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Permalink Reply by G.H. on August 3, 2015 at 3:33am

I think a lot more goes into drilling a well than most people know.  A lot of costs that people don't even consider that we wouldn't want passed along to us.  So I think something as high as 40% is definitely unreasonable for the producer.

That being said, I think 20% is pretty fair, assuming there aren't massive deductions withheld that reduce it significantly below 20%.  But hey, more is always better!  It might be frustrating to be stuck with an old 12.5% lease, as it seems like most leases these days are at lease a little bit higher.  At least you are probably getting free gas or something if you have an old lease like that.

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Permalink Reply by Harry E. Rose on August 3, 2015 at 4:18am

How about a 50% split after the producer recouped his real expenses? The key word in that statement is "real". Problem with that statement is greed in today's society. But I feel that would be fair. Mineral owner has the minerals and producer has the equipment and knowledge

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Permalink Reply by rmc on August 3, 2015 at 9:30am

Just remeber EQT just announced a IP Of 73 million cubic foot in Greene County pa. A land record for the world shouldn't the royality reflect that?

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Permalink Reply by G.H. on August 3, 2015 at 11:40am

@Harry not a bad idea to have royalty reflect a percentage after all the real costs incurred by producer.  I'm sure there are both good and bad reasons why they don't want to share those actual costs.

@rmc The royalty will most certainly reflect that...

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Permalink Reply by Charles Hurlburt on August 5, 2015 at 2:15pm

I believe that, if you could get that payment and could verify its accuracy, you very well might receive less than the 1/8 or 12.5% rate considered "minimum" by most people on here.

Leaving aside all controversy arising from "post production" costs, which occupy so much time here, the "production" costs; the cost of building the location and roads, drilling the well, casing and cementing the wells(s), perforating and fracturing the wells; all the myriad costs associated with just getting the production out of the ground would swamp the royalty vale expressed as 50% of the net value.

I have an old oil & gas law book I bought in a used book store one.  It was published in 1938, and it explains why 1/8 royalty became the "standard" (and boy was it--1/8 royalty used to be all you ever saw).  His theory was that 1/8 RI gave the lessor just about the same money at the end of the lease's life, as the 7/8 WI gave the lessee. 

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Permalink Reply by Frank Walker on August 3, 2015 at 12:36pm

20% minimum.  25% maximum.

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Permalink Reply by Kyle Nuttall on August 4, 2015 at 4:41am

In West Virginia you can usually negotiate up to 18% where wet gas is going to be produced, and 15% where it's only going to be dry gas.  If you negotiate hard, and the company really wants your property, you can get up just over 20%.  Of course, factoring in post-production costs is important.  Do your best to get a lease that provides for gross proceeds.

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