Processing and Transportation Costs

Continental is charging me processing and transportation and my original lease states “to deliver to the credit of lessor free of cost, in the pipeline to which it may connect its wells part of all oil produced and saved from the leased premises” “ to pay lessor for gas produced from any oil well and used off premises, or for the manufacture of casing head gasoline or dry commercial gas of the proceeds, at the mouth of the well. Should I be paying these charges.”. Thanks for replying.

It depends on the state where your minerals are located as there states vary in interpretation of lease language. In Texas, the phrase “at the mouth of the well” has been interpreted by the courts as being calculated as the sales net of all expenses from the well to the point of sale. However, it also depends on all of the terms and provisions of the lease as there could be other language which affects the interpretation. The law is different in Oklahoma and other states in the application of costs.

This lease is in Carter County Oklahoma

Those charges should not be a deduct off your price you get for the products produced

Look at the rest of your lease following the words you just quoted. Most Continental leases have a clause allowing them to take the deductions. ''less any transportation, marketing, compression…" or something along those lines.

This is not a Continental Lease. Continental said they would honor existing lease agreements. The original lease was with Ward Petroleum. I have the original lease from 1999. My dad and grandad would not sign a lease unless it was sold at the mouth of the well.

I have an Amended Division Order Statement from Continental stating”The Division Order does not amend any lease or operating agreement between the undersigned and the lesser or operator or any other contract for the purchase of oil and gas”.

“At the mouth of the well” has different meanings in Texas versus OK.
Does you lease say gross proceeds or net proceeds?