Understanding The Terms Of An Oil And Gas Lease In West Virginia: What To Watch Out For

If you are like most people, you have never seen an oil and gas lease before. So, naturally, you’ll want to know how much you’ll be paid for the natural resources on your land and if what the company is offering is fair.

Many people also want to know what kind of liability they are assuming by signing the lease – before they agree to its terms. In this article we’ll break down the key concepts of oil and gas leases so that you can decide how to move forward with confidence.

Keep reading to learn more about…

• The terms your West Virginia oil and gas lease should include.
• How “pooling” comes into play in drilling, and how it could impact you.
• What to do if an oil and gas company breaches the terms of a lease.

What Kind Of Compensation Might An Oil And Gas Lease Offer Me?

Your compensation for oil and gas can come in the form of a one-time payment or “upfront lease bonus”. This bonus is generally paid per acre or per net mineral acre.

What does “per net mineral acre” mean? Essentially, if the mineral extraction is taking place over a 100-acre area and you own 1/10 of that land, you will be paid a certain dollar amount per net acre that you own.

Alternatively, your compensation could come in the form of royalties based on a percentage of the oil and gas that the company extracts and sells over time.

Both forms of compensation are negotiable, depending on your bargaining position, where your property is located, and what the market conditions are. To negotiate properly, it’s crucial to have the help of an experienced oil and gas attorney to be sure the terms of your lease are fair.

Attorney Eddie Wagoner is a dedicated, knowledgeable oil and gas lawyer serving West Virginia. For over 15 years, he’s helped clients just like you ensure they’re paid fairly for the natural resources on their land.

Have questions, or in need of quality representation? Reach out to Hansberry & Wagoner, PLLC, for an initial consultation today.

Call for a Consultation! (304) 443-9138 (Morgantown) | (304) 898-8484 (Bridgeport)

What Is A Shut-In Clause, And How Does It Impact Landowners In Morgantown, WV?

An oil and gas lease typically has two terms. The primary terms apply for a set number of years, anywhere from three to 10 years. This allows the oil and gas company to drill and explore without producing any gas or oil. The secondary term allows the lease to continue so long as oil and gas are being produced.

A shut-in clause enables the company to continue the lease in the secondary term, even if they’re not able to produce and sell oil or gas. This could be due to a lack of market demand or other factors. They will then pay you either a flat fixed price or a fixed price multiplied by the number of acres you own.

What Does The Term “Pooling” Mean In A West Virginia Oil And Gas Lease?

In West Virginia, many wells are Marcellus or Utica Shale wells, which are drilled over a mile deep. When the wellbore is turned, it travels horizontally, sometimes in excess of two miles. This means the drilling is taking place under more than one property.

A “pooling” clause in a lease allows property owners to be paid based on their proportionate share of the acreage in that pool or unit. For example, if the pool or land area has 350 acres and you own 35 of those acres, your royalty will be based on 1/10 of the overall oil or gas produced.

What Is A Royalty Clause, And How Does It Affect My Payments?

The royalty clause in an oil and gas lease dictates the percentage of proceeds you receive from the company’s sale of the oil or gas produced from your land. Royalty clauses sometimes allow the company to take out deductions, though this is not always the case.

Attorney Eddie Wagoner is a dedicated, knowledgeable oil and gas lawyer serving West Virginia. For over 15 years, he’s helped clients just like you ensure they’re paid fairly for the natural resources on their land.

Have questions, or in need of quality representation? Reach out to Hansberry & Wagoner, PLLC, for an initial consultation today.

Call for a Consultation! (304) 443-9138 (Morgantown) | (304) 898-8484 (Bridgeport)

What Deductions Can Oil And Gas Companies IN Morgantown, WV, Take From My Royalty Checks?

This depends upon the terms of your lease. Historically, deductions were not assumed or allowed unless a lease specifically provided that the company could take deductions for expenses such as transporting and processing the gas or oil. However, there have been recent changes to West Virginia courts, and some of these protections may be rolled back.

If these terms are not specified in your lease, this could leave room for confusion over which party (you or the oil and gas company) can make allowances for deductions. Still, if your lease specifically provides that the company can not take out deductions from your royalty checks, then they can not.

What Legal Options Do I Have If A Company Breaches Our Oil And Gas Lease In Morgantown, WV?

If this happens, you can file a breach of contract lawsuit, with the goal of recovering any money you have lost as a result of the company’s breach. For example, if they have failed to make payments or taken improper deductions, you can generally recover the amounts they have not paid you.

Be aware that some leases include arbitration clauses that do not allow you to file a lawsuit. Instead, you would have to enter into private dispute resolution with the oil or gas company. While it is not advisable to agree to arbitration clauses, if you already have such a lease in place, all is not lost. An attorney can still help you seek redress, albeit through arbitration as opposed to a lawsuit.

Ultimately, most lawsuits against oil and gas companies for breach of contract can be settled out of court. In other cases, a new lease may be negotiated if existing terms are not beneficial to you or to the oil and gas company.

If your lawsuit can not be settled for a reasonable amount, your case may go to summary judgment or be tried in court, though this is rare.

Still Have Questions? Ready To Get Started?

For more information on Oil And Gas Leases In Morgantown, WV, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (304) 443-9138 (Morgantown) | (304) 898-8484 (Bridgeport) today.