Learning Too Late of the Perils in Gas Well Leases

On December 1, 2011, the New York Times published an article regarding problems with the language used in oil and gas leases signed by landowners across America. Many landowners are unfamiliar with the oil and gas terminology used in these leases, and often do not understand the fine print used. This misunderstanding may bring about problems in the future. Although these leases allow landowners to receive compensation for possible drilling on their property, they often do not cover unfortunate consequences that may come from this drilling. Examples of possible disastrous results cited in the article include contamination of well water on rural lands and an increase of environmental risks to the land.

According to the article, problems arise when oil and gas landmen pitch their sales tactics to uninformed landowners. Although oil and gas companies are required by law to disclose information on environmental risks to potential investors, oil and gas companies are not required to disclose this information to landowners in a lease. Many landowners sign leases without fully understanding the future implications of entering such an agreement. These consequences can also include unforeseen damage to their property, something oil and gas companies are not responsible for if not explicitly stated in the signed lease.

The unfamiliar language used in many oil and gas leases can come back to haunt landowners who did not understand the contract in which they entered. Landowners in certain rural areas of the country now have to deal with serious problems, such as contaminated water and exposure to toxic drilling sludge. Entering into a lease where the language is not understood can be risky, since there are few regulations that provide consumer protection for this type of contract.

See the full New York Times article at: