Does it do any good to state in lease...to pay at well head. Will this give you your % before all the other charges like pipeline,transporation fees, ect..??? Also, is it wise to specify or just lease to a specified depth..for instance 12,000 ft. This would leave the deeper for another lease..Shirley
Dear Ms. White,
To specify payment at the wellhead is one of the worst things that you can do if you are seeking to not have deductions for transportation, etc. If you have a cow and sell it at the auction barn (wellhead) you receive one price. If it sold to a meat packer, the price per pound goes up, until finally you could sell the cow to a restaurant who sells it to the customer, who is paying the highest price per pound of all. That is how I want my royalty figured -- based on the highest price received.
Get a good oil and gas attorney to work over your lease to avoid the problems of the Heritage Resources v NationsBank case (which does not allow deducts for transportation if the market value is set at the wellhead).
As to split horizon leasing, it has been done for years.
Thank you so much for the info !! Very very helpful…Shirley