1. The Financial & Tax Implications of
Oil & Gas Leases in Ohio
Marrison, D., Bruynis, C. & Ward, B. OSU Extension, 39 Wall Street, Jefferson, Ohio 44047
Abstract
Oil & gas exploration has hit Eastern Ohio with a flurry during the past year as oil companies are leasing the
Marcellus & Utica Shale mineral rights for up to $6,000 per acre. This leasing activity has the potential to provide
landowners with substantial revenue. An important consideration for landowners who receive bonus payments or
royalty income is how to manage the tax implications from this new revenue stream. OSU Extension developed two
educational outreach initiatives to address the emerging tax and financial questions. Topics included taxes
associated with oil & gas leases, what IRS forms to use to report income and expenses, how to calculate depletion,
and strategies for reducing tax liability. During the fall of 2011, the teaching team taught 466 tax professionals at
eight different sessions on oil & gas lease taxation as part of the OSU Income Tax Schools. Thus far in 2012, the
team has offered thirteen meetings reaching 519 landowners owning over 62,000 acres. Ten additional meetings
are scheduled for landowners in the upcoming months. The landowners who attended the 2012 workshops reported
mean knowledge gains between 1.79 and 2.05 on a 5 point Likert scale. The landowners also reported the following
anticipated actions for 2012: 77.3% plan to meet with a tax accountant; 68.5% will meet with their lawyer; and 63.3%
plan to sign an oil & gas lease.
Background
 There has been an explosion of leasing of the oil & gas rights for the Marcellus & Utica Shale Layers in Ohio.
 Landowners are receiving between $2,000 – $6,000 per acre for these lease rights.
 The large amount of money received by the landowners has them seeking educational assistance from OSU Extension
on the financial and tax implications of oil & gas leases.
 OSU Extension Educators are being asked questions such as, “How much taxes will I have to pay” and “How can I decrease my tax liability?”
Objectives
 To help Income Tax Return Preparers be better equipped to provide advice to clients who receive oil & gas money.
 To help landowners understand the federal, state, & local taxes they will be required to pay for their oil & gas lease revenue.
 To provide landowners with resources to make sound financial decisions with their oil & gas lease money.
Outcomes
 8 meetings for tax professionals were held in the fall of 2011 with 466 tax professionals attending.
 519 landowners, owning over 62,000 acres, attended the 13 Financial & Tax Implications meetings (2.5 hour session).
 The landowners reported mean knowledge gains between 1.74 and 2.01 on a 5 point Likert scale.
 The landowners reported the following anticipated actions for 2012: 77.3% plan to meet with a tax accountant;
Over 500 landowners have attended the tax &
financial meetings sponsored by OSU Extension 68.5% will meet with their lawyer; and 63.3% plan to sign an oil & gas lease.
 3 Tax Factsheets have been written (General Tax Article, CAT Tax, & Depletion) for distribution.
Knowledge Gain
Average Average
Knowledge Topic Area Knowledge
BEFORE the AFTER the Future Plans
Program Program
2.11 (s.d. 1.06) Taxes associated with royalty payments 3.90 (s.d. 0.75) Gain of 1.79  5 additional tax factsheets are being written.
 10 additional financial & tax implications meetings for
2.12 (s.d. 1.06) Taxes associated with bonus leases 3.93 (s.d. 0.72). Gain of 1.81
landowners have been scheduled for the remainder of 2012.
1.93 (s.d.0.97) Strategies for reducing income tax liability due to 3.82 (s.d. 0.79) Gain of 1.89  An Adobe-Connect web version of the meeting will be held
oil & gas payments over the internet in the fall of 2012.
2.04 (s.d. 1.22) Where on the federal tax forms that oil & gas 4.08 (s.d. 0.84) Gain of 2.03  8 additional meetings for tax professionals will be held in the
payments are reported fall of 2012.
1.69 (s.d. 0.93) How depletion deductions are calculated for oil & 3.74 (s.d. 0.82) Gain of 2.05  A video-based version of the financial & tax implication
gas payments meeting will be posted on-line by the fall of 2012.
Respondents were asked to report their level of knowledge on a 5 point Likert Scale (1=Poor, 3=Average and 5=Excellent)
EMPOWERMENT THROUGH EDUCATION
OSU Extension embraces human diversity and is committed to ensuring that all research and related educational programs are available to clientele on a nondiscriminatory basis without regard to age, ancestry, color, disability,
gender identity or expression, genetic information, HIV/AIDS status, military status, national origin, race, religion, sex, sexual orientation, or veteran status. This statement is in accordance with United States Civil Rights Laws
and the USDA.
Contact David Marrison (440-576-9008 or marrison.2@osu.edu) for more information about this educational program or for copies of the program handouts.