1. What if my oil and gas is already leased?

We realize that your oil and gas may be subject to existing leases that you or the prior owners of the oil and gas may have executed. In fact, the vast majority of oil and gas we purchase is being produced in small quantities and is what the industry terms as “Held By Production” (HBP). Similarly, much of the oil and gas we purchase is being held under the terms of a prior gas storage lease. You have every right to sell this oil and gas. JJK Mineral Company simply stands in your shoes after we make a purchase. In other words, we remain subject to any existing leases or agreements.

2. What does the term “HBP” or “Held By Production” mean?

A great deal of the oil and gas in Pennsylvania and West Virginia is what is termed "Held By Production" a/k/a “HBP.” Oil and gas that is HBP has already been drilled, and the existing wells are producing gas in paying quantities. Many of the wells were drilled between 5 and 100 years ago and are producing just enough gas per year to hold the property by production, thus keeping the old lease in effect. Under the terms of most oil and gas leases, after the lessee has drilled a producing well on the property, only they or their assignees have the right to drill another well. The companies who have the drilling rights own an interest in the leasehold estate and are referred to as Working Interest owners. Thousands of acres of oil and gas in Pennsylvania and West Virginia are HBP with the oil and gas owners receiving very small royalty payments, in many cases only a few dollars per year. As long as these wells produce, the oil and gas owner cannot lease their oil and gas again.

3. What is gas storage and how did my oil and gas become part of a storage field?

Several very large storage fields containing tens of thousands of acres were formed in Southwestern Pennsylvania and Northern West Virginia in the past 75 years, including: the "EQT Storage Field" in Greene County, PA, controlled by Equitable/EQT; the "Majorsville Storage Field" in Greene County, PA and Western, WV, controlled by Columbia Gas; the "Donegal Storage Field" in Washington County, PA, controlled by Columbia Gas; and the "Liberty Storage Field" in Marshall and Wetzel Counties, WV, controlled by Columbia Gas, to name a few. The companies controlling these storage fields inject gas from other properties into underground cavities in order to store the foreign gas until they are ready to market and sell it.

Many of the oil and gas owners, who originally executed the leases, did not realize that the terms of the leases would allow the production company to hold their unproduced oil and gas hostage by simply storing foreign gas underground. Under the terms of these old leases, the oil and gas owner cannot lease their interest for production purposes as long as the property us being used for gas storage. Basically, the oil and gas remains under lease at a very low per acre rate (often $1.00 per acre per year) for the life of the storage field. Only the company operating the storage field, or its assigns, has the right to drill new wells on the property. Moreover, no additional lease rentals or bonuses are due prior to new production operations. In effect, the owners of the oil and gas under tracts of land included in these large storage fields will always be in a "wait and see" mode with regard to the drilling of new wells on their property. It is quite possible, in fact likely, that generations of oil and gas owners will realize minimal income from these types of properties, even though we are experiencing a new and exciting age of drilling and production in Pennsylvania and West Virginia.

4. Do I get to keep my free gas?

If you are currently receiving free gas under the terms of an existing lease, you can keep it. JJK has no interest in acquiring your free gas, and we will happily exclude it from our deed. Just make sure you mention it to us during our negotiations.

5. What if I own my oil and gas along with other family members, but some of my family members do not want to sell?

JJK is making a purchase of YOUR oil and gas interest, and unlike a lease, we do not have to acquire a 100% interest in the oil and gas. Conveying oil and gas can be a family by family or individual by individual decision. We are interested in acquiring any fractional interest even if your other family members (or the other interest owners) are not interested in making a sale.

6. What expenses does the oil and gas owner have to incur?

NONE. In addition to compensating you for your oil and gas, JJK covers the cost of the title work needed in order to verify oil and gas ownership; all document preparation; realty transfer taxes; notary fees; postage, etc. Once you decide to sell your oil and gas, we take care of the rest. 

7. If I acquired my oil and gas interest in my own name, does my spouse have to execute the Option or Deed?

Yes. Pennsylvania recognizes all property acquired during a marriage, whether or not it is titled in the name of the husband, the wife, or both, to be marital property. Furthermore, a spouse also has a claim to the increase in value of any property acquired prior to a marriage. Consequently, when a seller (optionor in an option agreement and/or grantor in a deed) is married, his or her spouse must also join in the conveyance to release any marital property claim they may have to the oil and gas.

8. Is oil and gas a mineral?

Generally speaking and scientifically speaking, we think of oil and gas as a mineral. However, when "minerals" are conveyed in a Pennsylvania deed, in almost all cases, the term "minerals" does not include oil and gas. (It would include coal.) This is based on a legal presumption. On the other hand, in a West Virginia deed, a conveyance of "minerals" does include oil and gas.

9. I only own oil and gas “royalty” rights. What are royalty rights and why can’t I lease them?

In the past (in many cases generations ago), some of the landowners and farmers who owned the surface of their property as well as the underlying oil and gas, sold their property but reserved an interest in the “royalty” associated with the oil and gas under the land. Generally speaking, a reservation of royalty rights does not include the right to execute an oil and gas lease. The right to lease passes in the deed to the new owner, i.e., it passes along with the surface of the property. Furthermore, the royalty interest that was reserved remains with the prior landowner.

The most problematic aspects of only owning a royalty interest are:

  1. The royalty owner must wait for the other party with the leasing rights to negotiate and execute a lease; 
  2. If a lease is executed, the terms of the lease may not be in the best interest of the royalty owner; and
  3. Since you do not have the right to lease, you are entitled to NO LEASE BONUSES. Only owners of the leasing rights are entitled to the bonuses.  

10. As a royalty interest owner, I know that I can’t lease my royalty rights, but won't I receive money when a well is drilled on the subject property?

The answer is maybe. As long as a company has obtained a valid lease from the party with the leasing rights, they are under absolutely no obligation to go out of their way to find and pay the “royalty” owner. The company should do an investigation of the records in the courthouse of the county where the property is located. Most of the time, the information necessary to find you is not located in the county courthouse. In many cases, families entitled to receive royalty payments have been overlooked for generations as though their interest does not exist. Unless the company makes an extremely diligent search for the royalty owners by obtaining additional information from outside sources, it is likely the royalty owners will receive no compensation.

11. If my family isn’t receiving the royalty monies, who is?

Generally speaking, the drilling companies should open an escrow account at a local bank in the name of the unknown royalty owners. The company then pays all royalties due into that account. However, if the money remains unclaimed for 5 years, the royalties escheat to the state, i.e., they become the property of the state while they remain unclaimed.

12. How do I know if my family owns oil and gas royalties and where they are located?

It is nearly impossible! If members of your family are not aware of any ownership by now, chances are the family will never know unless contacted by a company such as JJK, who specializes in this field.

13. If I own royalties only and I elect to hold onto my interest, how can I be sure I am compensated if wells are drilled in the future?

The process is very difficult for the common, blue collar oil and gas owner. Here are a few of the necessary steps required:

  1. Acquire a copy of the original severance deed. (JJK is always happy to provide you with a copy.)
  2. Establish the precise location of the property. In most cases this can be done by using references to the county, township and the metes and bounds contained in the severance deed.
  3. Acquire certified copies of all necessary Estate information (i.e. wills or a certified listing of heirs), or if there is no legally filed Estate, then Affidavits of Heirship should be obtained to validate your ownership. These items must be placed of record in the subject county.
  4. If the necessary information is placed of record prior to the drilling company doing their research, then you may be compensated after drilling. However, if a well or wells have been drilled prior to placing the Estate information of record, the companies are again not required to do any additional, outside research. They will not have access to this information, and thus cannot find you. In this latter case, the royalty owner would need to establish that the property in which they own a royalty interest has been included in a deep well drilling unit. It will then be up to the royalty owner to contact the operating company and provide them with all of the necessary information to prove ownership. 

14. How will my income from JJK be taxed?

Each individual's finances are different, and you should certainly consult your accountant. However, in almost all cases, the money that you receive from JJK will not be treated like ordinary income. It will likely be considered a long-term capital gain for IRS purposes, which is taxed at a reduced rate. 

15. What is a "net acre?"

JJK purchases and pays for oil and gas interests by the net acre. To calculate your net acre ownership, simply divide the gross acreage of the tract by your fractional interest. For example, if you own a 1/2 interest in a 100 acre tract, you own 50 net acres. 

16. I do not live near JJK's office in Greensburg, Pennsylvania. How can I sell my oil and gas from out of state?

Many of our transactions occur with individuals who live out of state. In those cases, the negotiations and closing can all take place through a combination of phone, e-mail, and regular mail. JJK is happy to forward all necessary documents to you either by e-mail or regular mail. Since the original version of any executed documents need to be returned to JJK for recording, you can simply drop them in the regular mail. JJK is happy to reimburse you for all postage fees.