DOJ Oil and Gas Leasing Documents Merit Real Estate Brokers’ Attention

Two recently issued documents from the North Carolina Department of Justice (DOJ) relating to oil and gas leases merit the attention of real estate brokers as they conduct business at a time  of substantially increasing interest in oil and gas leasing in the state.

The documents are available on the Home page of the Commission’s Web site,, and inform landowners of their rights and summarize public protections in the Law.

Last year, the General Assembly passed the Clean Energy and Economic Security Act which legalizes fracking and horizontal drilling (see “Fracking: What Every Agent Needs to Know” in the Real Estate Bulletin, October 2012) and establishes the North Carolina Mining and Energy Commission. The Act prohibits drilling until the Commission establishes rules for fracking (to be in place by October 1, 2014), requires companies to obtain drilling permits from the NC Department of Environment and Natural Resources (DENR), and requires General Assembly approval before DENR can issue permits.

In the meantime, landowners with property in locations deemed more likely to contain oil and gas deposits will be confronted with solicitations to lease rights to companies to extract these deposits from the properties. These leases are complex legal documents and DOJ advises contacting an attorney with expertise in real estate law.

Brokers should read the DOJ documents to understand the issues facing owners and, when representing buyers or sellers, to be better able to fully disclose any material facts affecting value and title and to advise customers and clients about obtaining advice from attorneys who specialize in real estate law.

In “Landowners’ Rights”, DOJ offers tips when considering leasing for oil or gas exploration. These include:

•  contacting the mortgage lender, conservation easement holder, or Farm Service Agency office

•  checking out the salesman (landman) soliciting a lease

•  researching the salesman’s company

•  knowing the risks to your land and water supply

•  making sure your payment is reasonable and it covers damages and costs

•  talking with your neighbors, get all promises in writing, get a copy of your lease and your legal protections

•  not being pressured to sign and know your right to cancel

•  knowing where to turn for help

In “Summary of Landowner and Public Protections Under the Law”, DOJ provides discussion of the following nine key points:

•  Notice and entry to property

•  Water supply and water contamination

•  Surface activities and compensation for damages

•  Indemnification

•  Reclamation

•  Actions for damages

•  Landman registry

•  Required lease terms

Additional provisions include recording, assignment, and, very important for brokers to know, mandatory disclosure of mineral rights with real estate sales.

This article came from the Feburary 2013-Vol43-3 edition of the bulletin.