I was the last of eight heirs to receive the offer from Antero. The landman advised my signature was not necessary for Antero to proceed with drilling. According to the Cotenancy Modernization & Majority Protection Act passed in 2018, it seems he may be correct.
Am I now responsible for the mineral taxes even though I didn’t have a choice in this?
Long story short, yes. And you are also due your share of any income produced. Theres a lot of details involved if you were not to sign and theybdrilled anyway. Im not experienced in wv, but someone else can weigh in. But you being under lease is still better for the operator, so its probably a negotiating tactic to get you to sign first offer terms
Hi @Dodi_Gum Antero’s landman advised you correctly. Once they have 75% of the property leased they can proceed to drill. In WV they do this by filing a memorandum at the courthouse and are also obligated to give you the best rates that have been negotiated out of the other land owners. For all practical purposes, it’s the same as if you signed a lease. You will not receive royalties, meaning you will have reportable income and subsequent taxes.
If you are trying to avoid the additional income, you may consider selling your minerals and taking a one time payment.
Thank you gentlemen. I guess I’m signing a lease. Very concerned about owing more in land tax than what the royalties bring in. Time will tell.
@Dodi_Gum I have never seen an instance where the taxes outweigh the royalty income as they are usually proportional and directly correlated. The operators report your income to the state and often withhold taxes from your payment directly. Any additional taxes may be through a state production tax ticket but either way, you will be taxed a fraction of what you make.
You definitely should be more concerned about how much money you stand to make. If you were to sign a lease you’ll get a lease bonus payment, plus a royalty rate. Let’s say it’s 1/5. You get to keep 1/5 of the oil/gas that is allocated as yours, and the operator get’s the other 4/5 for taking all the risk, and doing all of the work. You can only be taxed on money that comes in, so you cannot owe more money than what the royalties bring in.
If you don’t sign a lease, I’m not sure what options you have in WV. But you essentially would be responsible for your share of the costs of the well, but owed your full percentage of oil/gas that is allocated to you. With numerous details that vary state by state.
Nick. Did you mean you would receive royalties? You put you would not receive royalties.
@Jim_White yes sir! Thank you for spotting that typo. She WILL receive royalties or the funds will be held is suspense if she is “unfindable” but that’s not the case clearly. In no circumstance can the taxes exceed the income though, it’s a portion of income.
@Dodi_Gum Very familiar with these cotenancy laws. You do NOT lose your rights, you just basically get forced into the lease, but terms arent bad.
They will send you a bonus payment proportional to your ownership (based on a State formula of the average bonuses paid on leases in that unit) and then you will get royalties as well at a rate in the Cotennancy filings (again another State formula).
Many times these royalties are BETTER than what you will be offered now. I’d consult especially if this is larger interests. I know Nick at MountainView Minerals does this type of consults
I’ve seen the attempted tax exceed the royalty income many times by Districts in Texas. Mineral income on an interest should only be taxed on a portion of the actual income within the year.
My sincere appreciation to all who have taken the time to offer insight and support for this unexpected situation. I’ve asked the landman to send me a current copy of the sign-on contract since the one I received was already expired. Thank you so much SteveCo, Nick-TBM, Jim White, and Khaled_Helmi.
Thanks also to the folks who created this site.
Sounds like youve seen someone in the district make a mistake. Mineral income on an interest is only taxed on a oercentage of the actual income
Look into wvsoro on the internet and you will find some very good information a must read for everyone. WVSORO stands for West Virginia surface owners rights organization but also deals with mineral owners rights
Since WV taxes severed interests regardless of production, there are quite literally millions of people paying more in severed mineral property taxes in WV than the (zero or nominal) revenue they receive.
My understanding is that this system was put in place to tax the out-of-state land barons who owned vast holdings of mineral rights in West Virginia for future coal production.
The severed tax won’t change even if you lease and get a producing well. If you get a producer, you can expect to additionally pay state income tax and ad valorem tax on the royalty interest.
Hi Kitchen. I don’t understand your comments. Would you mind providing more details? Maybe somewhere I could read the law you are referencing?
Hi Nick.
I am wondering if I misunderstood the “landman” that I have been negotiating with for several months. He explained to me, or rather what I heard him say was that my sister who refused to even speak to him would basically lose any money because it would go to the State of West Virginia and “Good Luck getting it back from them!”
From my understanding here, they have a correct address so they should give her the same amount I negotiated as it’s the highest. Correct?
Do you also own the surface of the minerals that may be developed?
Here is an explanation of the tax imposed on the production of minerals: Appraisal of Oil and Gas Royalties
Hi @Rottiemama thanks for the question. That “landman” is full of shite, and outright lying to you. These funds are mandatory for them to pay, and in the event they CANNOT contact the mineral owner they must hold the funds in escrow. That escrow is attributed to the mineral owner and can be claimed at any time by them.
If a company does not pay for the minerals extracted it becomes a massive lawsuit and WV takes that serious as can be seen with the “jay-bee” lawsuit recently. Whether it is held in escrow at the state, or company I’m not sure, nor is it as simple as walking into a bank and making a withdrawal, but it’s not unobtainable either.