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After inspecting my last statement I see where White Star has taking out all kinds of deductions that they are not suppose to (it’s clearly spelled out in my lease). This amounts to a substantial amount of money being deducted, even though they show zero deductions on the bottom line! I'm confused, could I be reading this wrong? Is anybody else having this problem with White Star?
It may be difficult to craft lease language which prevents post production deductions.
Post-Production Costs after Hyder by oil and gas attorney John McFarland
..."The lesson from these cases: a royalty clause, if based on proceeds received by the lessee, should also provide that "proceeds" means the price received in the first arms-length transaction between the lessee or any affiliate of lessee in a sale to a third party which is not an affiliate of lessee. "Affiliate" should be clearly defined. Heritage disclaimers don't work. And always avoid "at the well" or "on the lease" language in a royalty clause.'
If you keep up with things and have a good oil & gas attorney, you can do a pretty good job. I have about 2 to 3 pages of addendum on most of my leases.
I think the judge who was over the Hyder case was probably working for the oil company. But, that is only my thought. Sometimes when you go to court, you draw a bad judge who don't care for mineral owners. But, most of the time they are fair.
Hi, Virginia. Did you read John McFarland's paper which is linked in the article I shared? I am not suggesting it applies to you, but apparently one can have pages of modifying addenda negated on the turn of a word or due to being considered surplusage. Scary stuff.
I am well aware of the Hyder case and what took place. John McFarland is a very good attorney and I have heard him speak several times. You do have to be careful of how your addendum are wrote. Also, we are now dealing with a lot of foreign companies and their laws aren't like ours, so you really have to be careful. That is why a person needs an oil and gas attorney and someone who deals with it everyday. I know lots of good general attorney's and they can do a good job. But, do you want your brain operation by a general doctor?
AJ .. My lease does have it clearly spelled out (basically, so a child could read and understand it), but not as your describing above. My problem is that with Devon I never had any problem reading their statements, but White Star has me completely confused as to what the heck they're doing and whether or not if they're deducting any post production costs. Not only that, which I've read others complaining too about nothing ever seems to match up on the OTC gross productions, and they seem never be able to keep it current! Sometimes I've been tempted to think that this may be a way to keep us all confused about how much they're really producing, but I'm sure NO OIL COMPANY would ever think about cheating the lowly little royalty owner .. now would they .. haha
I just got my 1099's from Whitestar and discovered that they have been deducting for Federal taxes. Went back to my statements and it looks likes they stated deducting for Fed tax in October check thru Jan. 2018. I have never authorized Whitestar to make Fed deductions. I have also noticed, since Oct. /2017, that they have been placing state withholding and severance tax in the severance tax column.on the statements.
I am calling my attorney today to see what we can do. I have written them regarding other issues in the pass and its takes them 3 to 4 weeks to get back to you.
If your wells are in OK, then most operators will normally withhold state income taxes. You will need to file an income tax return in OK to determine if you owe more or are due a refund. Federal taxes will be withheld unless you have submitted a W-9 form to the operator. You do not authorize the operator to withhold federal income taxes, but instead the W-9 form contains a statement that you are not subject to backup withholding and therefore the operator can send you 100% of the royalties.