Marcellus Gas Royalties in PA and WV

by Duane Nichols on November 21, 2013

Getting Paid: Gas Royalties In Pennsylvania

Article from State Impact – Pennsylvania

As the natural gas industry has grown, many people across the state signed leases with the understanding that under Pennsylvania law, they were entitled to a certain percentage of the money companies made selling the gas.

The Guaranteed Minimum Royalty Act of 1979 put the figure at 12.5 percent.

Using that number, a 2013 report from the Allegheny Institute for Public Policy estimated that Pennsylvanians received $731 million in royalties for 2012– a dramatic increase since the gas boom began.

However some gas leases allow companies to deduct the expenses they incur moving gas from the well to the market – things like compressor stations and pipelines.

Several years ago a number of Pennsylvania landowners complained and filed lawsuits. In dozens of cases they argued all the deductions invalidated their leases.

In 2010 the PA State Supreme Court sided with the gas industry.

In a unanimous decision in Kilmer v. Elexco Land Services Inc., the court held that since the word royalty was not defined in the law, the industry could rely on its own interpretation, which allowed for subtracting the costs of moving the gas to market.

Some landowners have continued to complain they’re being underpaid. The issue has become particularly hot topic in the state’s busiest drilling hub – Bradford County.

In response to the complaints, the State Senate Environmental Resources & Energy Committee held a hearing in June 2013. Within a few weeks Governor Corbett signed a new law requiring gas companies to clarify the deductions on royalty check stubs.

However, a group representing the state’s mineral owners was angered over language inserted in the bill at the last minute, which allows oil gas companies to combine or “pool” some leases.

They argued the measure could adversely impact some people who signed contracts years ago and didn’t anticipate modern shale gas drilling–hindering their ability to renegotiate old leases. Corbett contends the language will enhance the efficient extraction of oil and gas, while protecting the rights of landowners.

Many of the royalty complaints have centered around the state’s biggest driller, Chesapeake Energy. In August 2013, Chesapeake agreed to a $7.5 million settlement in a class action lawsuit over the issue. The company denies wrongdoing but has called the agreement “fair and reasonable.”

The settlement agreement is still awaiting approval from a federal judge.

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Are my West Virginia royalty checks right?

At least one WV Supreme Court case and one jury has found that some oil and gas companies are underpaying royalty owners by deducting unjustified expenses or using market values for calculating the royalty that are not the proper market values.  If you want to know if the royalty checks that you are receiving are being properly calculated you can get a free initial consultation with a lawyer who has volunteered to do this for the WV Surface Owners Rights Organization members and others.

Here is an update on the Tawney class action against Columbia Natural Resources, LLC (formerly Columbia Natural Resources, Inc.), NiSource Inc., Columbia Energy Group and Chesapeake Appalachia, L.L.C. (“Defendants”)

Here is a September 20,2008, newspaper article explaining that the class action against Dominion has been settled.  If your are a mineral owner with Dominion wells, you should go to the settlement web site to keep up on what is happening and what you need to do.

The Marcellus is the most economic shale play around.  In other words, oil and gas companies are getting the best bang for their buck right here in West Virginia. So, we may not be getting paid enough for our leases here.

Most lease offers right now are around $1,350 per acre on the bonus and 12.5% on the royalty.  Admittedly, with a little negotiation and some leverage it’s not hard to get to $1,500 per acre and 14% royalty.  I’ve recently seen $1,800 and 18%.  Up in the northern panhandle at one point, some large tracts were commanding $5,000 per acre on the bonus, and Wetzel and Marshall counties could count on $2,500.

{ 4 comments… read them below or add one }

Cindy November 22, 2013 at 10:59 am

From the text re: West Virginia Royalities one would assume there should be two imbedded links in the following paragraphs, but they’re not there…..  ????:

Here is an update on the Tawney class action against Columbia Natural Resources, LLC (formerly Columbia Natural Resources, Inc.), NiSource Inc., Columbia Energy Group and Chesapeake Appalachia, L.L.C. (“Defendants”)

Here is a September 20,2008, newspaper article explaining that the class action against Dominion has been settled.  If your are a mineral owner with Dominion wells, you should go to the settlement web site to keep up on what is happening and what you need to do.

Reply

Jay Jackson January 5, 2014 at 6:33 pm

Now, that is a big percentage for royalties, 12.5% or more. (Also, the up-front payments are quite significant at $1500 per acre or more.)

No wonder companies are sometimes trying to find ways to delay payments. Nevertheless, it has been agreed upon and even signed to contract so they have to fulfill their part.

Reply

Greg Bates February 19, 2017 at 10:34 am

Consider this complex situation.

Drilling on our land of 100 acres comes from 5 different well sites outside our property. CNX and Antero are the owners of these well sites.

There are 20 acres that have been left between these two oil companies that we do not get royalties for. Both companies claim that their extraction of oil and gas does not come from these 20 acres.

I believe that they are getting this oil and gas without paying for it. Does anyone know of any class action lawsuits regarding this matter? Anyone have an opinion?

We live in southeastern Ohio.

Greg Bates

Reply

Clark Whiteman March 5, 2017 at 10:38 am

Hi.

My neighbor has gas wells taking gas from under my property.

Why dont i get royalties when i own part of the gas their taking?

I live in western PA. Thanks

Clark Whiteman

Reply

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