Occupational Licensing and the Landman. Are there rules?

All,

Occupational licensing in the United States is on the rise. It has been estimated that up to 25% of jobs now require a license.[1] There are a number of reasons why occupational licensing is detrimental to economic growth. Licensing requirements protect incumbents by preventing new entrants in the industry through the cost to acquire and maintain a license and discourages movement from areas of lower opportunity to high opportunity as requirements are often state-specific and do not transfer easily to new jurisdictions. Now landmen may be required to become licensed.

Badges to purchase Oklahoma mineral rights? It could be a thing…

Historically, landmen have not had to maintain a license. It would place a large burden on both company and independent landmen if they had to maintain some type of license in every state where they worked. As the headwinds in the basins shift and new prospect lines are drawn, a landman could spend a great deal of time and resources complying with licensing and continuing education requirements.

Recently, an Ohio court ruled in Dundics v. Eric Petroleum Corp, Slip Opinion No. 2018-Ohio-3826, that an oil and gas lease falls within the definition of real estate according to the Ohio law and the negotiation of which requires a real estate broker’s license. If it can be interpreted that the assignment of oil and gas leases fall within the definition of real estate, then one can assume that almost any oil and gas trade of any size will have to be negotiated through licensed brokers.

Most proponents of the occupational licensing claim that it protects consumers. Which party is the consumer in this case? A consumer is usually defined as a buyer or user of goods or services. In oil and gas transactions, the buyer or user or lessee or assignee is usually a professional in the business. Do they need protecting? This is weird.

Fortunately the Oklahoma Real Estate License code explicitly excludes oil and gas from its definition of real estate by clarifying that “real estate shall not include oil, gas or other mineral interests, or oil, gas or other mineral leases; and provided further, that the provisions of this Code shall not apply to any oil, gas, or mineral interest or lease or the sale, purchase or exchange thereof.” [2] While this would currently exclude landmen from having to obtain a real estate license, there is nothing to prevent the state from creating a new occupational license exclusively for landmen.

Occupational licensing is an important issue and should be monitored and advocated against in the event that other states want to copy Ohio’s regulatory overreach. Berlin would be interested to hear your thoughts on the matter in the comments section below.

More to follow,

Berlin

[1] Rodrigue, Edward. “Four Ways Occupational Licensing Damages Social Mobility.” Brookings. February 24, 2016. Accessed December 2018.

[2] The Oklahoma Real Estate Commission. “Oklahoma Real Estate License Code and Rules.” OREC. November 1, 2016. Accessed December 2018.

a version of this post originally appeared by the same author on www.oklahomaminerals.com