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Permalink Reply by 0l1a6laz7smpf on September 7, 2010 at 6:50pm

Hi Robin,
you mentioned 1/8 of the net....not sure what all you are talking about....I think you are speaking of royalties. If so...there are lease clauses that identify paying the lessor a royalty based on the gross not the net. Your best interest is to obtain a lease with that clause and negotiate it into the contract. On my lease it is called, "royalties (gross vs. net)" and it explains that there will be no asssessment or deduction from the royalty share for the transportation of the product. Now there is another clause on the addendum called the "market enhancement clause" which further defines the definition of the 'gross' royalty for the Lessor...and also secures the Lessor's payment in further definition.

Also Robin...the main contract may have the 1/8 royalty installed in the main body under 'royalty' but you would want to make sure that you do an addendum to that contract to include today's pricing for royalties (which could be 16% to 20% plus or minus depending where you are, etc.). The 1/8 royalty clause seems to appear on all these standard leasing contract forms and an addendum is necessary to properly define the new negotiated terms of your lease. You would think by now that all the clauses on the addendums would have caused the oil/gas companies to create new contracts so as not to be so confusing. Sounds like they have only showed you the old established leasing contract if they are only offering an 1/8...you all should be talking addendum then and it would profit you to find out about the above mentioned clauses I just told you about.

Another thing to consider doing is contacting other landmen/women in your area to see what they would offer before settling on your first offer. You could call Chesapeake Energy or Chief Gas/Oil for they really have been doing much leasing in Pa. (you can find their websites online)

Hope you have much success and negotiate a very fair lease!

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Permalink Reply by Robin Maines on September 8, 2010 at 1:16am

thanks so much....this is really confusing.....I was comparing this lease to the one we have from another piece of ground we leased 2 yrs ago....It stated 1/8 of the gross where this one is 1/8 of the net....

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Permalink Reply by 0l1a6laz7smpf on September 9, 2010 at 6:03am

hey robin..

but a lot has changed in the negotiating and in the production of what they are finding...so addendums have been used though many of the existing contracts used by the present oil/gas companies have that 1/8 of the net clause in them. So do contact another of the main companies doing much leasing and see what their offer may be....and you would then be able to see what some of the addendums have in their language of contract. You may gain much in profit by doing the proper research...actually you have much to gain. If it gets too confusing for you then look to find a group that has leased in a group situation and either join them or get an attorney that is familiar with doing gas/oil leases. However there are some excellent contracts that have been made already with existing group efforts.

I am sure that the admin of this forum (Keith Mauck) has some wise knowledge in that area as well as other areas as he is much more informed than I am. BTW Keith if you read this...you do an excellent job of this website and I applaud you for it and am glad to have joined recently as a member.

Robin, you may find this link to info real useful...it helped me. Notice the shale map of the density of what the geologists have mapped. This also determines how much the offers are in the different counties....of course we are all only human there may be more than they expect under that ground that God provided all of us... (kinda interesting to think that it was the plan of GOd to design dinosaurs then wipe them out and centuries later our automobiles would be supported by the fossils of that era!) (kinda hope He doesn't have some plan that some society in centuries of the future to use what is left of all this present civilization!...hopefully He doesn't consider us to be like the 'dinosaurs')
http://geology.com/articles/marcellus-shale.shtml
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