Marcellus Landowners: Check for These Important Things in Your Lease Before You Sign

At a recent meeting in Sherrard, West Virginia, senior trust officer for WesBanco Inc., Paul McKay, had some excellent advice for landowners as they get ready to sign leases. He told those at the meeting that the first lease they’re offered usually has room for negotiation, and some of the items landowners need to check for include shut-in royalties, the question of who pays taxes, and payment for natural gas liquids.

A shut-in royalty is a payment that mineral owners receive when a company is not producing gas, which McKay said those signing the contracts must make sure they are qualified to receive.

As for taxes, the mineral owner can request that the gas company pay the taxes on production royalties – and if the mineral owner will receive royalty payments before the gas company removes money to cover its post-production expenses.

The payment of royalties for natural gas liquids – including ethane, butane, propane and pentane – is another significant aspect to consider, McKay said. “A lot of the leases were drafted before the natural gas liquids were contemplated,” he said. “It is unclear if the mineral owners will be compensated for them, if it is not specifically spelled out in the contract.”*

Other things to consider when signing a lease, according to McKay:

  • limiting the area of the lease to the Marcellus Shale by limiting the depth of the drilling;
  • limiting the extension of the lease;
  • limiting the gas company’s ability to install storage facilities, disposal or injection wells for hydraulic fracturing waste, pipelines and compressor stations;
  • including surface damage protections to ensure the least amount of property damage.*

McKay said that leases are currently being offered to landowners in West Virginia with signing bonuses up to $4,000 per acre, and royalties from 12.5 to 19 percent.

*The Intelligencer / Wheeling News-Register (Feb 14) – Drilling Leases Will Impact Generations

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  • sederfan

    First thing to do if you are considering leasing your land is to see a psychiatrist. You’ve gotta be nuts to risk your own, your family’s and your neighbors health.

  • Jim Willis

    Keep researching Sam, and you’ll find out drilling actually doesn’t threaten anyone’s health (when done properly).

  • Andy Leahy

    I’m constantly amazed at the selectively blind cynicism of the anti-drillers.

    They talk like they never borrowed money, or bought a car, or took a chance, or threw themselves into a new relationship, or a new career, or a new house, or whatever.

    Oil and gas is just another branch of business!

    In fact, it’s a lot like life itself!

    Be careful. Do your homework. Line up representation, if you want it.

    And, if you don’t like the deal — then, for God’s sakes, don’t friggin’ sign!!!

    Either way, I sure as hell won’t call you crazy afterwards, like sederfan!

    When you’re done with your choices, leave the rest of us alone to make our own damn choices, concerning our own damn property, and our own damn lives.

    Truly, what’s getting lost in this whole debate is freedom.

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