Post Production Deductions

The Mercury 6_31-19N-16W 1HX well in Dewey Co. was completed on 8/1/2019 and I received royalty payments from Jan 2020 through Feb 2021 without any post production deductions. My lease states “all proceeds shall be without deductions for treating, transporting, etc., etc”. Then in March 2021, they recalculated back to Jan 2020 and started deducting “Gas Transportation Expense” and “Product Other Deduction”. All payments March thru June 2021 have these same deductions. I’ve called the company 10 times since March and actually spoke to the revenue supervisor twice and have received no response or resolution. I left messages on the other eight calls and got no reply. I then sent a certified letter to the CEO over a month ago and again…NO REPLY. Any suggestions on how to proceed?

Quite often the accounting software program is automatically set to take deductions since most folks sign the lease that has them. Accounting may not talk to the division order folks that have the leases with the exceptions. Check your lease and make sure that although it may have the “without deductions” phrase, make sure it doesn’t have the dreaded “however” phrase right after it that says they can take deductions that increase the value of the product. If it does not, then send a certified letter return receipt to the Division Order department and follow up with a call or two or three. You may have to ultimately contact an attorney to make the request on their letterhead.

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Thanks Martha. Yes I do have that dreaded “however” phrase in my lease but I have a hard time grasping the fact that a 40% “GAS TRANSPORTATION EXPENSE” is enhancing the value. Bottom line, I would at least expect them to respond to my calls and letter and explain why, after 14 months, they have started taking these deductions.

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