Being part of an Oil and Natural Gas Well has many benefits both economic and patriotic. The primary benefit is economic. Landowners that are part of a well are entitled to 1/8th or (12.5%) of gross well production. Even an average well can produce tens of thousands of dollars in revenue for the landowners. Predicting landowner royalties involves many estimates: the quality of the well (reserves), the price of oil and natural gas at any one point in time, duration that the well is in production and more.
The landowner who physically has the well on their property is entitled to receive 250mcf of free house gas per year and additionally has the option to purchase additional gas at well head prices if needed. This is in addition to their royalties and can add up to tens of thousands of dollars in additional savings over the years. (see chart below)
|250,000||Recoverable Reserves (MCF)|
|$7.50||Gas Price per MCF (wellhead)|
|12.5%||Landowner Royalty Percentage|
|$234,375||Total Royalties to Landowners in Drilling Unit|
|20||40||Aceage in Drilling Unit|
|$11,719||$5,859||Royalty Per Acre (Life of the Well)|
|Free Gas Value|
|200||Free Gass Allotment per Year (MCF)|
|$13.50||Value at Current Rate|
|$2,700||Value Per Year|
|20||Production Years of Well (low estimate)|
CONSIDER THE FOLLOWING
- Do you put fuel in your car? Do you use gas to heat your home? Do you know where it comes from? If we do not produce oil and gas locally, then we have to import it from other States in the US. This involves transportation, which wastes additional energy that is needed for transportation.
- As we all know, even the oil we get from refineries in other States in the US is probably imported from other countries. How many times have we heard about oil spills in the oceans that kill thousands of animals and harm the wildlife? The less oil we have to import, the less risk of spills and the safer it is for the environment. Again, importing from other countries also requires fuel for shipping, and this wasted shipping fuel further pollutes our environment.
- Furthermore, in other countries where these commodities are produced, the environmental standards are minimal or nonexistent. In Ohio, oil and gas producers are strictly regulated by the EPA and other entities that regulate pollution and limit the permissible environmental impact that can be left. Ohio producers are required to replant cut trees, seed and grass cleared areas and restore the land to the way it was as much as possible immediately following completion of drilling. They are also required to have filters in place to keep the air clean. So oil and gas produced in the US under these regulations actually result in a lower environmental impact than oil and gas produced elsewhere in countries where these standards do not exist.
JOBSThe Oil and Gas Industry employs more than 4,000 direct and 10,400 indirect jobs in the state of Ohio.
PERSONAL INCOMEThe Oil and Gas Industry, via its multipliers, is responsible for $730 million per year in personal income in the State of Ohio.
CONSUMER IMPACTOhio and its residents keep approximately $1 billion per year in state when buying locally-produced natural gas and crude oil, and Ohio consumers collectively save $65 million per year in avoided interstate pipeline transportation cost and the price reducing impact of having local supplies compared to other parts of the country.
TAX REVENUELast year, Ohio's Oil and Gas Industry paid over $57.5 million per year in severance, property, commercial activity, federal, state and local taxes. These taxes are used to fund many of the programs that benefit everyone in the state!
GROSS STATE PRODUCTThe Oil and Gas Industry generates approximately $1.5 billion in Gross State Product and a state-wide output or sales of $3.1 billion per year.
ROYALTIESOhio's Oil and Gas Industry generated royalty payments of over $126 million last year, and provided an additional $75 million in "free" natural gas to landowners.
Questions to Ask
Barrel - The unit of measurement for oil used in the industry. One barrel equals 42 gallons.
Delay rental - An annual payment made to the lessor usually on a per acre basis prior to a well being drilled.
Drill Lease - This is a lease that has to be acquired from the landowner that the well unit will be located.
Free gas - An annual allocation of gas to the lessor for domestic heating purposes. The industry standard is 200,000 cubic feet or 200 MCF per year and goes to the person upon whose land the well is located.
MCF - One thousand cubic feet; the unit of measurement for natural gas used in the industry.
Non-drill Lease - This is a type of lease that is acquired from any landowner that is part of the unit, but does not have the actual well located on their property. "Non-Surface Oil and Gas Lease"
Pooling or unitization - A provision that allows the lessor's land to be combined with adjoining lands to form a drilling unit to meet state acreage requirements.
Primary or initial term - The length of the lease in years, typically 5 years or more. The longer the term, the less likely a well will be drilled shortly after signing a lease. Royalty – The amount of production received by the lessor, usually one-eighth (12.5%) of the sales of oil and gas from the well. If there is more than one landowner in the drilling unit, the royalty is shared according to the amount of acreage each lessor has in the unit.
Secondary term - The length of the lease after a well is drilled, usually for as long as the well produces in commercial quantity.
Shut-in royalty - Payment that is received in lieu of production royalty when the well cannot be produced due to production problems or other factors.
Signing bonus or cash bonus - a one-time payment paid to the landowner upon signing of the lease agreement, typically a Non-Surface Oil and Gas Lease. This is in addition to the royalties.
Termination - End of the lease due to expiration of the primary term or when commercial production ceases and the well is plugged.
|Sound Levels of the Oil and Gas Industry|
|Drilling rig on rig floor||90 db|
|Drilling rig @ 100 ft||80 db|
|Drilling rig @ 200 ft||70 db|
|Drilling rig @ 300 ft||60 db|
|Pump jack running in production||75 db|
|Pump jack running @ 100 ft||45 db|
|Gas well running in production||65 db|
|Common Environmental Noise Levels|
|Normal Conversation||60-70 db|
|Average Cell Phone Ringer||75 db|
|City Traffic (inside car)||75 db|
|Power Mower||107 db|
|Power Saw||110 db|
|Jet Engine @ 100 ft||140 db|
- Average - 100 ft x 100 ft
- Large - 150 ft x 150 ft
- Tank battery and meter run - 25 ft x 40 ft
- Pump jack - 15 ft x 15ft