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Financial liabilities may outweigh pluses of buying gas or oil well

 

 

By CELESTE BAUMGARTNER

Ohio Correspondent

 

COLUMBUS, Ohio — If you have a gas or oil well on your property, you could buy it and have free gas forever. Sounds like a sweet deal, but you had better be certain that the benefits outweigh the financial liabilities, said Dale Arnold, Ohio Farm Bureau Federation (OFBF) director of energy policy.

"The farmer or landowner owns the well outright," Arnold said. "It is an exempt, domestic well, and he is allowed to use the natural gas from that for domestic purposes on his property. There will be some oil production with that to keep the well going, and he is allowed to sell some of that into the market."

Arnold has worked with some farmers in eastern Ohio with farrow-to-finish hog operations, dairy or greenhouse operations who purchased wells on their property, he said. Having access to their own fuel was great, but they also understood the financial responsibilities.

"Most were getting the wells for domestic use; they wanted to heat their homes," Arnold said. "That is usually worth $1,500 to $2,500 per year. The amount of oil they can sell into the market because they keep the well pumping to keep it clean, that’s another $800 to $1,200."

But these wells are also under what is called interruptible capacity, he said. That means there are no guarantees that they will be producing oil and natural gas, so land owners need to have a second source of heating fuel for their home.

The land owner is also responsible for filing reports with the Ohio Department of Natural Resources (ODNR) because the well is still in operation, Arnold said. And they must have liability insurance.

"He might be exempt from having to show proof for that, but he still has to have it, and many farmers and rural residents are finding out that farm and ranch owner policies have never covered that type of exposure," Arnold said.

Also, natural gas from an exempt domestic well may not be sold or used for rental properties, Arnold said.

The land owner is responsible for required emergency management planning information and for all maintenance and upkeep of the well, Arnold said. Probably the biggest financial blow would come from decommissioning the well, when it becomes necessary.

"Since you own the well outright, you are responsible for decommissioning that well; that’s a minimum $25,000 hit," he said.

If land owners are considering buying a well on their property, Arnold suggested they contact ODNR and have the well inspector for their county come out and inspect the well to make sure it and the equipment are sound.

They should check the ODNR website to learn their well’s production history. To learn more, watch a video on this topic at www.youtube.com/user/ohiofarmbureau

To find out a well’s production history, visit the Ohio Oil and Gas Well Locator at http://oilandgas.ohiodnr.gov/well-information/oil-gas-well-locator For your county’s gas inspectors. go to ODNR Field Inspectors at http://oilandgas.ohiodnr.gov/inspectors

7/23/2014