From the Article by Jamie Stover, WBOY, 12 News, Clarksburg, WV
Natural gas development has brought hundreds of jobs and boosted the
local economy in north central West Virginia, but workers and business
owners aren’t the only ones who can cash in. Mineral owners are entitled
to royalties for minerals extracted by natural gas producers. For some
families in W.Va., such royalties are like hitting the lottery.
“Some people on a fixed income, this could make a big difference in
their lives,” said Tammy Beamer, a mineral owner in Doddridge County.
It’s a seemingly solid offer, thousands of dollars and all the mineral
owner really has to do is sign on the dotted line. But experts said
mineral owners need to do more before they make that binding agreement.
“A lot of the leasing agents don’t even work for the companies they
represent. They are really independent contractors. They have an
incentive to get you to sign the lease,” said Bill Quinn, a CPA. Some of
those who understand what the wording in lease agreements mean said the
real winner is often the one who wrote the lease.
“The initial offer, typically, is very advantageous for the oil and
gas company and not the mineral owner,” said Luke Thomas, an oil and gas
attorney. Thomas said this is why mineral owners need to do their
homework, and seek advice before jumping on board. He said the up-front
costs are worth it to ensure that a solid and fair deal is made. He said
a good negotiator could triple royalty rates.
Mineral owners could be offered as low as 12.5 percent and as high as
20 percent in royalties. A next door neighbor could get a completely
different offer. ”The variances between what neighbors get is drastic.
It doesn’t have to be. One neighbor takes it to an attorney and gets
competent assistance and get a very good lease for their family and
future generations. But someone who just signs the document may have
just cost their family a small fortune by not,” Thomas said.
Tammy Beamer owns minerals in Ritchie and Doddridge counties and has
signed more than 15 lease agreements. She also worked in the industry as
an abstractor. “It is very easy to get tricked. I get caught up
sometimes,” Beamer said. But experience taught her to watch out for
certain clauses. “I don’t ever guarantee title {warranty of title}. Say
they came to you and they were mistaken, their person went out and said
you owned and you really didn’t and they paid you. Then you would be
expected to join in with them if there was a lawsuit,” Beamer said.
She also crosses out post production costs; something Thomas and
Quinn strongly support. ”I ask for well-head price. The difference
there is if you have a lease that you’ve agreed to pay post production
cost on, you will be charged for the transportation,” Beamer said.
A good rule of thumb: never sign anything you don’t understand.
Quinn said mineral owners should never agree to (natural gas) severance
charges or (natural gas) transportation fees either.
Beamer said she has also seen lease agreements that include market
enhancement charges. She never signs a contract that includes those
fees, as she believes the gas is rich enough without enhancements. Quinn
and Thomas said mineral owners need to realize that a contract is
always negotiable, until it’s signed. The two have seen a wide variety
of lease agreements over the years. “You should get that royalty, by and
large, free of all costs and expenses,” Quinn said.
Thomas said the only true standard for oil and gas contracts is a
minimum royalty rate, making seeing an expert before you sign all the
more important. ”There are no consumer protections really out there for
a mineral holder or a surface owner. It’s not like buying a car where
there’s a Consumer Credit Protection Act and those sorts of things. The
only really protection, is there is a state minimum of 12.5 percent that
they have to pay you by statute,” Thomas said.
Beamer also avoids contract agreements that include storage and
adverse claim, but Beamer said she is in the middle of learning a new
lesson. “You need, because the West Virginia State Law does not require
the producers to begin payment at any certain time, your leases need to
include a statement that says how long they will hold the money for
payment after the well is on line,” Beamer said.
She started signing lease agreements as a mineral owner nearly five
years ago but has yet to receive a check in the mail for royalties.
Beamer said she soon learned she wasn’t alone. “I have been talking to
people about this non-payment. I have found out that it is more the norm
anymore, than the exception. There is a huge delay from the time the
well goes on line and the time the royalty owners get paid,” Beamer
said.
She’s not taking it lightly. “I own other oil and gas properties. I
already put the word out, I am not signing any more payments from the
wells that already have,” Beamer said.
According to Antero Resources, it typically takes seven to eight
months before a royalty owner starts receiving payments, but it can take
close to a year. Al Schopp, Vice President of Antero Appalachia, said
the delay is typically attributed to time needed for a full title
opinion. Schopp said this opinion determines all of the heirs and how
much their entitled to.
Schopp added that most of the lease agreements date back to past
generations, and companies need to verify who the rightful heirs are
before payments can go out. “Majority of the people never show up on the
name of a lease because the leases were made years ago,” Schopp said.
“The lease doesn’t have all of the current royalty owners, the lease may
be e generations long and have been passed down.”
Once everyone is accounted for and the math is in check, Schopp said
checks start going out monthly. The first check is typically the
largest, as it includes earnings from date the well started producing.
But Beamer believes that should have been taken care of before the
drilling started. “Why aren’t they sending out checks, who gets the
interest in that money?” Beamer said. Her options are limited. “I can
either take my money and hire a lawyer and try to fight these huge
corporations. I don’t think that’s fair. Or I can sit and wait it out,”
Beamer said.
She also contacted the Attorney General’s Office and West Virginia
Department of Environmental Protection. She said both agencies told her
there was nothing they could do to help. “Our Attorney General’s Office.
I see where you can put up hotlines. I think if he put up a hotline for
mineral owners that aren’t being paid, or being paid properly, he would
find there are more people out there than he really realizes,” Beamer
said.
With nowhere to turn, Beamer said someone needs to be looking out for
the mineral owners. “There’s no one out here to regulate it. There’s
nobody out here to protect the citizens of this state who are getting
ripped off,” Beamer said.