Replies to This Discussion

Permalink Reply by HARRY STEPHENSON on December 13, 2009 at 5:04pm

I am not an expert on this, but the way I understand this is if you are included in a unit you will get royalities on your entire 40 acres whether the horizontal is under your land or not. You do not have to add an addendum....that's just the way it works.

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Permalink Reply by Whitt on December 14, 2009 at 3:02pm

That is not how the royalty portion works. You will only receive royalties for the proportinant share of the property that is being developed. There is not going to be a company that will pay you royalties on acreage that is not being produced. You can add a pugh clause that will only allow the company to hold acreage that is being produced but you will not get paid on all your acreage because it is in a unit. Some companies will not give this in their lease but it is what you should look to have added.

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Permalink Reply by Sinclair on December 14, 2009 at 7:20pm

Thanks for your reply, Now I am even more confused. Will it or should it state on the lease what part of your acreage will be used for figuring royalties. Are you saying that If my property is part of a unit but the first horizontal is not under my acreage, then i get nothing? Can the lease then be held by production in the unit that is not creating royalty income for our acreage or will the lease expire after the primary term is up?

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Permalink Reply by HARRY STEPHENSON on December 14, 2009 at 8:26pm

Me too!!! Jenny, if you go to PSU cooperative ext service web site and go to their royalty calculator you will see it explained exactly as I did to you. Click on tools. Then on PSU royalty calculator.
It says if there is 400 acres in a production unit and you own 100 acres of it you will be paid 25% of the royalties of that unit times your royalty lease rate. It doesn't matter if the horizontal is under your acreage or not. Not sure what other gentleman is geting at????

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Permalink Reply by Dolores Chobert on December 15, 2009 at 9:25am

I agree with you. We were told we'll get royalties for all 25 acres , because we're in the unit. Doesn't matter if its under our acreage or not.

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Permalink Reply by Matthew Santiago on December 15, 2009 at 10:54am

Harry i agree it doesn't matter about the horizontal going directly underneath your property.

However you could own 100 acres have it leased and have only 50 acres in the production unit. You would be considered in the unit, however you would only receive royalties on 50 acres

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Permalink Reply by Matthew Santiago on December 15, 2009 at 11:00am

Ruby & Whitt are correct in what they are saying.

First it doesn't matter if the horizontal goes directly under your land. If you are in the unit you get paid for your amount of acreage that is in the unit (it may be all your leased acres, it may be half or something else) It depends how the unit is drawn. It does not matter which leg they drill first.

For Example: You sign a lease on 25 acres. When the unit is drawn up, only 18 acres of your leased land is placed into the production unit. You are considered in the unit. However you do not get paid royalties on all your 25 acres. You only get paid on the 18 acres in the production unit. If all 25 acres are in the production unit then yes you will get paid royalties on all 25 acres.

Hope this helps. What you really need to see is the production unit map. You can then see how much if any of your acreage will be in the unit.

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Permalink Reply by HARRY STEPHENSON on December 15, 2009 at 11:50am

OK, I think the confusion here is in assuming that the 40 acres of leased land in the original question is all in production unit or not. For my answer I assumed it was. Apparently Mr Whitt assumed it was not all included. If not all of the leased land is in the production unit then yes you only get royalities on the part that is included. That is also where the pugh clause comes into play.

But to answer the original question again....the horizontal DOES NOT have to be under your leased land that is in the production unit to get royalities. WHEW!!!!

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Permalink Reply by S.M.Williamson on December 15, 2009 at 12:04pm

If you are part of a group your entire acreage is considered covered, unless otherwise excluded in the wording of the contract. Also, make sure you don't sign a lease that puts you in too long of a holding period with excessive or endless contract option to drill at a later date in the future. Avoid a contract that requires the energy company to recover their investment before you receive royalties. My advice would be to get a lawyer from Texas with experience in the leasing of land to big oil and gas companies. Do not trust the judgement and inexperience of the lawyers jumping on the boat, you could potentially lose an enormous amount of money and give up rights not necessary.

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Permalink Reply by beetle on December 20, 2009 at 9:00am

Just how do you tell if your in a unit or not? There are wells going in all around me and im signed......how can you find out?

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Permalink Reply by Charles Moss on January 7, 2010 at 7:42pm

Can anyone help us with this question? How do you get to see a production unit map? How can I find out how many acres are in the unit to which I belong?

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Permalink Reply by BuckinghamGasMan on January 21, 2010 at 3:44pm

I just listened to a Webinar from PSU on this and similar topics. They explained that the company developing the production unit will contact you about your inclusion. If you have not heard, then you are not in one. However (if you don't really trust the gas companies), I believe that the units are filed in your local County Recorder of Deeds office. Visit the Penn State web site and get some good information, including the "Webinars" that have already been held and can be watched. Visit: http://naturalgas.extension.psu.edu

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