The minimum allowed royalty in Pennsylvania by law is set at 12.5%. However, there are a number of things to take into consideration when looking a minimum royalties for land owners. If you are a mineral owner in the Marcellus Shale, it’s important to understand what this minimum royalty represents.
Minimum Royalty is not Minimum
The minimum royalty is not always the least amount you will receive. There are a number of other factors that affect the total amount you will receive. This includes marketing costs, pipeline connection costs, transportation fees, and a number of other expenses that can be deducted from the total amount you receive. If you only have a 12.5% royalty, the typical amount you will receive is less than 12.5% once all the fees and expenses have been removed. This has sometimes caused landowners to feel that they are receiving less than their fair share.
How to get a better royalty
As a mineral owner, you want to ensure you get the highest royalty percentage possible. You may have to sacrifice some up front lease bonus cash, but this will pay off in the long term once the well starts producing. You may be approached with an offer to lease your mineral rights at the minimum of 12.5% but this does not mean that 12.5% is something you should accept. When negotiating for the highest royalty percentage possible, you want to ask for the highest amount and use the royalty as a negotiation tool. Many mineral owners accept the royalty that’s initially offered assuming that it’s the “industry standard” amount and they’re getting a fair deal. You should almost always ask for a higher royalty percentage.
One option you may consider as a royalty owner is performing an audit of the expenses and fees being taken out. There are two ways you can do this:
1. Full Scale Audit: A full scale audit requires hiring an audit team to review documentation and look for expenses that should not be taken out. This can be very time consuming and costly so this option is really best if you have a very high amount of royalties you receive monthly.
2. Personal Audit: To a small degree, you can perform an audit of your royalties on your own. By looking at past statements, a years worth or more, you can look for variances in the expenses that are deducted. If you see a large credit amount, or big fluctuations in expense, this can indicate that something is off and could be investigated further by contacting the operator.
Selling Royalties in the Marcellus Shale
If you’re currently receiving royalties in the marcellus shale and you wish to sell, it’s important to get the highest price possible for those royalties. We highly recommend listing your property with US Mineral Exchange or contacting us using the form below. We’ll be happy to answer any questions you have about your royalties and what your royalties could be worth.
If you own mineral rights and have questions, fill out the free consultation form below. We can help you with the following questions:
- Mineral Rights Value
- Evaluate whether you have a fair offer to sell mineral rights
- Answer questions about selling mineral rights
- Understanding Market Value of Mineral Rights
- + Any other questions related to mineral rights!
No matter what question you have regarding your mineral rights, we can help! We usually respond to your inquiry within 1 to 2 hours!
Whether you want to sell mineral rights, determine mineral rights value, or simply have some basic questions regarding your mineral rights ownership, fill out the form and we will quickly be in touch.