive the additional revenue without questioning potential risks while others may see it as an unacceptable intrusion on their quality of life, land use, environmental protection or heritage. Some may inherit minerals but live far away from the leased property. The landman’s offer for “mailbox money” (royalties) may be readily accepted without a sense of personal attachment to the property.

A landman serves a company by locating mineral ownership through courthouse records, occasionally curing title defects, contacting mineral/landowners, negotiating leases, and inspecting surface conditions before drilling. The landman (or landwoman) will be the company’s face and will contact owners by mail, phone or face-to-face to secure 51 percent of the unit’s acreage as quickly as possible. In Arkansas, once this majority holding is secured, the pursuit changes dramatically. Owners, who could not be located or opted not to sign, are likely to be integrated through “forced pooling.”

During the early leasing period in the Fayetteville Shale play, the public was not aware of the extent of proposed development, what prices to expect, or what problems drilling might bring. Front money incentives, known as signing bonuses, start at a low level per acre until word gets out that some receive more than others. As the leased percentage of a unit nears 51 percent, the landman agrees to more generous signing bonuses, royalty shares, and surface use agreements.

Many practicing landmen are lawyers, but employment is cyclical with boom and bust trends in energy exploration. After the collapse of energy prices in the late 1980’s, two decades of attrition left the number of landmen at a low ebb. Many who weathered that downturn in activity are now retiring. Universities that dropped their petroleum land management degrees are reversing the trend to supply the employment opportunities called for in the current energy boom.

There has been a sudden need for landmen during the current land rush that developed between exploration and production companies. It has created a situation where some landmen have better reputations than others. The degree of aggressiveness and ethical negotiations vary widely and contribute to the public’s distrust of the industry. Mineral owners should ask if their landman is certified or belongs to a professional association. Since the mineral owner is likely to have difficulty finding qualified legal representation, individuals must avoid being rushed into signing a contract. Self-schooling takes time, but is critical to protect one’s interest. Fortunately with today’s Internet communications and available references, a person can avoid many pitfalls. One excellent resource is a landowner’s guide to oil and gas development produced by Earthworks’ Oil and Gas Accountability Project, Oil and Gas at Your Door?  It is available for download online at or purchased in hard copy.

Always remember that the landman represents the company’s interest and may withhold information at best and misrepresent it at worst.

 

 

 

 

 

 

 

 

 

Leave a Reply

Your email address will not be published. All fields are required.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>