This does not happen very often in Ohio. It is more widespread in larger oil-producing states such as Texas and Oklahoma. You have the right, as the owner of the oil and gas, to sign a lease with an oil and gas firm granting it the right to develop the oil and gas. Then the firm would drill some wells on your land or seek partners who are willing to pay them money for the right to explore for oil and gas.
In this way, you could get help from different companies interested in making money by finding oil and gas under their lands. This can also be done when you don't want anyone but you yourself to enjoy the benefits of the oil and gas underneath your property.
The length of a lease can vary but usually it's for 10 years plus another period that can be either fixed or floating based on how you structure it. After the initial term, the lease can be renewed by you for additional periods of time. If you decide not to renew the lease, then the company has the right to continue exploring for oil and gas on its own until it runs out of space to drill into.
As long as you follow the rules set by your lease agreement and there are still oil and gas reserves beneath your property, the company will have to give you permission to explore further.
A resurgence of interest in oil and gas leasing in Ohio has the potential to generate significant new money for landowners. Landowners who earn revenue from oil and gas leasing bonus payments and royalties must be aware of the tax consequences. Oil and gas revenue is taxed at both the federal and state levels and must be reported correctly. The IRS requires oil and gas companies to report all bonuses and other consideration paid for the right to drill on federal land. The government uses this information to calculate how much profit or loss was generated by the well. If the company that leased your land made a bad decision and didn't properly account for its expenses, you could end up with nothing.
The first thing to understand about taxation of oil and gas revenues is that it is required by law at both the federal and state level. Federal law requires that oil and gas companies report all bonuses and other consideration paid for the right to drill on federal land.
State law requires that royalty owners report their share of oil and gas revenue. Each state has its own taxing authority and can determine what percentage of the profits from oil and gas activities they want to take out of the total revenue earned. Some states also require operators to withhold taxes from royalty payments.
When getting an oil and gas lease from an individual mineral owner, it is usual practice for landmen to seek not only the record title owner's signature but also that of that person's spouse. This is done for a reason. If both parties to a marriage own separate interests in the same property, what happens if one of them wants to sell his or her share? The spouse cannot make such a sale on his or her own; instead, the couple must join together to negotiate a price for either to be sold. The same thing applies when one party to the marriage wants to lease his or her interest. The spouse can't do this on his or her own; rather, the pair must work together to arrive at a price for either to be leased.
The spouse's consent is also needed for any changes that are made to the property's use. For example, if the husband owns the property and wants to change the use of the land from oil and gas drilling to something else (such as farming), his wife would have to agree to this change. If she refuses, he can refuse to go through with the deal.
Spouses can also assist each other in negotiating leases. For example, if one spouse knows of someone who may be interested in leasing part of the property, they could ask that person to talk with the other spouse first before agreeing to a contract.