For every drilling rig and pump jack across our state, a land agreement had to be reached before they could get down to work. But how exactly are these agreements made? Who is responsible for what, and for how long? There are lots of variables and it’s the landman’s job to navigate each one.
Step One: Prospecting
The Oklahoma Corporation Commission (OCC) grants and regulates drilling permits. Tracking the latest drilling permits at the OCC reveals land geologists have deemed ripe for oil & natural gas production. Staying up to date with where future drilling will occur is vital to being a successful landman.
“The land side of the business is really the tip of the spear. Once an area is identified by geologists as potentially productive, it’s the job of the landman to go out and acquire the lease rights to drill that acreage.”
—Saxby Stradinger, President, Blackfin Exploration
Step Two: Title Search
Landmen are well acquainted with Oklahoma’s county courthouses. That’s where the state’s land title information is housed. Today, more than 90 percent of land records can be searched with specialized online applications or data systems.
Once they locate a landowner and the land title, they begin outreach. In many cases original land ownership dates back several generations, which means the landman might have to do some legwork to locate the current landowner or mineral rights owner.
Step Three: Negotiation
Minerals can be bought outright, but are more typically leased. ‘Surface rights’ refer to use of the land itself; farming, building a house, etc. ‘Mineral rights’ refer to owning the minerals below the surface. The landowner may own them, but they can be leased or sold independently from surface rights.
“The United States is virtually the only nation in the world where private citizens own the minerals. In almost every other country, the central government owns exclusive rights to all minerals,” said Stradinger.
Once the title work is done and the owners are located, surface rights and mineral rights are negotiated. An operator pays a fee up front for the right to drill over a period (typically three years). If a well is drilled, and oil or natural gas are produced, the operator pays the owner a percentage of the value of production. Royalty payments continue for as long as the well is economically viable.
Step Four: Permitting
Along with drilling permits, the Oklahoma Corporation Commission regulates spacing between wells – how many wells can be drilled in a specific area, section pooling –combines leased land & adjoining leased tracts all under one umbrella, and many other requirements. Once an agreement has been reached, a contract is drawn up, signed and a permit to drill is obtained. When drilling begins, the landman’s job is complete.
Finding the right land; locating the landowner; negotiating; contracting; and drilling. Now you have some idea of all it takes to build a land agreement. Through it all, the landman is the go-between for the operator and the landowner. It’s a very specialized job and a valuable part of producing the nation’s oil and natural gas.