Is the lessee or lessor usually responsible for operating and transportation fees? Does it vary by state, my interest is in Grady County Okl. Any advice would be much appreciated!! KLP
The mineral owner [lessor] is usually not responsible for operating costs. Post production and transportation should be negotiable.
My argument would be that if the operator could not absorb post production and transportation costs, they have no business drilling a well in the first place and I do not want them to produce my minerals. There is the example of the dairy farmer in Pennsylvania with 200 acres and 4 gas wells that make money but he receives checks for $0.10 a month because the operator sold the gathering line to another company which charges virtually as much as the product is worth ro transport it. The operators themselves own a portion of the pipeline company and get a REBATE for the transportation of their share of the product. Only on paper does the operator pay the same as the mineral owner to move their product and the operator actually makes money off the mineral owner for the transportation, because they own part of the pipeline company.
I would gladly take 2 percentage points, ie 18% rather than 20%, less royalty if there can be no deductions other than taxes, just to be on the safe side.
thank you so much for your insight
r w kennedy said:
The mineral owner [lessor] is usually not responsible for operating costs. Post production and transportation should be negotiable.
My argument would be that if the operator could not absorb post production and transportation costs, they have no business drilling a well in the first place and I do not want them to produce my minerals. There is the example of the dairy farmer in Pennsylvania with 200 acres and 4 gas wells that make money but he receives checks for $0.10 a month because the operator sold the gathering line to another company which charges virtually as much as the product is worth ro transport it. The operators themselves own a portion of the pipeline company and get a REBATE for the transportation of their share of the product. Only on paper does the operator pay the same as the mineral owner to move their product and the operator actually makes money off the mineral owner for the transportation, because they own part of the pipeline company.
I would gladly take 2 percentage points, ie 18% rather than 20%, less royalty if there can be no deductions other than taxes, just to be on the safe side.
Here a court case usually referenced on the subject.
MITTELSTAEDT v. SANTA FE MINERALS, INC.
http://law.justia.com/cases/oklahoma/supreme-court/1998/11722.html