Here you will find answers to frequently asked questions about leasing land for gas drilling. If you have a question Ask Here. If we don't have the answer, we'll try to find it. As the most applicable answers surface, they will be posted here.
Note: Answers ARE NOT presented as legal advice. The sole intent is to help to identify potential issues to consider before leasing land for natural gas exploration and drilling.
WHERE CAN I FIND OUT IF GAS COMPANIES ARE LEASING IN MY AREA?
Start by contacting your closest Agricultural Extension Office. Pennsylvania has a Gas Team and your extension agent will be able to direct you to the right place to acquire the information you need. |
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WHAT IS A LANDMAN?
A landman is an agent who works for a drilling company, or is contracted by a drilling company or broker. Their mission is to negotiate the lowest possible lease price and most advantageous terms for the oil/gas drilling company.
During a "play" hundreds of landmen may converge on an area to quickly close leases before landowners realize the value of their mineral assets.
No matter what. It cannot be stressed enough to NOT sign ANYTHING until you UNDERSTAND EVERYTHING!
When the landman comes, it is time to seek qualified legal oil/gas assistance. You may be signing a deal that is more valuable than the value of your property itself! |
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WHAT SHOULD I DO IF I AM ASKED TO LEASE MY LAND FOR OIL/GAS EXPLORATION?
Ask the landman for a copy of the lease he is proposing. Tell him you will look it over. As the Penn State Extension Gas Team strsses... "DON'T SIGN ANYTHING UNTIL YOU UNDERSTAND EVERYTHING!"
Although most landmen are reputable, we have heard horror stories where uninformed landowners who thought they were signing a lease for "exploration only" and it turned out to be a full blown drilling lease... or worse, a CONVEYANCE. |
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WHAT IS THE DIFFERENCE BETWEEN A LEASE AND A CONVEYANCE, OR SEVERANCE?
Unlike a LEASE, which grants limited use of the minerals specified by the land owner, A CONVEYANCE transfers the MINERAL ESTATE, which is under the surface of your land to the buyer. YOUR RIGHTS TO THE MINERALS UNDER YOUR SURFACE LAND COULD BE LOST FOREVER!!!
A severance is much the same in that you are being paid for the rights to your gas/oil. Although the up-front money may look very attractive, it is all you will get. Any royalties and possibly minerals will go to the company you signed the severence with... permanently.
Again, it is critical that you consult with a qualified gas attorney BEFORE signing anything! |
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IS IT BETTER TO FORM OR JOIN A GROUP, OR "GO IT ALONE"?
Your decision to lease or not to lease should be based on what is important to you. If you have done any research, you will have discovered that the initial drilling phase involves acreage. In our opinion, joining, or forming a group that has the same goals for land use is the best way to go. Many heads are much better than one, and the added amount of property available under one lease provides greater leverage when negotiating terms of the gas or oil lease. |
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WHAT IS AN ADDENDUM? WHY IS IT SO IMPORTANT?
Understand this. Although the gas drilling company isn't trying to "stick it to you", leases are drawn up to favor the company. For example; many leases have an extension clause whereby the lease automatically renews after the primary term ends... At the same price, or less.
A properly written addendum can change that to give the company the right to match the offer of another company, if the value of the lease increases. Do you hunt? Perhaps you don't want drilling activites during deer season. That should also be in your addendum.
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DO I NEED AN ATTORNEY? AND IF SO, WHAT TYPE OF ATTORNEY DO I WANT?
Exploring and drilling for gas and oil is a million dollar venture for drilling companies. If a successful gas deposit is tapped on your land, your signature could represent a million dollar decision, or a world of grief. Before signing any natural gas lease agreement, you need to know what you are getting, and what you are giving away. An attorney with experience in gas law is your best assurance to get the most out of your gas lease agreement. |
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WHAT IS A POOL?
It is a term in gas and oil production and PA Gas & Oil Law. A pool or unit is the area from which and actual well would draw its gas or oil.
Think of it as an under ground pond. If 1/2 the pond of gas is below you and the other 1/2 is below your neighbor then, when a well is bored you and your neighbor would comprise the pool, or "production unit". You and your neighbor share the royalty money from the gas well 50/50.
The UNIT is based on the geological formation below the surface of your land. It is determined by geologists and that information is submitted and reviewed by the State. |
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I GOT RIPPED OFF! MY NEIGHBOR GOT MORE THAN TEN TIMES WHAT I LEASED FOR. CAN I DEMAND MORE?
You would have to speak with an experienced gas/oil lease attorney. But you will probably find the answer to be a simple no.
A gas lease is a binding legal contract. The time to do the research and make sure that it is most beneficial to you IS BEFORE SIGNING A LEASE AGREEMENT! Once signed and registered, you are legally bound by the terms you agreed to.
One of the points brought out early in the Damascus PA Gas Lease Meetings, was the all too common fact, that many people sign off on gas and oil leases, without ever consulting anyone who has gas lease experience. The result of that decision can be disappointing, as those who have asked this question have unfortunately discovered. |
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THE PRICE PER ACRE... IS THAT PER MONTH OR PER YEAR FOR THE TERM OF THE LEASE?
Simply put: If you have 100 acres and you sign for 5 years (negotiated) a paid up lease at $750 per acre then you will get a check for $75000.00 dollars one time only 30-90 days after signing. (the $750 is just an example it could be $1200 or what ever is negotiated)
You will not get anymore money in the primary term until something else happens. If they move in to start a well you will get well siting money. 15,000-25,000 dollars.( If you negotiate for that)
You could be entitled to delay rentals or shut in payments during certain set of circumstances. ( this also gets negotiated)
If the well produces gas you will get monthly royalty payments based on a % of the wells production.( the % of the royalty is also negotiated the PA state minimum is 12.5 % or 1/8th but out west 25% seems to be the average royalty) |
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I ONLY OWN 4 ACRES, MY NEIGHBORS HAVE LEASED. ARE THE COMPANIES INTERESTED IN MY LITTLE PIECE?
Although you may never have a drill rig on your property, if your property is in a pool, or drilling unit, you are due royalties based on the number of acres you have in the pool. Yes, the companies are interested, and unless you have specific reasons not to lease, leasing could prove rewarding if gas/oil is produced from your pool. |
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THE COMPANY WHO WANTS TO LEASE MY LAND IS ONLY OFFERING A $10 AN ACRE BONUS. SHOULD I HOLD OUT?
It depends on what you mean by "holding out". The natural gas lease is negotiable in that you appear to be interested in leasing out your land, and the company appears to be interested in leasing it from you.
Ideally, what you want to do is to negotiate to make the lease a win-win for both you and the company.
This entails first finding out what others have been able to negotiate in your area, and by seeking qualified natural gas leasing legal help. Gas attorneys are in the know about what is doable and what is "pie in the sky".
Also, keep in mind that there may be other natural gas exploration companies that may be offering even better lease terms than the one who first contacted you. |
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WHAT THE HECK IS A LISTENING WELL?
Thanks to Mapper Maven, ronholog (RR) you can Read The Full Explanation Here |
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In Honor Of Our Veterans and Our Men and Women in Uniform.
West Virginia Surface Owners' Rights Organization
