There’s ‘Black Gold’ in These Hills
By Jeffrey J. RokiskyI recently have been contacted by clients with questions regarding oil and gas leases. Why do oil and gas companies suddenly have an interest in pursuing leases with property owners throughout the state of West Virginia?
The answer is the Marcellus Shale. Marcellus Shale is a low-density carbonaceious (organic rich) shale that occurs in the subsurface beneath much of Ohio, West Virginia, Pennsylvania and New York. Marcellus Shale may contain more than 500 trillion cubic feet of natural gas. The volume of natural gas supplied by Marcellus Shale would be enough to supply the entire United States for about two years and have a well-head value of about $1 trillion dollars.
With that in mind, here are some questions that clients have asked pertaining to oil and gas rights.
1. Should I sign the lease presented to me by an oil and gas company?
Answer: An oil and gas lease is like any other legal document. Before signing a lease, you should consult with an attorney so you understand your rights and are able to make an informed decision.
In previous years, oil and gas companies would present a lease to a land owner with a "take it or leave it" attitude. They were not negotiable, and, if you would decline to sign the lease or attempt or attempt to get a high royalty rate, the oil and gas companies simply would move on to an adjoining land owner.
The Marcellus Shale has changed all that. Many have been able to get higher royalty rates by negotiating terms that deviate from the standard leases presented by the oil and gas companies.
2. How valuable could these rights be?
Answer: Your rights could be very valuable. In New York and central Pennsylvania, where the shale is thicker, oil and gas companies have been paying up-front fees in the hundreds of thousands of dollars. The monthly royalties from such leases can be as much as tens of thousands of dollars.
3. How will these royalty rights affect me if I go into a nursing home?
Answer: As a general rule, all income attributed to a person in a nursing home must be paid to the nursing home. In addition, upon one's death, the West Virginia Department of Health and Human Resources will put a lien against the royalty rights for Medicaid benefits paid on behalf of a person in a nursing home.
In years past, these royalty rights are not deemed valuable enough by the West Virginia Department of Health and Human Resources to pursue. I would anticipate that this position will change based on the value of such rights.
4. Is it possible to incorporate these royalty rights into an asset protection plan?
Answer: Yes, like any other asset, it is possible, with proper planning to protect royalty rights from long-term care expenses, including nursing home costs. It is imperative that planning takes place as early as possible to avoid the "look back period" that is imposed by the Medicaid laws. In addition, a significant planning opportunity exists to transfer the royalty rights before drilling has begun, when the royalty rights may be less valuable.
Jeffrey J. Rokisky practices law in Wheeling, Weirton and Robinson Township, Pa. He is a member of the National Academy of Elder Law Attorneys. To ask a question, call 877-748-3234, or e-mail rrokisky@ weir.net.
