Attorney warns Marcellus Shale landowners to be careful

By Jessica M. Karmasek | Aug 5, 2010

Samol WHEELING -- One Wheeling lawyer is warning area landowners who hope to cash in on Marcellus Shale natural gas drilling to be careful before blowing their windfall.

Samol

WHEELING -- One Wheeling lawyer is warning area landowners who hope to cash in on Marcellus Shale natural gas drilling to be careful before blowing their windfall.

The shale, which extends throughout much of the Appalachian Basin, contains largely untapped natural gas reserves, and its proximity to the high-demand markets along the East Coast are making it an attractive target for energy development.

Scientists believe they can recover enough to supply the U.S. with years of consumption, worth trillions of dollars.

Robert Samol, an attorney with Wheeling firm Phillips, Gardill, Kaiser & Altmeyer, said he's representing more and more landowners facing lease issues.

Some are being offered deals including $2,600 to $2,800 an acre, like those in Marshall County, or $3,000 to $3,600 an acre, like those Ohio County property owners.

Samol said he's been giving seminars in hopes landowners can avoid what he describes as "horror stories."

"I've heard horror stories about people who in previous years got a substantial sum of money and went out and got a new vehicle, a new tractor, bought housing for their families and then all of a sudden they've gone through $300,000 or $400,000," he said.

"Then they go to a tax preparer and they say to them, this is how much you owe. That money doesn't do them a whole lot of good anymore."

Samol said the Internal Revenue Service and the state will take a share of lease payments or production royalties in the form of income taxes.

"A lot of people don't understand that this is considered to be ordinary income, meaning earnings like you would fill out a W2 (form) for," he said. "This gets tacked onto whatever income you make."

Unfortunately, he said, some landowners don't think about taxes when they sign the drilling contracts.

"We've tried to stress -- they need to understand what the lease is doing and what they're giving up and how it operates," Samol said.

There is no definitive rate for the taxes, as the state and federal governments will take more from those with higher overall incomes than they take from those with less earnings.

Samol said the best advice he can give landowners is to consult with a lawyer or financial adviser about the royalties and lease payments, whether the sum is considered to be substantial or somewhat smaller.

And, he said, set aside a portion of the money for taxes.

Samol suggests landowners saving at least 35 percent of what they receive.

"That could be how much they end up paying," he said.

Of course, the actual rate depends on what tax bracket they're in, he added.

The current federal income tax rate for those in the highest bracket -- $373,650 annually or more -- is 35 percent. This amount may rise to 39.6 percent if President Barack Obama and members o Congress allow the Bush tax cuts to expire next year.

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