Does anyone know if it’s normal for a company to withhold a maintenance fee if the royalty rate is above 14 percent? Or is this just an excuse the companies use to discourage negotiations? Thanks for any information and Happy Thanksgiving to all.
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I have never heard of that, but I’m not as well versed as others on this site on all the tricks gas and oil companies use to shortchange owners. As you mentioned, it sounds like a ploy to discourage negotiations. The whole point of negotiations is to come to a mutually agreeable outcome. Stick to your guns the best you can and Happy Thanksgiving!!
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We signed a lease in Marion County above 14 percent and do not have a maintenance fee.
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No maintenance fees here in Ohio and Gross Royalties well above 14%
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@DebbieSS The maintenance fee you are inquiring about is actually called “post production cost”.
POST PRODUCTION COST
Here’s a breakdown of typical fees under post-production costs:
1. Gathering
2. Compression
3. Dehydration & Treating
4. Processing / Plant Fees
5. Transportation
6. Marketing Fees
7. Fuel & Shrinkage
8. Storage Fees (less common in routine leases)
When you are presented with an oil and gas lease, all drilling operators include this in the gas royalty clause of the lease. If they offer you a 14% royalty and you don’t have Post Production costs removed, they will deduct around 6 to 7% of the royalty from you. This means after they deduct the fees, your 14% turns into about 6 to 7%, so you lose half of your royalty check. You want to make sure you negotiate the lease with “cost-free royalty” or “Gross at the wellhead.”
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This post is about W Va minerals and language interpretation depends on the state. In Texas, gross value at well means it is net of all the listed expenses which are incurred after the gas leaves the well. The gross value at the well is the sales value of gas and NGL at the plant or other sales point less all costs incurred backwards to the well.
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Wow. Thank you so much. That tells me a lot.