What is a lease and what do I have to do?

A lease is an agreement and  legal contract between the mineral right owner and an oil and gas company.  The contract provides rights to the company to extract certain minerals from the land in exchange for compensation.  However, there are more terms and conditions that should and must be contained in the contract.  As with any contract or important financial decision,  you should consult an attorney who has experience with these types of issues and  contracts.

What are lease terms and conditions?

Terms which specify how long a lease remains in effect or what activity must occur to keep the lease in effect, as well as what happens when the lease ends.

Types of minerals that may be extracted and the depth in which the well may extract those minerals.  Descriptions for  specific formations, such as shallow oil/gas versus deeper formations like the Marcellus Shale and Utica Shale.

Transferability of the lease and your right to sell the lease.

Bonus Payments – How much and when do they get paid?

Royalty Payments – State law mandates a certain percentage, but how much more are other landowners receiving?

Damage Clauses – What happens when you can no longer drink your water or your trees have all been cut down.

How much will I get paid?

This really depends on how well your negotiations transpire.  You should always retain an experienced and respected oil and gas attorney as he/she will be able to put you in a position of strength when the negotiations begin.  Obviously, the better and more experience you have on your side, the more money you should expect to receive.

Do I even own the mineral rights below my land?

This question is one of the first questions people ask themselves.  It can be answered, but you must be able to read and understand the specific language contained in your deed and any other addendum that may affect the deed.

 Will I be forced to lease?

The simple answer is, it depends.  Pennsylvania does not have forced pooling.  However there are laws on the books that may challenge this in the very near future.

What if I don’t want them to drill on my property, but they drill on my neighbor’s property?

This is a common and complicated issue.  Many people feel differently about whether the gas and oil companies should be drilling in the first place.  Moreover, people have different concerns when it comes to Marcellus Shale…is it safe, what happens in 10 years, will my water be contaminated, etc.  If you are asking this question, then you better seek immediate advice.