Dan & Marcus. Looking at the conversation about division rights and how much you own. Most of the time a section (640ac) is sold with "undivided interest rights". Meaning everyone who purchase that section has an ownership in "ALL" of it given a certain numerical division or part. It is usually set up like you mentioned as 10/2560 or some other fraction of the whole. If you take 640 acres and divide it by 10/2560 or 1/256th you get 2.5 acres. So of the 640 acres in the section you own 2.5 acres of it, just not any specific acres. Unlike your home where you own the specific plot it sits on of the total block it is in. In this case you own 2.5 acres of the whole. So if you want to sell your interest you would sell the 2.5 or any part of for usually a price for an acre. Eg. $15,000 an acre in this case would bring you $37,500 if you sold all of it off. Also if you are one of 5 children and all of you share/own the 1/250th then you own 1/5 of the 1/250th. So you would get $7,500 if it sold... It also mentions in the message what appears to be 4 sections. If its each section that you own 10/2560 then multiply above by 4. if its 10/2560 of all 4 then you divide by 4. Same with the income monthly royalties off the well or wells which could be from 1/4 to 1/6th.
Hope this helps... Steve
Is anyone familiar with the final outcome of the court case listed below? I found this on the Texas Land and Mineral Owners Assoc. site. Does anyone know of any similar class actions against Shell or Anadarko. They are taking 50 - 93% out of of my royalty revenue checks. Re, re, rereading my (inherited) leases it's plainly stated that I "shall not bear the costs of gathering, treating, compressing, dehydrating or transporting Lessor's oil and/or gas".
Supreme Court Denies Motion for Rehearing in Chesapeake v. Hyder - January 2016
The Texas Supreme Court denied Chesapeake's motion for rehearing, affirming its original decision that the royalty owners in the case had successfully negotiated lease-terms that prohibited post-production cost deductions, and that Chesapeake had been wrongfully withholding post-production costs from the Hyders' overriding royalties. Splitting down the same lines as the original decision, the Court voted 5-4 against rehearing. It also issued new opinions that have been substituted for the majority and dissenting opinions issued last June.
Click here to read the majority's opinion, and click here to read the dissent
Supreme Court Hears Arguments in Chesapeake v. Hyder - March 2015
In March, the Texas Supreme Court heard arguments in a case for which TLMA and NARO-Texas jointly filed an amicus briefauthored by former Justice Raul Gonzalez and attorney John McFarland. The Hyders challenged Chesapeake's deduction of post-production costs from the overriding royalty interest because the Hyders had carefully negotiated to disallow such deduction in the terms of their lease. The district court and the 4th Court of Appeals both found in favor of the Hyders. Chesapeake appealed the rulings to the state's highest court.
Click here to read a Star-Telegram article about the case.
It depends on all the terms of your lease. Does your lease state that gas or oil will be paid baaed on proceeds or market value? Is royalty on gas at market value at the wellhead or at point of sale? The courts have ruled that market value at the wellhead means the price at point of sale less all costs incurred from wellhead to the poiny of sale, regardless of other lease terms.
Reading some of the stuff about "Leases" it kind of appears that WE the owners of the property and minerals ask someone to come on OUR property and extract the minerals from the land. In exchange we are to receive some kind of payment in return for them extracting the minerals based on some percentage like 1/4 to 1/6th. Then there is created multiple prices they can base their payment to us on. It seems that in a clever lease they can strip away almost all of our $ money $ leaving like Susan below states. "They are taking 50-93% out of our royalty revenue checks" to cover all other expenses they can imagine or incur. Isn't it no wonder that we the owners of the property get the royal shaft both horizontally and vertically when it comes to making money off of what we own. The Billion Dollar companies rip off from us every last cent they can and we in some or most cases don't have the resources or funds to correct or fight for our money. And like Tennis says the system can legally chew up 95 percent of our small royalty payment in fees and costs. A billion dollars of money has made off of my 1.71Ac of 1280 Ac. by the leasing companies over the past 65 years. Yet my royalty income won't even buy a CHEEP compact "used" car from what I have seen from it. What's wrong with this picture.....? The term for the piece of paper we sign should be changed to Screw'er and Screw'ee, contract...
Just an observation and opinion...
Understand the comments posted here but even though the resources are "on" (or under) our properties, we do not have the resources and capital to access it. Which leaves the only option to lease to operators who do.
Remember, these are $6 to $10 Million wells that are being drilled. And monthly operating costs can be in the tens of thousands - especially early on.
Every landowner has the option of participating for their share of a unit's working interest - and take the same capital risks as the operators. That would give them more monthly income (assuming the well "works") - but they you are in the same payout mode where it is months or years before you are in a break even position. And you are totally dependent on the operator as technical support and decisions (unless you want to pay consultants to watch over your working interest).
The burden of getting and signing a good lease is on the landowner IMO. Operators are out to make money - if contracts / leases allow them to charge for various things, they will. And trying to change contract / lease terms after the fact is expensive and difficult (and potentially legally impossible).
I believe that O&G lawyers should be heavily advertising their services in the oil patch to promote the opportunity to landowners to get all the info possible make the best lease decisions.
Any O&G lawyers out there that are familiar with this Chesapeake v Hyder outcome? What did Hyder have in their lease that convinced the TX Supreme Court that they were not responsible for cost of processing? And is anyone aware of any such actions against Shell or ANadarko? I understand your point Rock Man, but I have another gas operator that charges nowhere near what Anadarko and Shell does. Will I see a cost reduction soon - I see significant gas infrastructure being developed nearby?
First, as a mineral interest owner, it is clearly stated on most lease forms I've seen, including the standard Producer's 88, that the lessee may deduct certain costs from oil and gas produced in making it marketable/merchantable. Practically speaking this applies much more to gas than to oil. I've been at this a very long time and this has been pretty standard as far back as I can remember.
Anyone who is offered a lease with such terms can accept and sign the lease, reject it, or attempt to negotiate such clause or clauses out of the lease before signing. A lot of people I know are doing the latter these days. I never have, as it seems fair and equitable to me that I incur my share of such costs. I've never felt cheated by the oil companies I've leased to, I read the leases carefully and know what I'm signing. There are often other terms of leases offered to me that I do take exception to and I do ask to that they be stricen from the leases and usually they are.
When I sign a lease - or any contract or agreement - I consider it my responsibility to know what I'm signing. I have, on a very few occasions, signed leases with terms I had not thought through carefully enough and had to live with the consequences, but there was nobody to blame for that but myself. However, I did not make the same mistakes twice. Live and learn, as they say.
To qualify further my immediately preceding post, it sounds as if the folks that Susan Van Siclen inherited her interests from had negotiated the post production costs out of her leases, to the extent possible. She also noted that there has been a case recently decided that she feels might set precedent in remedying her situation. My recommendation would be that she she find a good oil & gas attorney and speak to him/her about her concern, rather than wasting time asking a lot of folks that are not attorneys and/or have not read her leases in detail. Sometimes, but not always, the first visit to the attorney will be free. If the attorney feels she has a case, it might be well worth the fees to try to get it rectified, depending on how much money is involved. As to one operator charging more in post production deductions than another, it should be noted that these costs are not standardized, i.e., they are almost certainly going very from lease to lease and from operator to operator for a myriad of reasons.
Good discussion of negotiation of post-production costs. Allowing post-production costs in your lease can especially impact gas royalties. As production declines, or times get lean, or a less ethical operator takes over your lease, it can have a huge monetary impact. It also puts the owner in the position of having to educate themselves on how to do an audit and the cost of doing so. I try to resist allowing any post-production costs in a lease. One exception may be to allow them when the operator owns the gas treatment facility and you are being paid royalties on the post-treatment product, not the raw gas.
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