Nancy's Page

Nancy,

There is no difference in royalty payments between a property with a well, or a property without a well. Royalties are based on the % royalty stated in your lease(or 12.5% state minimum) and the percentage of acreage you own in the declared unit. 

Here's how it basically goes:

A well is drilled and a unit is declared for that well only. The unit will consist of all properties that the gas co. feels will be drained by the well. Now if you have 76 acres leased and all 76 are in the unit and the units' total acres is 760 acres, then you effectively own 1/10 of the total unit acreage. Lets say the well produces $1,000,000  per month of gas.... then what the unit holders will receive is 12 1/2% (or what is in your lease) of $1,000,000 which is $125,000/month for all 760 acres. Now you have 1/10 of the total acres of the unit, so you would get $12,500/month or about $165/acre/month. In reality I have seen folks getting their initial checks that was for $300+/acre/month!!! There have been checks at $50/acre/month as well though. 

If your lease is for 15%, as mine is, then you would get 15%. All leases could be for differing %'s as well. To throw another monkey wrench into things here's another scenerio...I know someone who was just included in a unit in Ohioville/South Beaver. He has leased 250+ acres, however they are only taking .4 of one acre in this unit. So he won't get royalties on 250 acres, only 4 tenths of one acre. The downside is his lease expires May 2012 but since some of his property is in a declared unit, the whole leased property is tied up and it won't expire, so he will miss the $$'s and opportunity to re-lease next year. The upside is that they are drilling right there, and will probably be drilling close again and including the rest of his property. 

See, there are all kinds of wrinkles in leasing gas rights.

Have a good day!
Craig