Is it legal for a “producer” to charge 30% of the gas production in "processing fees when the lease reads “free and clear of all costs” and royalties are to be paid based on well head gas? Our previous producer did not charge, but our current one does.
Dear Mr. Proctor,
It would help immensely if you specifically addressed your question as to the state of which you inquiring. There are majority rule states and minority states.
If you are referring to WY, as your profile indicates, here is the appropriate Wyoming Statute:
(a)� As used in this act:
(i)� "Lessee" means the person entitled under an oil and gas lease to drill and operate wells, paying the lessor a royalty and retaining the remainder, known as the working interest.� The lessee pays all costs of production out of his interest, the lessor's interest being free and clear of all those costs;
(ii)� "Lessor" means the mineral owner who has executed a lease and who is entitled to the payment of a royalty on production, free and clear of the costs of production;
(iii)� "Operator" means a person engaged in the business of drilling and producing wells for oil and gas;
(iv)� "Other nonworking interest" means any interest in an oil and gas lease or well which is not a royalty, overriding royalty or working interest;
(v)� "Overriding royalty" means a share of production, free of the costs of production, carved out of the lessee's interest under an oil and gas lease;
(vi)� "Costs of production" means all costs incurred for exploration, development, primary or enhanced recovery and abandonment operations including, but not limited to lease acquisition, drilling and completion, pumping or lifting, recycling, gathering, compressing, pressurizing, heater treating, dehydrating, separating, storing or transporting the oil to the storage tanks or the gas into the market pipeline.� "Costs of production" does not include the reasonable and actual direct costs associated with transporting the oil from the storage tanks to market or the gas from the point of entry into the market pipeline or the processing of gas in a processing plant;
(vii)� "Royalty" means the mineral owner's share of production, free of the costs of production;
(viii)� "Working interest" means the interest granted under an oil and gas lease, giving the lessee the right to work on the leased property to search for, develop and produce oil and gas and the obligation to pay all costs of production;
(ix)� "This act" means W.S. 30-5-301 through 30-5-305.
Hello Mr. Cotton,
Thank you for the information,....yes, our mineral rights are in Wyoming.