How are oilmen like Marlon Brando from “The Godfather?” They can make potential leaseholders an offer they can’t refuse.
At a presentation on oil and gas leases at Southwest Mississippi Community College on Tuesday, Mississippi State University Extension Service officials outlined the history of oil production and the process for leasing land.
“In Southwest Mississippi you have a long history of oil and gas production. A lot of people in this part of the country work in the oil and gas industry,” Mississippi State University associate professor Martin Hegwood said.
Mississippi produced 16.9 million barrels of crude oil in 2018 and is home to the nation’s ninth-largest refinery in Pascagoula, according to the Mississippi State Oil and Gas Board.
One of the goals of the presentation was to educate residents about the difference between surface property and mineral acres, which determine the value of property as it relates to energy production.
“You may have a situation where you own all the surface land but all the mineral acres had long been broken up,” Hegwood said.
In Mississippi, mineral rights laws are such that people can sell all of their surface property but retain all or some of the mineral rights to the property.
In some cases, mineral rights to a given property may have been piecemealed decades ago, leaving residents with a smaller proportion of ownership and therefore a smaller cut of potential royalties from energy production.
“If a land man comes to you, he or she has to determine if you’ve got mineral acres,” he said.
Individuals who choose to sign a lease on their mineral rights receive a bonus for doing so in addition to regular royalties on profits from production. A typical royalty is to the tune of 3/8 to 3/16 of the production value, he said.
When asked by an audience member what options existed for residents who did not want to sign an oil or gas lease, he explained that it would be essentially impossible to refuse.
“You will probably need to consult an attorney,” he said.
People who choose not to sign a lease with an oil or gas producer don’t have much by way of legal options to keep companies off their land. Oil producers will drill wells anyway and send those individuals royalty checks after the well pays out three times over. And if an individual chooses not to sign a lease they are held legally accountable for the maintenance of the new well.
“It’s better to sign a lease and receive your royalty at the beginning of production,” Hegwood said.
Dr. David Burnett of Texas A&M University sees the expansion of the oil business as an opportunity if proper care is taken.
“Cheap energy is at hand if we’re able to improve technology and address environmental issues,” he said. “Coal, oil and gas give you the most bang for your buck.”
Burnett likened those with environmental concerns related to fracking to Londoners in 1908 who opposed the construction of a major railroad for similar reasons.
While the increased production of petroleum comes with both benefits and challenges, Burnett stressed the importance of being realistic.
“Tax revenues will not match increased public expenses,” he said.
For Burnett, there are four main issues to be considered — the present lack of infrastructure for petroleum production, concerns related to fresh water use, issues with the environmental perception of projects and the overall environmental impact.
Burnett intended to set the record straight about fracking from a scientific perspective.
“The composition of fracking fluid is environmentally safe now,” he said. “Contamination (of fresh water sources) is possible if fracking fluid is disposed of incorrectly.”
Fracking fluid is mostly water but there are often chemical additives introduced to the fluid’s composition to more efficiently break up below-ground shale to extract oil. There is no distinct composition of fracturing fluid and it is dependent on the specific environmental conditions of a given well.
According to a 2015 EPA study of hydraulic fracturing fluid, roughly 58% of reported fracturing fluid compositions contained hydrochloric acid and ethylene glycol.
A 2017 study by researchers at Yale found that arsenic, benzene, formaldehyde, lead and mercury can also be found on a list of over 200 common biocides and cytotoxins found in fracking fluid.
The real danger regarding the harsh chemicals used in the shale fracturing process is that if even trace amounts of chemicals are released into sources of water or fertile soil, those sources of water and fertile soil could be contaminated.
All of the harsh chemicals used in the fracturing process are meant to serve a specific function, however some worry the same substances could at some point contaminate nearby wells and aquifers.
“Anything on the surface could leach into the ground and aquifers,” said Dr. Jason Barrett of Mississippi State University. “Educate yourselves about your well, ask those questions, become knowledgeable about what you’ve got. In southwest Mississippi we tend to have acidic water, 5.0 in some cases.”
Although Barrett encouraged those in the crowd to pay close attention to the chemical composition of their wells, he was sure to emphasize the value in wells.
“Properly constructed wells are good, safe sources of fresh water,” he said. “Be conscience of what you’ve got and where you have it. Online resources are fantastic, but talk to people that you know.”
Some problems with water quality are actually naturally occurring, he said. Hardness, excess iron, hydrogen sulfide and manganese can all show up in your water without any direct contamination having occurred.
“Twenty-five percent of people haven’t gotten their water tested in Mississippi,” Barrett said.
Barrett emphasized the importance of testing water for bacteria such as E. Coli and coliform rather than dissolved solids such as metals. For Barrett, it represents a public health issue.
“What’s underneath your feet can affect people a mile down the road,” he said. “Basic testing is generally either free or reasonably cheap. Get a price before you get any testing done.”
Changes in water odor, taste and color may indicate the presence of contaminates, he said.
“Make sure that you report complaints to the MDEQ,” Barrett said, referring to the Mississippi Department of Environmental Quality.
Mississippi Oil and Gas Board Geology Administrator David Snodgrass rounded out the end of the event.
“The water underneath your land is owned by the collective State of Mississippi, not the Mississippi government,” he said. “We take environmental issues very seriously.”