Short answer: Should I lease my mineral rights? It depends on what you own, what you need, and what the offer actually says. Leasing can bring a signing payment and future royalties while you keep ownership, but it ties up your minerals for years on the company’s terms. Before you decide, confirm your title, compare leasing with selling or holding, and never sign under time pressure.
This guide gives Pennsylvania landowners a decision checklist. It is part of our oil and gas law resource center. It does not include market prices, because offers vary by location, timing, and title, and any number we printed could mislead you.
First, make sure you know what you own
You cannot make a good decision about minerals you may not own. In Washington County and across southwestern Pennsylvania, oil and gas are often owned separately from the surface. Before you respond to any offer, confirm
- Whether you own the oil and gas, or only the surface
- What fraction you own, if the minerals were split among heirs
- Whether an old lease is still in effect
- Whether your land is already inside a drilling unit
Our guide to who owns mineral rights in Pennsylvania explains how to check.
Your three options: lease, sell, or hold
A mineral rights lease is a contract that lets an oil and gas company explore for and produce oil and gas from your property for a period of time. In return, you usually receive a bonus (a one-time signing payment) and a royalty (a share of production value). You keep ownership.
A sale transfers some or all of your mineral ownership to a buyer, usually for a lump sum. You give up future royalties on what you sell.
Holding means doing nothing for now. You keep full ownership and flexibility, and you receive nothing until you lease or sell.
| Lease | Sell | Hold | |
|---|---|---|---|
| You keep ownership | Yes | No (for the part sold) | Yes |
| Money now | Usually a bonus payment | Lump sum | None |
| Money later | Royalties, if wells produce | None on the part sold | Depends on a future decision |
| Control over drilling terms | Limited to what you negotiate | None | Full, until you sign something |
| Effect on heirs | Heirs inherit minerals subject to the lease | Heirs inherit the sale proceeds, not the minerals | Heirs inherit the minerals |
| Main risk | A one-sided lease that lasts for decades | Selling for less than the interest is worth to you | Missing an opportunity, or development nearby without you |
None of these is right for everyone. A retired couple who needs income now, a family that wants to keep land for the next generation, and an heir with a tiny fractional interest may all choose differently. For more on selling, see our mineral rights page.
Decision checklist: should I lease my mineral rights?
Learning how to lease mineral rights starts with these questions. Work through them before you sign anything.
About your goals
– [ ] Do I need money now, or can I wait?
– [ ] Do I want to keep the minerals in the family?
– [ ] How would drilling, a pad, or a pipeline affect how I use the surface?
About the offer
– [ ] Is this offer in writing, with the full lease attached, not just a summary?
– [ ] How long is the primary term, and can the company extend it?
– [ ] What royalty fraction is offered, and what costs can be deducted from it?
– [ ] Is it a “paid-up” lease, with no yearly payments after signing?
– [ ] Does the lease protect my surface, water, and roads?
– [ ] Can the company pool my land with other tracts, and on what terms?
– [ ] Does any part of my land stay tied up if only a small part is drilled?
About the people and the process
– [ ] Who is the actual company that will hold the lease?
– [ ] Has a lawyer who represents me, not the company, read the lease?
– [ ] Have I talked with my family and anyone who co-owns the minerals?
– [ ] Have I spoken with a tax professional?
If you cannot answer most of these, you are not ready to sign yet. Our post on Marcellus Shale gas lease terms explains the clauses in more detail.
Questions to ask the landman
A landman is a person who negotiates leases on behalf of an oil and gas company or broker. A landman is not your advisor. Their job is to get leases signed on terms that work for their client.
Ask, and get the answers in writing
- Which company will own this lease, and will you assign it to someone else?
- Is my land planned for a specific unit or well? Which one?
- Is this your standard form, and will you accept changes?
- What deductions, if any, will be taken from my royalty?
- When will the bonus be paid, and what happens if title review delays it?
- Who do I call after signing if I have a payment question?
A landman’s “standard lease” is a starting draft. In many cases, terms can be negotiated. If someone says no changes are possible, that is useful information too.
Pennsylvania rules that affect a lease
A few state laws set a floor for every lease
- Minimum royalty. Pennsylvania’s minimum royalty law, 58 P.S. § 33, requires at least a one-eighth royalty. How deductions affect that minimum depends on the lease and on court decisions.
- Royalty statements. Act 66 of 2013, 58 P.S. §§ 35.1–35.2, requires payors to give royalty owners statements showing how payments are calculated.
- Cross-unit drilling. Act 64 of 2013, 58 P.S. § 34.1, addresses when a company can combine leased tracts into units and drill across unit lines. Your lease language still matters.
- No general forced pooling for Marcellus wells. Pennsylvania’s Oil and Gas Conservation Law, 58 P.S. § 401 et seq., applies to wells that reach below the Onondaga formation. In general, Marcellus wells are not subject to a general forced pooling law, so whether and how you lease remains your decision.
Tax basics to raise with your tax professional
Taxes can change the real value of any offer. In general terms, and subject to review by your tax professional
- Lease bonuses and royalties are usually treated as ordinary income for federal tax purposes.
- A sale of mineral rights may receive different treatment than lease income, depending on how long you owned them and your basis.
- Royalty owners may be able to claim a depletion deduction.
- Pennsylvania personal income tax and local Earned Income Tax rules may also apply.
We do not give tax advice in this post. Ask your accountant to run the numbers before you choose between leasing and selling.
Family and estate considerations
Mineral decisions often outlast the person who makes them. A lease signed today may still be in effect when your children inherit.
- Co-owners. If siblings or cousins share the minerals, each owner usually signs for their own share. Talk early to avoid conflict.
- Estate planning. Minerals can be passed by will, held in a trust, or placed in an entity. Each choice affects who signs future leases and how royalties are split. See our estate planning resources.
- Inheritance tax. Mineral interests are part of an estate and may need to be valued when the owner dies.
Never sign under time pressure
Some offers come with a deadline. Sometimes the timing is real. Often it is a negotiating tactic. A lease can affect your land for decades. A few extra days to have it reviewed is reasonable.
Warning signs include
- You are asked to sign at the kitchen table without a copy to keep
- You get a summary sheet but not the full lease
- You are told “everyone signs the standard form”
- You are discouraged from talking to a lawyer
If you feel rushed, slow down.
Key takeaways
– Confirm what you own before you weigh any offer.
– Leasing keeps ownership and may pay royalties; selling pays now but ends your interest in what you sell; holding keeps every option open.
– The landman works for the company, not for you.
– Pennsylvania sets a one-eighth minimum royalty, but lease language decides much of what you are actually paid.
– Talk with your family and a tax professional, and never sign under time pressure.Free download: Pennsylvania Gas Lease Review Checklist
Got a lease offer on the table? Walk through it clause by clause before you sign. Download the free Pennsylvania gas lease checklist
Get your lease offer reviewed
If you have received an offer and want to understand it before you sign, call (304) 982-1586 or request a consultation. After you call, we will ask you to send the offer and your deed, explain what our lease review covers, and set a meeting. We work with landowners from our Cecil Township office.
Frequently asked questions
How do I lease my mineral rights in Pennsylvania?
Confirm that you own the minerals and in what share. Then get a written offer with the full lease. Review the terms, ask questions, and negotiate changes. Have a lawyer who represents you review the lease before you sign. Keep a signed copy and record the details for your heirs.
Is it better to lease or sell mineral rights?
Neither choice is right for everyone. Leasing keeps ownership and may pay royalties for years if wells produce. Selling pays a lump sum now but ends your rights to the part you sell. Your income needs, tax situation, and family plans should drive the decision.
Do I have to lease my mineral rights in Pennsylvania?
Generally, no. Pennsylvania does not have a general forced pooling law for Marcellus wells, so you usually choose whether to lease. Deep wells below the Onondaga formation are handled differently under the Oil and Gas Conservation Law.
What is a good royalty rate in Pennsylvania?
State law sets a minimum of one-eighth. Above that, offered rates vary by area, company, and timing, so we do not publish a figure. The royalty fraction also matters less than you might think if the lease allows large deductions. Read the deduction language as closely as the rate.
Can I negotiate a mineral rights lease?
Often, yes. A landman’s form is a first draft. Landowners commonly ask for changes to deductions, surface protection, lease length, and pooling terms. Whether a company accepts changes depends on the situation, but asking costs nothing.
About the author
Daniel B. Kostrub, Attorney, Kostrub Law Firm, PLLC. Dan focuses on energy law, oil and gas transactions, title opinions, division orders, mineral rights, and lease review for landowners in Washington and Allegheny counties. Read Dan’s full bio.
This page is general information, not legal advice. Reading it does not create an attorney-client relationship.