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Some Ohio landowners benefit from spike in crude oil prices

Special to the Legal News

Published: May 19, 2022

Local motorists may be grumbling about higher gas prices, but for some landowners in Ohio, the increase in oil prices is good news.
Though most of the oil wells in Ohio are operated by out-of-state companies, landowners who lease property to those companies for drilling make money whenever oil is pumped from their land, according to Mike Chadsey, director of public relations for the Ohio Oil and Gas Association.
When gas prices spike as they have this year, drillers typically try to extract more crude oil, which means more cash for the landowners.
“The landowners benefit (from higher prices). They get royalties based on volume, and the more volume, the more royalties, so landowners are tickled pink,” he said. “In terms of operations in Ohio, producers are a little more active.”
It’s not necessarily a huge financial windfall for all landowners, however, especially farm owners, whose higher profits from royalties are offset at least somewhat by inflation in other sectors, said Chadsey.
“Their royalties are up, but their expenses are up. The cost of fertilizer, fuel. Fertilizer prices are way up. They’re paying more for everything just like the rest of us,” he said.
While the companies pumping the oil are also benefiting from higher gas prices, it doesn’t come without challenges, said Chadsey.
“They’re dealing with a lot of supply shortages. There’s a shortage of pipe. There’s even a shortage of sand for fracking and they’re also having trouble hiring enough workers,” he said. “They’re going through some of the same problems other industries are going through.”
Gadsey said that years ago, when the oil industry wasn’t as robust as it is today, there were fewer jobs in the field, so oil companies didn’t hire as many workers. As a result, the industry now has a gap of older, experienced workers.
“We need bodies and we need certain supplies that we can’t get our hands on,” he said.
The pain at the pump for drivers worsened in the past week as gas prices in central Ohio eclipsed the $4 per gallon mark.
The average price for regular gas in the Columbus area on Tuesday was a record-high $4.18, which was 31-cents higher than a week earlier and $1.41 per gallon higher than a year ago, according to AAA.
The average price for regular gas in Ohio on Tuesday was $4.17 per gallon, up from $3.94 a week earlier and $2.82 a year ago.
The average price for the nation was $4.37 per gallon, an increase of 26-cents per gallon from a month ago and $1.41 higher than a year ago.
The Buckeye State was the largest oil producing state in the country from 1895 to 1903 and, while its production has since been dwarfed by such oil-gushing states as Texas, North Dakota, New Mexico and Oklahoma, Ohio still produces about 20 million barrels annually, according to the Ohio Department of Natural Resources.
Most of Ohio’s crude oil wells are in the eastern half of the state, though commercial quantities of oil and gas have been found in 69 of Ohio’s 88 counties, according to the Department of Natural Resources. The state has approximately 60,000 active wells.
The application of horizontal drilling combined with the hydraulic fracturing drilling method, or fracking, resulted in a drilling boom for gas and oil in the Utica shale region of eastern Ohio during the past decade.
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