For Pennsylvania Land and Mineral Owners
Call Attorney Art West 1-800-738-2261
Before You Sign an Oil and Gas Lease
Lease Review:
The language in an oil and gas lease contract is difficult to understand for most. Few landowners can read through each sentence in the preprinted lease and understand its meaning. BE SMART, retain Attorney Art West, who has experience in this area of the law, to protect your valuable oil and gas assets. When requested, a reputable oil and gas producer will negotiate a balanced lease favorable to both parties. Attorney Art West can suggest changes, amend the “Standard Oil and Gas Lease” and add specific terms that better protect the landowner.
Wealth and Estate Planning:
Estate planning prior to or just after negotiating an oil and gas lease is prudent. Larger tracts of land will produce significant personal wealth once production begins. Family limited partnerships and other estate planning devices should be considered. Attorney Art west will discuss how to protect assets from creditors and how to preserve family wealth.
Oil and gas lease negotiation on behalf of landowners or owner groups:
The “Marcellus Shale” has created significant opportunity and some risk for the Pennsylvania landowner. To protect yourself and obtain the best outcome, consult with Attorney Art West. Exploring and drilling for natural gas is big business. Your signature should not be placed on an oil and gas lease without legal representation. Lease provisions that need special attention are varied and complex. The following material is an overview of what is at stake.
Signing Bonus:
Many factors will influence the size of a “Signing Bonus” and percentage royalty that a natural gas producer company will pay a land and mineral owner in Pennsylvania.
Factors in the Oil and Gas Mineral Lease Negotiation that impact the Signing Bonus and Royalty Payment:
- The term of the lease prior to drilling operations.
- Size of acreage being leased.
- Drilling unit size and its relationship to the parcel being leased.
- The Pennsylvania County that the property is located in.
- Competition from other producers in the area that your parcel is located.
- Number of neighboring parcels that are leased.
- When and how the signing bonus is to be paid.
- Remember, you have “one” opportunity to sign a fair and balanced lease. Retain Attorney Art West!
- A signing bonus can range from $250.00 to $7,000.00 per mineral acre.
- Royalty can range from 12.5% to 20%.
Call Attorney Art West 1-800-738-2261 for Legal Help!
The following is a list of other provisions that require special legal attention, which
Attorney Art West will negotiate on your behalf.
| Drilling site locationClean up premisesTimber rightsNo gas storageRoad width/locationCrop damagesWater quality issues
Fence producing well Fences and gates Well site fee Pipeline clause Prudent operator Market Enhancement Location Approval Use of ponds and water Plow depth Pugh Clause Arbitration clause No warranty language Royalty rates Signing bonus |
Clean and greenFresh water damageCommencement of operationsCompliance with regulationsIndemnify & hold harmlessAuditNo other minerals
No option to extend Surface damages Payment in lieu free gas Force Majeure Ad Valorem taxes Shut in limits Fair market value royalties Notice of assignment Minimize soil erosions Right of first refusal Special warranty title Non-surface lease Surface lease Term of lease Noise |
You may want to join or form a group of adjoining property owners that share your goals for land use. Larger tracts of land typically provide greater leverage when negotiating terms with gas producers.
Land use challenges:
Timber rights, mineral deeds, mineral rights, development rights, leasehold interest, life estates and estate planning. Know what you own and how to retain assets for future generations.
Pugh Clause:
A “Pugh Clause” is the most important provision or addendum that should be included in every gas lease agreement that addresses whether the entire parcel of land is to be held under a lease agreement or if only a portion of the leased land is to be held under a lease agreement. If only a portion of a twenty acre or a one hundred acre parcel is developed, the acreage not developed needs to be released from the original mineral lease. Without a “Pugh Clause” the remaining acreage not in the unit, will not receive a royalty return and you will not have the right to lease to another company. This is a bad result all landowners want to avoid.
Shut-in royalty:
A “Shut-in royalty” is paid when one or more wells are fully developed, but the producing company has decided, for reasons they chose, not to produce or sell gas. These provisions need to be fine tuned with a balanced approach between the producing company and you the mineral owner. Once a well is drilled, the producing company may elect not to produce gas which means no royalty for the mineral owner. Contact Attorney Art West to negotiate a fair and balanced lease agreement.
Other Resources:
- Penn State Cooperative Extension www.naturalgas.psu.edu
- Pennsylvania’s Gas Rush: Uncovering the Impacts of Natural Gas Development www.wpsu.org/gasrush
- Royalty Calculator-Calculate your projected royalty income at www.geology.com/royalty/.
- A blog for information exchange focused on Pennsylvania Marcellus Shale, www.NaturalGasPA.com.