Oasis transportation costs

I received royalties from Zenergy in ND without any CMG/TRN deductions. Zenergy sold their interest to Oasis, now I noticed these deductions on my royalty check. My lease states: 1ST To deliver to the credit of Lessor, free of cost, in the pipeline to which Lessee may connect the wells on said land, the equal eighteen percent part of all oil produced and saved from the leased premises. 3RD To pay Lessor for gas produced from any oil well and used off premises or in the manufacture of gasoline or any other product a royalty of 18% of the proceeds, at the mouth of the well, payable monthly at prevailing market rate.

Am I correct that I should not have these deductions? If so what do I do about it if they do not remove them?

To clarify CMG is compression, gathering, and treating. TRN is transportation costs.

Kevin, they can take the charges out for several reasons.

It's been determined that the gas has no value, could not be sold "at the mouth of the well" without it being processed so it can go into a pipeline, so in the absence of words absolutely forbidding the deduction of these costs from your royalty, the courts say it is fair for you to pay it because you would not receive a royalty at all if you can't sell the gas. These charges are also pre-pipeline, must be completed before the product goes into a pipeling.

"Cost free" and "free of cost" no longer mean they can't charge your royalty for expenses, the courts say it NOW means you don't have to pay for the drilling of the well.

Never mind that you would be extremely unlikely to lease your interest giving up 82% if you had to pay for your share of drilling and completing the well as any other working interest would. We have the best judges money can buy.

It's not a matter of what is in your lease, it's a matter of what is not! Your lease needs to absolutely forbid deductions or they can be taken, the courts have said so. The fact that there is nothing in the contract that says they CAN take the deductions, natters not at all. If these costs were not taken out up to this point, I think you were lucky but your luck has run out on that issue. Without the proper language in your lease, I would not dream of filing suit over them taking the charges, unless or until they take it all like that poor farmer in Pennsylvania with 4 gas wells on his, I believe 190 acres farm and he gets checks for $0.10 a month. That is my realistic take on that.

The courts have kicked lessors feet out from under them with these new interpretations. These are not the only ones and the courts are not the only ones who can do it.

Some lessors in ND reserved some formations in their lease and the NDIC has declared them a common source of supply. If you had a depth severance clause and your depth severance clause named the formations, you likely would not have a leg to stand on, because to produce from the common source of supply with a single well in any of the named formations is to produce all of them simultaneously, although you might have a leg to stand on if your lease releases all depths over 100 feet from the perforations of the pipe.

A lease these days needs to be crafted in such a way that the courts or the NDIC can't reinterpret it in the future. The meaning and intent has to be spelled out. Some people leases were so specific, naming each bench in the Bakken and Three Forks and all the money paid to their lawyers was wasted because it named the formations and it's all a common source of supply now.

The funny thing is that the operator only asked for the common source of supply to apply to one spacing only. It was the NDIC that asked if this ruling could not be applied field wide. The NDIC gives away your rights even when the oil companies don't ask for them.

It's little things like this that put me off leasing in ND. If you are force pooled, you eventually own the equipment used to process the gas and they can't charge you forever, to use your own compressors and pipe.

I have 12 acres in MT and the lease expires in May. I think I will try to participate. It is pretty sad a lease is now a worthless piece of paper. I guess 82% of my oil is not a high enough number for them.