If you're thinking of the mounds of cash to be made by letting an energy company drill for natural gas beneath your land, you better be lawyered up and with luck on your side.
Leasing your mineral rights is booby-trapped with legal risks and could result in expensive bills to clean up a mess left behind by a gas exploration concern that goes bankrupt.
Ted Feitshans, an N.C. State University professor and the state's leading authority on mineral rights, on Tuesday laid out the risks involved in signing contracts with energy exploration companies eager to get at natural gas deposits trapped in the state's prehistoric rock formations.
Feitshans made his presentation to about 80 people at the Chatham County Agriculture building in Pittsboro. Chatham County, along with Lee and Moore counties, are believed to be the epicenter of natural gas deposits that could meet the state's demand for four decades.
"If I were a landowner I wouldn't agree to take on any of the liabilities, recognizing I might get stuck with them anyway," Feitshans said after his presentation.
Since last year, five energy companies have signed contracts with local property owners, giving the companies the right to drill or extract gas on some 9,400 acres in Lee County.
Farming advocates say the leases here typically pay a signing bonus of $1 to $4 per acre, well below prices paid in other states, where companies have been known to pay more than $1,000 per acre.
Some of the energy exploration companies entice property owners with checks waiting to be signed and cashed, Feitshans said. But he warned that the checks can include one-sided contracts on the reverse side, and endorsing the paper with a signature can mean signing away your rights and taking on legal liabilities for as much as a decade.
The technology used to extract natural gas from shale deposits -- horizontal drilling, hydraulic fracturing and chemical injections -- are currently not legal in this state. But that could change as public officials look for ways to harness domestic energy resources.
Feitshans said that energy companies typically offer property owners a standard lease agreement that exempts the companies from a slew of legal liabilities. "Don't sign it," Feitshans said.
Instead, he said, hire a lawyer to draft a landowner addendum that shifts all liabilities back onto the company, including the responsibility to cover any costs associated with environmental damage caused by the drilling operation.
Feitshans said a good lease document will require the company to remove all equipment from the landowner's property. And it will transfer rights of ownership to the landowner if the industrial equipment is abandoned, so that the landowner can pay to have it removed without being sued.