What matters most when you are negotiating an oil and gas lease? Your knowledge of oil and gas? Which company you’re negotiating with? Your negotiation skills? Where your property is located? How much oil and gas property you own? What the overall market is like? Which landman you’re negotiating with?

Turns out, it’s whether you “…have the skills or resources to negotiate for more favorable leases…”.

Here’s the abstract of a study done by the National Bureau of Economic Research.

Just in case the web page disappears someday, we’re going to quote the abstract in full.

“Oil and gas lease negotiations provide mineral owners the opportunity to negotiate for both compensation and auxiliary clauses that may protect their health and properties. We use optical character recognition to assemble a novel dataset of compensation and specific clauses in nearly 60,000 leases signed in the Marcellus Shale Play of Pennsylvania. We leverage the dataset to produce three main findings. First, contrary to the standard utility maximization model, we find a positive relationship between compensation and clauses. Second, we find that as development of the shale play progressed over time, compensation rose and leases became more likely to contain environmentally protective clauses. Third, we find that compensation and the presence of clauses have a weak relationship with the geologic productivity of nearby wells. Together, our findings indicate that oil and gas firms simultaneously make concessions by raising compensation and approving clauses, but these concessions do not depend on geologic productivity. This suggests that some mineral owners, such as those that are high-income or from more socially organized communities, have the skills or resources to negotiate for more favorable leases all-around and point to similar environmental justice concerns identified in other shale plays.”

There’s a good bit to unpack here, but the main point is that if you are knowledgeable in oil and gas, or you can hire someone who is (a lawyer), you will get the best terms and the most money.

Our experience shows that people with larger net mineral interests (more oil and gas property) also get better terms and more money than those who don’t.

So, if you want to maximize the return on your investment, get a lawyer.