Fayette County, TX - Oil & Gas Lease

Thanks to all

Darrell:

Check out the Texas Land & Mineral Owners Newsletter (TLMA) by opening this link below and then opening the December Newsletter tab. You might also want to read the September Newsletter as well since there is some more background information on the free royalty issue cases.

http://www.tlma.org/news.htm

There are two great articles in this newsletter that you should definitely be aware of before you sign your next lease. The first page covers "Property Tax Rollbacks for Oil pads on Agriculture Land" and the third page gives a little more on the continuing fight over the royalties issue in the Chesapeake v. Hyder case. The big oil companies are fighting this with everything they have so I doubt that this is over yet.

I will post the Property Tax Rollback issue on another post so everyone will hopefully see it and be aware. I have brought this up once before about a year ago, but this is extremely important to know and understand the consequences before signing a lease.

IMO, like everyone else has said, the best money you will ever spend is on a "good" Oil and Gas Attorney.

Hello all:

I mentioned this on a previous post about a year ago; but, it seems like the taxing authorities just can't get enough so I am posting the full PDF document on the "Property Tax Rollbacks For Oil Pads On Agriculture Lands" from the latest TLMA Newsletter. Not many leases are being renewed in our area right now; but, there will be another day and we need to understand and be ready when that day gets here and know what to do.

3086-PropertyTaxNewsletterArticle.pdf (263 KB)

FYI on the roll back tax issue. Gonzales county is doing the same thing as of 2014 tax year. Not sure how to present this to our state reps but it is quite detrimental to the land owner. First they tax you on the mineral production once you have production and then they come along and penalize you on the property tax. The worst part being the roll back issue. As Bigfoot stated you are hit going back 5 years with penalty and interest on something that you didn't have income on for those years. The worst part is we all know (as is happening right now) the production will slow and even stop at some point and then you have to wait 5 years to get it back into ag exempt. I learned the lesson the hard way but was able to get a tax clause into some new leases I did.

Don:

Yes we all have you to thank for bringing this issue to our attention after you got zapped. Now the TLMA is keeping an eye on this issue. With that said, I would like to put a plug in for as many Mineral Owners as possible to join the TLMA just to get another name on the list. The majority of us are absolutely and totally insignificant as individuals in any of these battles against the legislature or the taxing authorities; but, through groups like this we might be able to make a difference.

Merry Christmas!

Bigfoot: This is a very important issue for surface and or mineral owners. I first came across this issue in Hill County many years ago when drilling activity was highly active in the Barnett Shale Play. With horizontal drilling the well pads were large and the Appraisal District was licking there chops. At the time I was in disbelief and never heard of this taxing policy. This created a huge upset with those who had wells drilled and many that did not pay out much in royalty income but the tax burdens will be there for no telling how long. What was really bad was mineral owners, including us, had already signed leases when this tax policy was acted upon. We had no recourse but then our leases had expired so we were not

affected.

Mike:

Well in your case it goes back to the country western song "Sometimes I thank GOD for unanswered prayer"; but, it sure would be nice to know the consequences prior to singing a lease. I have one lease that just expired on December 15th. May never get to lease it again in my lifetime; but, at least many of us are aware now and we can add this as another major clause provision to off set these potential charges in the future.

The sad part of this is that the taxing authorities are so greedy and so ill informed that many surface owners do not own their minerals anymore or if they do it is only minimal. Wow, that would be a bummer.

Fortunately, so far, most counties have not gotten that greedy yet; but, just give them time.

Don, Bigfoot, Mike,

Thanks for the info.

That tax assessment rollback and subsequent interest fine is not only unbelievable, it's unconscionable and should be illegal. Simply WRONG on so many counts.

As low as the oil price is right now, why aren't we, USA, pumping as much crude as we can into the strategic reserve?

Great idea, but the SPR is at 97.4% of capacity as of August (excerpt below on this subject)

==============================================================

The Strategic Petroleum Reserve is an emergency fuel storage of oil maintained by the United States Department of Energy. It is the largest emergency supply in the world with the capacity to hold up to 713.5 million barrels. The current inventory is displayed on the SPR's website. As of 7 August 2015, the inventory was 695.1 million barrels

To pay for the upcoming Social Security/Disability/Medicare shortfalls Congress and the President decided to sell a good portion, about 50% if I remember correctly, of the present reserves in the SPR in the next couple of years(passed a couple of months ago).. If you google it, you will find more info on the process....so add these millions of barrels of crude coming on the market during the next several years...hopefully they can wait and get at least $50/bl ...but they needed the money now, so who knows...this should all be in the story you can search...

Depressing that we have to use SPR assets to cover social security pay outs.

It begs the question "do we really need an SPR?" We already have SPR's locked away in the oil shale formations plus what can be retrieved from EOR programs. What we need is for the price to increase above the B/E level to produce. Is the SPR necessary?

Good point on need for SPR's - but in times of urgent and immediate need, it would take lots of time and $$$$ to drill and extract oil over time from new unconventional wells plus EOR projects.

Nice job Obama, stash away oil at high prices and sell it at the lowest point so far to pay for stuff and in the process further depress prices. Sounds like a recipe for attempting to to further strangle our oil and gas industry, oh wait, now we can buy oil from Iran! Nice job Nice job.

LRJ

You took the words right out of my mouth or at least off the end of my fingers. Anyway, When I saw that post from Mr. ML, I thought very seriously about making some negative comment; but, got busy messing with some cows and forgot about it. Anyway, it needed to be said. Sounds like a typical government move, put away a few million bbls at $90/bbl and then sell it to one of their buddies at $50. Sounds like a deal to me.

I count 58 million barrels to be sold over eight years beginning in FY 2018.

5 million bbl will be sold the first year, or less than 1/3 of the amount we use in one dayin the U.S.

As of Dec. 18, 2015, the SPR contained 695.1 million bbl of oil. So the REPUBLICAN controlled Congress authorized the sale of a little more than 8% of the SPR. The proceeds of the sale each year will be deposited into the general fund. So it will also go to fund all sorts of programs beyond those you mention.

EC. 403. <<NOTE: 42 USC 6241.>>  STRATEGIC PETROLEUM RESERVE                          DRAWDOWN AND SALE.      (a) Drawdown and Sale.--Notwithstanding section 161 of the Energy  Policy and Conservation Act (42 U.S.C. 6241), except as provided in  subsection (b), the Secretary of Energy shall draw down and sell--             (1) 5,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2018;             (2) 5,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2019;  [[Page 129 STAT. 590]]              (3) 5,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2020;             (4) 5,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2021;             (5) 8,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2022;             (6) 10,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2023;             (7) 10,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2024; and             (8) 10,000,000 barrels of crude oil from the Strategic          Petroleum Reserve during fiscal year 2025.      (b) Emergency Protection.--The Secretary shall not draw down and  sell crude oil under this section in amounts that would limit the  authority to sell petroleum products under section 161(h) of the Energy  Policy and Conservation Act (42 U.S.C. 6241(h)) in the full amount  authorized by that subsection.     (c) Proceeds.--Proceeds from a sale under this section shall be  deposited into the general fund of the Treasury during the fiscal year  in which the sale occurs. SEC. 404. <<NOTE: 42 USC 6239 note.>>  ENERGY SECURITY AND                          INFRASTRUCTURE MODERNIZATION FUND.

Why Congress Should Pull the Plug on the Strategic Petroleum Reserve

In this bill that was mostly to cover cost of social security disability, which was running out in 2016, they made the choice to sell down the SPR..and of course to pass it other issues were included. Now in ALL states persons applying for SS Disability have to see a doctor...Texas was always that way but over 1/2 the other states did not have this. Anyway the draw down on the SPR is as follows:

5 miilion barrels for the years 2018,2019,2020,2021

8 million barrells for 2022

10 million barrels for 2023,2024,2025

This all goes to the general fund.

Then another $2 billion dollars worth will be sold off from 2017-2020 to cover the cost of maintenance, construction, repairs, etc...to the facilities of the SPR.

I also thought there was another $5 billion draw down in the bill...but I could not find it.

This bill is not the budget bill the house and senate just passed....but I know in those discussions they mentioned selling SPR inventories as well...the final docs on the budget I could not find...not sure if Obama singed them yet..

Anyway it looks like the SPR is now the piggybank for the government......since in the "bill" there is all sorts of language detailing why the SPR is not needed in our day and age...

The proceeds from selling less than 9% of the SPR go into the general fund which also pays for, among many other things, corporate welfare, farm subsidies, and $500 hammers at the Pentagon. It appears to cost $200-300 million/year just to maintain the SPR, which appears to be almost obsoleted.

Isn't most of the oil going into the SPR royalty oil that government is taking "in kind" instead of receiving a royalty check?

But agree it is pretty ridiculous taking a commodity that was worth $90-$100 per bbl and getting rid of it at a 50+% discount.

If it were our business, the "out of business" sign would be up soon!

Happy Holidays to everyone!!!!!!!!!!!!!!