Maybe we should all form our own company and use a free hold friendly lease , useing only freeholders land. Im sorry if this is off topic.
Wonderful idea Lori but I'm thinking it's impractical since we are so spread out on the continent. It might work in a local area if enough money could be raised to finance the drilling and producing, otherwise you are back to being at the mercy of producers.
Lori B said:
Maybe we should all form our own company and use a free hold friendly lease , useing only freeholders land. Im sorry if this is off topic.
Lori:
I'm not familiar with the term and didn't try to look it up; but, this problem is bigger than any of us, even if we have oodles and gobs of acres. Even though this looks to be an individual civil matter, it goes back to the our legislature and the RRC to help control gross lease violations. Of course, it all goes back to money. As one said earlier, these guys are all "lawyered up", plus they have the money to buy who ever they want to get the ruling they want. Whether we call it class action or some other name, this has to be stopped. The "Tea Party" folks started as nothing and became a strong force, maybe it is time for someone to start up a ground swell of folks that are tired of these thieves having their way. How or who would be a good question; but, I believe this will ultimately be the only answer.
Lori B said:
Maybe we should all form our own company and use a free hold friendly lease , useing only freeholders land. Im sorry if this is off topic.
There are those unfortunate royalty recipients like me who did not have executive rights. A lot of land / mineral owners had money waved in their faces by landmen and hollered "where do I sign, just throw me the bucks!" I wish I had had some input. I am leased with Chesapeake. I will let you know how it goes in years to come. Power comes in numbers they say. Hence the class action lawsuits. It is better than no action.
Many companies agree not to charge "post-production" expenses, but tell you "Oh, but "market enhancements should be ok, right? " Right. And they do exactly the same thing as PPE....the same deductions with a new name.
Prior to 1980 you almost NEVER saw a lease with post-production expenses and "market enhancements" ... That's so new I haven't seen more than a few dozen such leases with that exact term.
Keep in mind those PPE are going to increase with time. Many of the PA royalty owners already see 50% of their checks disappear into the PPE black hole... A 3/16th lease thus becomes a 3/32th... I have calculated a lot of leases that were less than 8% net royalty to the mineral owner
you are worrying me.
Cookie:
This should scare every Mineral Owner to the core. Until "all" mineral owners "get it" and pull together, starting with the lease, then a few of these thugs will continue on their rampage. Evidently Chesapeake has the baton and is carrying it out in front of the pack.
Cookie Gartner said:
you are worrying me.
The oil company is doing what it is supposed to do. Laugh at the clowns. The problem is that the mineral owner is greedy and does not want to spend money getting it right before they run to the bank, build the pool and buy the new pickem up truck. They will get a lawyer to keep them from paying child support or to get a simple divorce, but will not get one to put together a comprehensive air tight lease for a lifetime of royalty payments. The problem is that "you can't fix stupid!"
I did not know how to spell "awl" three years ago. I had to learn. There is lots of stuff on the internet about it. If you can learn games on your phone, you can look up a lease or find an attorney who will take it. These people are lucky to have rights, no matter how small the royalty. Most of the public would kill for it. I do understand your tough job though.
Kyle Nuttall said:
Well, if CHK never does anything to get the minerals out of the ground, of course they have no value. But the whole point of a lease is to get the minerals out of the ground and to market. That should be a fun case for some attorney to take to court. Should settle for a large amount.
I think it's just too complicated for small mineral owners to keep track of and enforce their rights regarding post-production costs. If I were representing lots of people who have hundreds of acres of minerals, I might think differently, but I see loads of people here in West Virginia who have a tenth of an acre, three acres, or even twenty acres, who just won't have the resources to check up on the producer, hire someone who knows how to read the books, get an attorney, and challenge the producer in court. I have to keep it simple for those folks; a percentage of what comes out of the ground.
most royalty owners are not savvy enough to understand a lease. It is not a matter of "greed". It is a matter on ignorance. No one likes to say, "I don't understand". A fast talking landman who is saying "Take this now or else we force pool you..etc etc." puts people in a position to not know.
When the gas companies came to a remote region of the Arkoma basin that had no history of production and only a few dozen wildcat wells, they managed to lease huge chunks of land for 1/8th royalty before it became knowledge that they were producing gas from shale. Even the local lawyers, had virtually no experience with leases and were saying, "Sure. Take the money, I don't know what those "Post-Production" expenses are.
Well, of course they didn't. Virtually none of the leases from the 20s, the 50's or the 70's had that clause. The National Assoc. of Royalty Owners (NARO-US.org) was created in the late 70s. It was one of the new issues that the late Jim Stafford wrote up when he pushed to create NARO and published the pamphlet "Look before you Lease".
Once folks wised up, they asked for the post-production clause to be dropped. So they subsitituted the language "Market Enhancements" and still lopped off the same. In the early stages of development, that percentage might only be 5 - 15%...but as a well matures the volume is reduced while the costs continue to be rather steady. I see many checks that are in the 40% and more deductions.
To top that, most of these payments are to related companies. This is not an arm's length transaction. The same board of directors are running both companies in some cases. How can one argue that SEECO (as an example in Arkansas) is "arms' length" from DeSoto Gathering? And if you are Chesapeake, you simply take those deductions anyway and hope they don't notice and if they do, delay as long as possible and settle for a percentage.
Our executor took what they put in front of him in 2010. There were lawyers dancing all over the place in Cotulla. I am a victim of a lease signed by the executor but since I was not expecting an oil lease (now producing thank goodness) I won't complain. We will see how the new CEO with CHK handles the money and the bad rap they have. We can hope.
Wow just looked over my Eog royalty check and found that on a well in Louisiana in which I own some mineral rights, they to over 92% post production. Yes my gross was $553 and I got $43. I will have to start the process with them now. Dont think they have been doing this much before looks like they have started charging me a Marketing fee now. wow There is no way that this is what they make on the gas that belongs to them.
I had been hearing the rumbles. I guess EOG wants to be the new Chesapeake.
Mickie Byrd said:
Wow just looked over my Eog royalty check and found that on a well in Louisiana in which I own some mineral rights, they to over 92% post production. Yes my gross was $553 and I got $43. I will have to start the process with them now. Dont think they have been doing this much before looks like they have started charging me a Marketing fee now. wow There is no way that this is what they make on the gas that belongs to them.
Since the amount is small, can you just take them to small claims court? Large corps hate them because the lawyers they have to send stand there doing nothing for a few hours in their $2,000 pin stripes with evicted people and the like, and collect $500.00 per hour. Then the judge will make them go sit in with the mediator. It usually never goes to the judge to be heard. It is such a waste of the large company's money. All you invest is YOUR time. At least that is what happens in Texas. I know. I won a few cases that way.
Let us recall the Golden Rule. (He, who has the gold, rules! In this case it is black gold = YOUR oil). The Golden Rule has always been that the royalty is calculated at the very first point, where the oil or gas is in marketable condition. For oil that is almost always at the wellhead. For gas it is when the gas is pipeline quality. The latter may be a little more difficult (sour gas needs sulfur removed, very rich gas needs stripping, and very remote, lonesome wells may need some help from you).
But stay firm on this: if it can be sold to a third party, who will pick it up, that is where your royalty on oil or gas is due.
John Gustavson
Good to see you Post John - Here in Arkansas, our laws are terrible. I just met with a representative of a major player in the Fayetteville and they hope to get the law changed but we have royalty (1/8th) paid by the operator and the excess royalty paided by the JO partners to each party they've assigned.... and some don't pay for 90 days after they are sent the notice to pay by the operator. Folks are hoping mad and cannot even read their stubs. That same individual showed interests in one well taken "in kind" where the operator was paying $3.54 an MCF and one partner was paying $2.48 per MCF from the same well... So much for "Market Value".... and we see one docking the check for $0.45 and another for $0.25 an MCF...The check stubs are a mess.
Also, I see appraisals from engineers basing the "value" of a mineral interest on NYMEX prices and they make no allowances for the post-production expenses. This suggests to me that they will come out with a higher valuation than the reserves support if you used a local gas price and typical PPE.
John B Gustavson said:
Let us recall the Golden Rule. (He, who has the gold, rules! In this case it is black gold = YOUR oil). The Golden Rule has always been that the royalty is calculated at the very first point, where the oil or gas is in marketable condition. For oil that is almost always at the wellhead. For gas it is when the gas is pipeline quality. The latter may be a little more difficult (sour gas needs sulfur removed, very rich gas needs stripping, and very remote, lonesome wells may need some help from you).
But stay firm on this: if it can be sold to a third party, who will pick it up, that is where your royalty on oil or gas is due.
John Gustavson
Hi, T L Shields:
You are right on. I imagine that you are the same "Terry" Shields that I knew many years ago when I was teaching the University of Tulsa course "Appraisal of Oil & Gas Properties"? The course is still going strong, albeit instructed by my successors. I will look for your savvy blogs, now that I mostly work on appraisals for landowners in the Bakken, the Niobrara, the Marcellus, the Utica and a few other shale basins.
Yep, that's me. I still work on Fayetteville shale and Oklahoma properties - in fact, I started teaching a class to appraisers so they don't get themselves in trouble trying to value minerals when they don't understand the first thing about them. Did several classes in Pennsylania in 2010 and 2011 and have been asked to go back this fall...
I'm really sorry to hear that. Iam also sorry to say that there is nothing you can do as long as we have the best judges that money can buy.
Susan B said:
My CHK checkstub is impossible to read. Dry gas in Tarrant County selling at over 50% less per mcf than a similar Devon Barnett Shale dry gas well. Then, the marketing and production fees deducted. Of course, the gas is being purchased by a CHK "affiliated" purchaser.
RWK:
Well said and I don't believe anyone could have said it any better. We can just look to the East and see what money as well as stupidity can buy!
r w kennedy said:
I'm really sorry to hear that. Iam also sorry to say that there is nothing you can do as long as we have the best judges that money can buy.
Susan B said:My CHK checkstub is impossible to read. Dry gas in Tarrant County selling at over 50% less per mcf than a similar Devon Barnett Shale dry gas well. Then, the marketing and production fees deducted. Of course, the gas is being purchased by a CHK "affiliated" purchaser.