In Oklahoma in the Mittelstaedt vs Santa Fe Minerals case of 1998 a case is made to pay royalty owners for the gas priced at the First Market value without post production charges.
" ¶ 31 I would accordingly respond to the certifying court by stating that in Oklahoma the lessee is responsible for all marketing costs until a first-marketable product is obtained. Royalty would be paid on the actual market value of the gas at that point. Other than possible transportation adjustments in the event that the first market is not in the vicinity of the well, there should be no need for inquiring into the reasonableness of post-production costs and no proportional-increase requirement. This is so because under the theory I espouse, the lessor would receive no value from the lessee’s post-production (post-marketable) enhancement of the product.77"
So if I am asking a Gas Production Company to delivery to me Royalty payments free of post production charges other than transportation,
- Is there a market price for First Market product? (I could not find one on the CME energy futures).
- If the Gas Producer only connects to the buyers pipeline with an Enhanced Post production product would a First Market price for my royalty payment be available to me?
- If the only market available to the Gas Producer is with an Enhanced Product, do I have to resign my lease to include post production charges, and attempt to get disclosure language in my lease to determine if the these post production cost to me are fair?