Landowners Should Keep a Close Eye on “Market Enhancement” Costs

Ever hear of a "market enhancement" royalty clause? If you're a Pennsylvania landowner, or perhaps a landowner in Ohio and West Virginia, you likely have. Even if you (as a landowner) have a lease that disallows post-production deductions from your royalty check, many leases have market enhancement clauses that allow the driller to deduct certain expenses if they can process the gas and sell it to a distant customer for more money than they can get locally. A higher price for the gas theoretically means you the landowner get a bigger royalty check, right? Not so fast...

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