I just learned that I have inherited mineral rights in Marshall County WV. E Q T production wants to lease these rights . I am looking for some sound advice.
Hi sgrube and welcome to the forum. I am a royalty owner in Marshall Co, Liberty district our leases are with Southwestern Energy. Depending on which district and how many acres you are dealing with will possibly determine how much leverage you have in negotiations with EQT. The more acres the better your chances of getting a good agreement. As to lease bonus for signing a lease $4,000 to $4,500 per net acre is a good target. Royalty interest rate should be 16-18% minimum vice the standard 12.5% stated in most boiler plate lease documents. Add an addendum to the original lease document that overrides the original language on exceptions that you negotiate. Better yet amend the language in the original document to these exceptions. Sample below as a starting point. Getting professional advice from an O & G attorney is always a good alternative. You have several online access points to check and compare what others are agreeing to. Check the Marshall Co Clerk’s office for online documents and the wv.dep.gov site for map and well info. Good luck and come back with other questions as they arise.
Sample Addendum
Should there be any inconsistency between the terms and conditions set forth in the main body of this Lease and the terms and conditions specified in this Addendum, the provisions of the Addendum shall prevail and supersede the inconsistent provisions in the main body ofthis Lease.
ROYALTY: All references made in Paragraph (B) of the section entitled "PAYMENT TO LESSOR’ as to one-eighth (1/8) royalty shall be amended to EIGHTEEN Percent (18%).
ROYALTIES WITHOUT DEDUCTION: All royalties due hereunder shall be based upon the gross proceeds received by Lessee for all oil, gas, and the constituents thereofproduced and sold from the Lease, without deduction, directly or indirectly, for the cost ofproducing, gathering, separating, treating, dehydrating, compressing. processing. transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form. The royalty paid hereunder shall be subject to a deduction for its proportionate share ofany production tax and/or severance tax.
NO STORAGE RIGHTS: Notwithstanding anything herein contained to the contrary, Lessee agrees the herein described leased premises shall not be used for the purpose of gas storage as defined by the Federal Energy Regulatory Commission. Any reference to gas storage contained in this lease is hereby deleted. lf Lessor wishes to enter into an agreement regarding gas storage using the leased premises with a third party, Lessor shall first give Lessee written notice of the identity of the third par1y, the price or the consideration for which the third party is prepared to offer, the effective date and closing date of the transaction and any other inforrnation respecting the transaction which Lessee believes would be material to the exercise of the offering. Lessor does hereby grant Lessee the first option and right to purchase the gas storage rights by matching and tendering to the Lessor any third party’s offering within 30 days of receipt of notice from Lessor.
NO COALBED METHANE: Not withstanding anything contained herein, this Lease shall not include the right to produce coalbed methane.
COMPLIANCE: Lessee’s operations on said land shall comply with all applicable federal and state regulations.
HOLD HARMLESS: Lessee agrees it will protect and save and keep Lessor harmless and indemnified against and from any penalty or damage or charges imposed for any violation of any laws or ordinances, whether occasioned by the neglect of Lessee or those holding under Lessee, and Lessee will at all times protect, indemnify and save and keep harmless the Lessor against and from any and all loss, damage or expense, including any injury to any person or property whomsoever or whatsoever arising out ofor caused by any negligence ofthe Lessee or those holding under Lessee.
WARRANTY OF TITLE: lt is understood that Lessor warrants title to said property only with respect that the title is good to the best of Lessor’s knowledge and Lessee agrees that no claims will be made against Lessor pertaining to warranty of title.
AD VALOREM: Lessee agrees to pay a proportionate share of any increase in ad valorem taxes assessed against the leased premises, which is based upon the value of oil and gas production from, or reserves under, the leased premises.
SHUT-IN LIMITATIONS: Lessee agrees that the shut-in royalty payment will be $25.00 per net mineral acre, per year. Notwithstanding anything to the contrary herein, it is understood and agreed that this lease may not be maintained in force for any one continuous period oftime longerthan five (5) consecutive years afterthe expiration ofthe primary term hereofsolely by the provisions ofthe shut-in royalty clause.
EXTENSION OF PRIMARY TERM: The paragraph contained in the Lease, to which this addendum is attached, providing for an extension of the primary term for one additional term of five (5 ) years from the expiration of the primary term by payment of an amount equal to the initial consideration, is deleted in its entirety.
I would also suggest adding a depth clause limiting drilling to the Marcellus level. If they want to go to the Utica then they need to renegotiate.
Thank you for the advice. Sounds like I need to get an O&G attorney for some help. Thanks for helping me educate myself before I sign anything.
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Thank you for help . I am trying to make sure I get some good , sound advice before signing anything.
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