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


Asked on 5/13/03, 5:26 pm

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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.

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Answered on 5/13/03, 5:52 pm


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