There is Deceit in Leasing as Practiced Yesterday, Today, and Tomorrow?
Essay by S. Tom Bond, Retired Chemistry Professor and Resident Farmer, Lewis County, WV
We are learning that our society, at the top and now working down, goes on the old principle of “anything I can get away with.” Standards of ethics and behavior, which applied a generation or two previously, are largely forgotten. There has always been a crust of this at the top and a lager at the bottom of the social scale which practiced this ethic, but the middle is more and more crowded by them. One must be more self-protective.
Nowhere is this more conspicuous than in mineral leasing, both in what is written in the contract and how lease taking is done. The first John D. Rockefeller was quite religious, but his brand of Christianity didn’t have much, if any, sense of fairness. It involved a sort of social darwinism. He said, “The growth of a large business is merely a survival of the fittest.” Born the son of a con artist, his Standard Oil gained control over 90% of the U. S. oil business.
Standard Oil was broken up by the federal government as a trust (illegal monopoly). Five year later it was reorganized as a holding company (which owned the fragments of the previous Standard Oil) and had to be broken up again. Some of the worst features go back to that time and his company. One in particular is the habit of leasing not only the drilling target layer but also “all oil and gas” as long as any of either is produced on the leased property.
As a friend once described it to me, from “heaven high to hell deep.” Such leases, taken originally as much as 100 or more years ago still hold today, although the land ownership and the company ownership have changed and the original owners are beyond memory – only names on paper in the courthouse.
Then the idea of separating estates came into existence so the children of the original owners of the lands could receive the “royalty” from oil and gas extracted, but the surface was sold to someone else. The royalty was pure gravy and usually was divided among the original owner’s children, and they divided it when giving to the next generation, which causes several kinds of headaches, both for mineral owners and for producing companies.
If a lease runs out, mineral ownership is still divided. And all mineral owners must be looked up if it is to be leased again. Royalty checks get smaller each generation when divided this way, and have gotten difficult to handle. Record keeping and taxation are a headache for the state.
The situation on my farm is instructive. It was leased in 1934 by my predecessor’s predecessor, a highflying physician in Buckhannon. He was an absentee landlord who had gone broke, but whose father in law, one of the wealthy Bennett family in Lewis county, bought it back at the courthouse steps. I called his daughter, who was the spokesman for the ones who inherited it. She could not even figure out which of the farms her father owned that I was talking about!
This rentier (as the economists call it) mentality cares no more about what happens to the land or community than the blind investor who only cares about increase on his investment. There is a single value in their system of thinking. They will sign about anything the company puts in front of them to keep that easy money coming. Bad for the future, for the environment, for the community and bad for the present surface owner.
Friends and I thought about this situation many years ago and decided it might be a good thing anyway. If it hadn’t, northern West Virginia might have become like much of the southern part of it. There the land has few areas suitable for farming, so coal companies bought it all, and today there are many large company-owned land holdings, and in places the ordinary citizen can’t even find a place to have a residence.
Another long-standing complaint is leases that include other features than oil and gas extraction, particularly for pipeline rights of way. They need to be able to drive along the pipeline, but the description of their need is sufficient so if they need to put in a pump station later, they have a road to it along the right of way. They sometimes call for waterlines, telephone, telegraph and electricity lines!
The lease man is at the bottom rung of the corporate ladder. If you want something outside the company plan, such as to go around a spring, he has to go back to his boss, and he to his boss who knows how far. Time consuming at best, this is more like a screening your request has to go through. Minor changes in a lease can be made, though. Write it on the contract and the lessor and the leaseman must initial it. Beware of the lease man who claims to make a verbal agreement; if it is not written on the contract, they will just laugh at you later when you try to get what you were promised.
One of the big complaints now is what is called “pooling” A company will decide on a drilling plan that includes several tracts. Laws proposed by the industry would allow it to take the rest after getting a minimum of 80%. This is effectively the same as eminent domain used for private gain. If the supply of drillable land was running out, there might be some public good, but leased land is abundant at this time. If it has to be condemned should the driller be allowed to put the well on the condemned land for his convenience, too?
There are endless horror stories about how the leases are executed. Pipelines are laid at a bad time of the year, spoiling hay harvest, or finished up in the fall too late for ground cover to be established before the winter rain. Fences are not replaced, animals are killed. I know of one case where they broke the pelvis of a nursing cow, which, of course could not be sold or utilized and had to be shot and buried. The calf had to be sold immediately, rather than as a weanling. You hear about roads not rocked because the work was done in warm, dry weather is a common complaint. Wells drilled so close to schools the noise and odor is strong. Children are apt to be more vulnerable to toxic substances, too.
Lessors do it once in a lifetime, leasemen do it several times a day. Lawyers are constantly looking to get more for the company. People engaging with a drilling company need to talk to other people who they know are knowledgeable, and if they can find one that is not biased for the companies, consult a lawyer. It’s tricky business, and risky from top to bottom!
See also the recent article on the XTO landman who defrauded West Virginians.
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