As we think more about it and gain more experience in 2025, we have additional advice for mineral owners (and those who own both surface and minerals who are dealing with their minerals).
This information applies if the company is offering you a new lease for gas, oil, and/or liquids. It also applies if there is an old gas or oil lease on your land and the company wants you to sign an amendment to the lease because the old lease lacks a pooling/unitization clause. They need this clause to drill horizontal well bores through multiple mineral tracts—and that is about the only way wells are drilled now.
An important note on surface use
This article primarily covers royalty terms for gas, oil, and liquids. One horizontal well produces 60 times more gas than an old conventional vertical gas well, and they put 6 to 8 or more horizontal wells on one pad. So we do not get as many calls for advice on separate surface use agreements or surface use provisions in leases. Our advice for surface use has not changed since we won the EQT vs. Crowder case.
We have other resources on our website on what you should insist on in leases if you own the surface and they want to use you for a well pad or something else, so in this article, we advise you to insist on a “no surface use” provision in a lease/amendment or its addendum. Before you allow use of your surface, you should dive deeply into the protections you should have if they drill on your land.
And we reiterate that if you want to agree to be paid for using your land for a well pad, you should be paid what use of your land is worth to the driller (hundreds of thousands of dollars), and not what it is worth to you.
Background
We have seen leases offering to drill for gas (and it’s for OUR gas, mind you), with royalties ranging from 12.5% to 18%. When companies sell leases to each other, the royalties the eventual actual driller has to payout usually frequently total 20% (including the royalty due to the lessor/mineral owners in the original lease, plus an “overriding royalty” that the original lessee/company that first “owns” the lease gets for selling/assigning the lease to the actual driller).
So think about it. The driller gets to keep 80% or more of the money they receive for selling OUR gas. West Virginians need to think like rich Texans and rich drilling companies. Things should sell for what they are worth to the buyer, instead of what they are worth to the seller.
Lease or lease amendment royalty negotiations
Do not buy the company’s argument that if you do not sign, or do not sign on their terms, they will drill elsewhere and you will get no royalties at all. Trust us on this.
Drillers drill where their petroleum and reservoir geologists tell them the most and richest deposits of gas, oil, and liquids (as well as existing infrastructure) are located. If the driller gets to keep 80+% of the gas, and their geologist or reservoir engineer tells them they can get 1% more gas drilling where your land is as opposed to somewhere else, then the driller can afford to give you another percent or two (or three or four) of royalty.
Negotiation Guidance
Do not agree to a lower royalty just because they say they are drilling in a thinner or less rich formation. (Check with the West Virginia Geological and Economic Survey to see if they are telling the truth, at least about thickness.) Yes, that may mean that they will not have as much gas to sell from a well (or unit). But since your royalty is a percentage of what they sell, that already means you will get a smaller amount than if they drilled elsewhere, because your percentage is a percentage of a smaller amount.
If your royalty check is already going to be smaller because they are selling less, you are losing twice if your royalty percentage is also smaller. Maybe your signing bonus should be less if the producing formation under you is thinner, but not the royalty.
Forced Pooling & Cotenancy
We are seeing at least one big company, and maybe others, becoming less and less flexible on their royalty and other terms. In the past, when companies said that their offer was only good for 10 days, we found that after 10 days, the offer usually went up. But some companies were holding very firm early in 2025. (More lately, they have been competing a little more with each other, but that is not expected to last.)
They may be threatening to use “cotenancy” or “force pool” you, to which we say, “Good.” Why? Because, IF they force pool you or use cotenancy, then you will get the highest royalty paid to any other mineral owner in the unit; there will be no deductions from your stated royalty percentage; and you will avoid having to agree to all the overreaching language in their long, multi-page leases.
True, you will only get the average signing bonus in forced pooling, but lots more money comes from better royalties than from better signing bonuses. (We have a whole page on forced pooling and cotenancy on our website.)
Lease Language Warnings
Finally, the financial terms of leases, royalties, and signing bonuses are the easiest to understand and seem most important to most people. But these leases have pages and pages of fine print.
When you buy a house or a car and sign papers, lots and lots of the terms in those papers are required by consumer protection laws. But in an oil and gas lease, every single one of the provisions in the lease is drafted by the driller’s lawyers, and most are not very good for you.
The longer the lease, the more you should be concerned about what it says.
One example is an “arbitration clause” that will eliminate you from a class action if the company shortchanges its royalty recipients. Another one — and we are not making this up — is a “general warranty” provision that says that if the driller gets sued for doing the title search wrong, you will pay for the driller’s defense lawyer.
If you want to sign your own lease rather than accept one prepared through forced pooling or cotenancy, we strongly advise you to hire your own lawyer. You can find a list of possible lawyers here. There is a lot of other legal language in a lease that needs to be negotiated beyond the financial terms.
Our website has pages dedicated to leasing, amendments and royalties for further reading.
