Natural gas producers begin the process of exploring and producing natural gas by obtaining mineral rights from property owners interested in leasing their land for potential drilling activity. Land professionals, or a “landman,” conduct due diligence and research in county courthouses for information on property records and meet with those owners to develop a lease agreement giving the gas producer the right to produce natural gas and other hydrocarbons from their mineral estate.
The lease typically includes a per-acre signing bonus for a specified number of years and an agreed-to royalty payment to the property owner if a well produces natural gas. A number of market-based factors influence the terms included in each agreement.
Leases also include provisions to allow for the construction of underground gathering lines to transport natural gas from wells to larger transmission pipelines and processing plants. Landowners are compensated for the use of property needed for these pipelines, as well as other facilities and infrastructure that may be needed.
It is important to note that leases are legal and binding documents. The lease or “contract” represents the official written agreement between two parties, usually the gas company and the mineral/gas owner. Like all legal contracts, landowners should consider outside counsel prior to engaging into a lease agreement.