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Drilling Boom Spurs Demand for Landmen

January 6, 2008

Just a couple of years ago, Samuel Green was a retired criminal-defense investigator. Ron Long was researching land titles in Oklahoma. Bob Penn was a real estate developer. Carolina Ortega and Steve Abney were college students.

Today, they’re all working the Barnett Shale as landmen — people who collect and manage mineral-rights leases. By most accounts, there are perhaps 1,000 landmen in Tarrant County and at least that many more throughout the region. The figure is hard to pin down because there are no licensing requirements and the vast majority are independent contractors, not employees of energy companies.

The natural gas drilling boom has sparked demand for landmen to handle everything from researching deeds to gaining signatures from homeowners. Lured by pay that can top $450 a day for experienced landmen — more than $100,000 a year — hundreds of workers, many of them young people, have flocked to North Texas for a chance to get a piece of the Barnett action.

They’re jumping into a market that bears little resemblance to the past.

“In the old days, you went out and talked to the farmer or rancher, came back and wrote up a report,” said Terry McInturff, director of the Center for Energy Commerce at Texas Tech University in Lubbock. “You could do it so much more quickly. When you need, say, 160 acres for a well, a rancher with 10,000 acres is pretty sweet,” he said.

All that has changed now that drilling has moved into urban areas.

“There are no advantages, only negatives. How many homeowners do you need to get your 160 acres?” McInturff said. Throw in news coverage of a boom, and pretty soon “everybody’s an expert,” he said. “It’s a nightmare.”

Or a dream. It all depends on perspective.

“I’m having a great time,” said Green, 67, a Dale Property contractor who moved to Texas to be closer to his daughter after retiring from the public defender’s office in Cook County, Ill., where Chicago is located. “It’s partly sales, but really it’s explaining,” he said. With homeowners exposed to years of news coverage about the Barnett Shale, “you’d think they’d read all about it. But no.”

On-the-job training

When he first started working a little over two years ago in southeast Fort Worth, “The question was: “How is it going to affect my property? Now it’s about the money,” Green said.

Ortega, his colleague at Dale, had barely heard of the Barnett Shale about 18 months ago. After growing up in Venezuela and getting a business degree from Texas State University in San Marcos, the 24-year-old was living in Miami when a friend who had gone to work for Dale told her about the North Texas drilling boom. She’s been with the company about 18 months.

Both she and Green — two of about 175 landmen working for Dale in Tarrant County — have had rapid-fire training: Dale gave them printed material to study. They toured a drilling rig, learned how to run land titles through the county’s records system, processed lease packages.

“It’s basically on-the-job training,” Green said. “One of the district landmen trained me, gave me tips.”

The hierarchy of the land business allows that kind of hands-on learning. At Dale, a landman reports to an area landman, who reports to a district landman. Dale, in turn, contracts with energy companies, who give the land company a range of prices that they’re willing to pay for leases. If the price escalates beyond that range, higher-level leasing and company officials get involved.

Other than the company landmen, just about everybody works independently at day rates. Among the independent landmen, pay ranges from perhaps $175 a day for entry-level workers to $400 and even $500 for experienced workers.

Green and Ortega’s quick introduction to the business contrasts sharply with the other end of the education scale, which is a bachelor’s degree in petroleum land management, or the lawyer who specializes in land work. But it can make do in the frenzied environment of the Barnett Shale.

“It’s more like a manufacturing process,” said Jim Holcombe, president of Colt Exploration in Fort Worth. A new person can be quickly trained in one element of the business and put under the supervision of a more experienced landman. Other specialized work, such as tracking down ownership gaps in property deeds, can be handled by someone else.

Pay can top $100,000

Long, who researches titles for Continental Land Resources, was one of a few dozen landmen recently paging through deed records in the Tarrant County Courthouse basement, a crush that has prompted the county to set up tables in the hallway for researchers.

He used to work in southern Oklahoma, but he’s been working in Fort Worth about four months.

“They give me a run sheet,” or list of properties to review, he said. “Hopefully, the legal description puts me right on the document we’re after. We want to know who owns the minerals. That’s what we’re looking for.”

When that ownership isn’t clear, a title abstracter like Monica Richardson might get involved. Richardson’s job has taken her into ownership records dating back nearly two centuries, she said. She’s worked on mineral-rights titles the past two years after spending about 10 years in real estate.

“It’s like a puzzle,” Richardson said. She held up a folder with 155 pages on a property she’s currently working on. “It’s only about half of it. I’m working on a gap that’ll take me two or three days to work out.”

She’s paid $350 a day for her work, which keeps her busy six days a week “ever since I started doing minerals,” she said.

That’s a bit above the $325 a day that the average landman earns in Texas, said Robin Forte, executive vice president of the American Association of Petroleum Landmen, a professional association based in Fort Worth.

According to the group’s 2005 salary survey, the median annual compensation for independent landmen was $89,500, while the median for landmen employed by companies was $108,000. Half make more than the median, and half make less.

Since 2000, independents have seen their pay rise 38 percent, and company landmen have enjoyed a 33 percent raise. Independents receive mileage reimbursement and also per-diem food and lodging expenses while traveling but no benefits.

Licensing proposal

Although Long and Richardson spend their days in a courthouse, while Green and Ortega might be in the field talking to homeowners, all call themselves landmen.

“A landman is a bit like a lawyer. He can specialize in several areas,” Forte said. “Some do title work predominantly, some are lease buyers. Some are company landmen who do contract negotiations and drafting, or administration and supervision.”

Although Forte understands the influx of people into the land business to cope with the leasing boom, it also worries him that the profession’s image is being lessened.

“There’s a certain level of expertise a person should have for us to consider him a landman. A business card and laptop does not necessarily a landman make,” he said. “For some of the work that has to be done, somebody can walk off the street and do it in a week or so,” he said, but the industry still needs experienced personnel.

“The disadvantage is, there’s not a degree requirement” or even a license, he said. “People can walk into our profession and besmirch our name, and we can’t do anything about it.”

In the most recent Texas Legislature, a measure proposed by Rep. Marc Veasey, D-Fort Worth, that would have put landmen under the licensing authority of the Texas Real Estate Commission failed, partly because of opposition from the American Association of Petroleum Landmen.

But sentiments are changing, Forte said. “The industry is tending more and more to favor licensing. We’d rather have an independent land commission,” he said.

Bob Penn’s solution is to give his landmen — as well as himself — more formal education. Penn and Associates is a year-old firm that works with Fort Worth Energy, which recently sold its leases to XTO Energy.

Penn learned about Texas Christian University’s new petroleum land practices certificate program, launched this fall, and enrolled himself and two lawyers who were performing title work for him. He said it was so helpful, “I’m going to put three more of my landmen in it next semester.”

Christine Riordan, associate dean in TCU’s M.J. Neeley School of Business, which oversees the program, said 16 people enrolled in the fall. The program, which includes about 55 hours of classroom work and field trips to a drilling rig and the courthouse, costs $4,900.

In addition to teaching the technical side of the industry, “we put them through about 16 different role-playing situations” a landman is likely to encounter, such as dealing with a rural landowner or negotiating with an urban neighborhood association.

“They feel much more confident after going through the program,” Riordan said. Spring and summer sessions are planned.

Although landmen are among the first idled when the industry experiences its inevitable downturns, the Barnett Shale seems to have enough momentum to offer years of employment.

“The good part of the Barnett Shale is that it’s what we call a long-term ticket,” or assignment, said Marty Searcy, president of Four Sevens Energy, a Fort Worth land firm that works for Chesapeake Energy. “We’ve had several firms working for us since 2002. In days past, a one-year assignment was huge,” said Searcy, who has about 100 leasing agents and 15 title agents working under him.

Landmen Q&A

What is a landman?

A landman handles mineral-rights leases, usually on behalf of an oil and gas company that will actually do the drilling and development. Some research land and mineral-rights ownership. Others mostly collect leases by contacting property owners, answering questions about drilling and development, holding informational meetings and negotiating terms.

Whom does a landman represent?

Almost without exception, landmen work for petroleum producers or larger land-services companies that ultimately deal with producers. Just as a Realtor selling a home works for the home’s owner, landmen work for oil and gas companies, not property owners.

Are landmen licensed in Texas?

No. The American Association of Professional Landmen, based in Fort Worth, is an association that grants a “Certified Professional Landman” designation to qualified members, but there is no regulatory oversight.

How are landmen paid?

Most are independent contractors who are paid a day rate by a land-services company or a producer. They also receive housing and food expenses when traveling. Some work for their own account, collect per-lease or per-acre incentives, or receive a small portion of the value of production, called an overriding royalty.

What can a landman tell me or not tell me?

Landmen should explain the offered terms of a lease and what those terms mean, just as any salesman would explain the features and benefits of a product. Those terms typically are determined by the land-services company or producer, not individual landmen, who can’t be expected to disclose the highest bonus or royalty the company is willing to pay. Landmen should explain state rules governing royalty payments, well-spacing requirements and city ordinances governing drilling sites. A landman might or might not know the locations of drilling sites or associated pipelines.

A landman can explain the consequences of signing or not signing a lease but should not suggest that a landowner must sign. No landowner can be forced to sign a lease in Texas, nor can mineral rights be acquired by eminent domain. A landowner could be left without a lease if the property is more than 330 feet from a well bore, but the well bore may not pass directly beneath unleased property.

What ultimately determines the lease terms a landman or operator can offer?

Competition, mostly, and negotiation. Multiple bidders usually push up the price, while large landowners or smaller landowners who band together to negotiate from a position of strength can also attract higher bids. But competition is the key.




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