Legal Question in Administrative Law in Pennsylvania
Fair amount for oil and gas royalty in Pennsylvania?
(I selected 'Administrative Law' because I didn't know what other category to choose for this; please ignore)
In the state of Pennsylvania, the MINIMUM royalty on production paid to oil and gas lessors is 1/8 of the value of the product. If I (one of the lessors) wanted to negotiate with the company for more than that, what would be a FAIR amount? Yes, I know that by law the lessee is not required to pay more than 1/8.
Thank you in advance
1 Answer from Attorneys
Re: Fair amount for oil and gas royalty in Pennsylvania?
I don't know if LawGuru has an "oil and gas" or natural resources category. Administrative law deals with governmental agencies, usually regulatory or policy-implementing agencies of the executive branch at the federal, state, county and municipal levels, such as the Federal Aviation Agency or the Board of Zoning Appeals.
Since I'm neither a Pennsylvania lawyer nor an oil and gas specialist, I'll give you a very general answer.
First, if you are one of a group of lessors holding an undivided interest in a producing unit, you are probably only entitled to a pro-rata share of the 1/8 minimum. In other words, if you have a 1/10 share with ten other partners, you would be entitled to 1/80 of the value of the extracted oil and gas, value probably measured at the wellhead, but that's a guess.
Your right to negotiate with the lessee probably depends upon your status as a co-lessor and your contract with the other lessors. If you are, for example, a limited partner, you probably have no right to negotiate with the lessee; that right would belong to the general partner(s).
So, your starting point is to review the contractual or other relationship you have with the other lessors.
Unless a lease is expiring or for some other reason new leases are now or soon to be under
(re)negotiation, it may be very difficult to get the lessee to negotiate.