Owning oil and gas rights on 100 acres in West Virginia, I was in a wonderful position to profit from the new oil and natural gas boom. The land lies at the western edge of the Marcellus shale deposits that are the focus of the revival of the oil and gas industry in the United States. The problem was that I was not aware of the magnitude of this potential.
According to Frackcheck WV, the Marcellus shale layer underlies large sections of Ohio, Pennsylvania, New York, West Virginia and Virginia. It contains vast amounts of oil and natural gas that were not previously recoverable by methods that were economically feasible. The deposits are locked in the shale, which must be fractured to release them.
Customary Lease Rental Was $2 to $5 Per Acre
My land had been leased intermittently to gas exploration companies for 10 years. The rental was $4 per acre with no signing bonus.
In 2006 the lease expired, and a different company wanted to lease the land. Surprisingly, they offered us a signing bonus of $100 per acre, in addition to a $5 annual rental per acre. We were exceptionally pleased to receive a $10,000 bonus. We were told that it had been discovered that the shale layer underlying the land contained a lot of oil and gas.
According to Frackcheck WV, a process known as fracking has been developed. To fracture the shale, millions of gallons of water and chemicals are pumped into the shale layer at extremely high pressure. The fracturing releases oil and gas which flows through the well piping to the surface and then to distribution lines.
I Missed the Chance to Become a Millionaire.
According to Oil and Gas Monitor, signing bonuses in 2012 reached the previously unimagined amount of $5,000 to $10,000 per acre. If I were leasing my 100 acres of land now instead of in 2006, the signing bonus could have been between $500,000 and $1,000,000. In 2006 I was happy to receive the $10,000 bonus. This was so much higher than the $4 per acre we received in the past. I used the money to buy a good, used Cadillac with low mileage.
Before signing a gas lease, consult a lawyer and research the situation thoroughly.
I sometimes wonder if I could have become a millionaire if I had waited until 2012 to lease the land. My mistake was not realizing the magnitude of the oil and gas boom. However, the old adage is, “a bird in the hand is worth two in the bush.”
“What is Fracking”/Frackcheck WV
“Fracking: Economic and Environmental Considerations”/Oil & Gas Monitor