Just wondering, I know people have leases that state no deductions, but is anyone getting a royalty check = royalty rate * gross market proceeds, period!
There is a gas company out in the Pacific run by a man named Mr. Rourke, when his controller Tattoo cuts the checks they come with no deductions.
I'm in PA and, yes, sure I'm receiving royalties with zero deductions. My lease calls for this.
If PA ever passes an ad valorem tax on O&G production I will have to pay my share. And that will show up as a deduction on my ROR (royalty owner's report). So far we have no such tax here, only an impact fee. And the impact fee has no impact on royalty owners.
If you asked your question in order to get a feel for your own personal prospects you should have included, in your question, your state. This kind of stuff varies all over the place. Without being state specific you scarcely have even a starting point for any discussion.
I'm just looking for some general info.
So the price your receiving, as best you know, is the market sale price the company is getting (not a back calculated wellhead price), with no deductions of production volume either? Those companies can be creative about their deductions.
I've not exercised my audit privilege, if that's what you're asking. Nor have I plans to do so. I'll let the big fish worry about such stuff. If you're a big fish you need a lawyer/adviser, and a knowledgeable one at that. I plan to swim with the current and allow actions (if any) against my gasco to be pursued by others. If they are cheating me it always come out sooner or later. If not, I am receiving the "arm's length sale to third party" price, with no self dealing, gasco agreed to in my lease. And as I wrote earlier, there are no deductions. My lease does not allow deductions, except for the tax I mentioned earlier.
Since you won't even reveal your state I can't contribute much more. This stuff tends to go by state and region and so forth. Different places, different practices. The gascos get away with whatever they can, obviously.
BTW I'm not sure what you mean by "deductions of production volume". AFAIK the gas is metered at the wellhead, whereas my price is determined at point of sale to third party, after all processing and transportation.
Frank, what company drilled your well? Is it yours or or are you in a unit?
I'm in NE PA.
No, I'm not asking about audits, you can find out a lot by comparing with your neighbors in the same unit (the market price and volume they report, not the total cash amount), if they have different leases which allow various deductions you can infer quite a bit. Takes a few minutes. But anyway, thanks for the input. Sounds like you got a great lease!
Joe, OK. That helps a lot. I thought you might be in OH or something. Things are different there.
But OK, only thing I can say now is that I leased a while back when the price of gas was much, much more favorable than it is now. And I leased with a really good company. If you are unleased I'm not sure I would lease now. It might be better to wait for the gas price to go up some. If you are already leased then your terms are fixed and nothing can be done. How you made out probably depends on exactly when you leased and how good a lawyer you hired. I held out for seven or eight years before signing. I met so many different landmen I can't remember all of them. In the end, through shear luck only, I signed before the gas price plummeted, but after the groups had improved the leases so much. If I had waited longer I would have really been hurt.
I have compared with neighbors regarding price and volume. It was the same as mine. It's all computerized. My gasco details deductions and there is space on my royalty owner's report for that. My deduction entries are all zeros.
I have also found it really useful to check my volumes against the PA DEP Marcellus well production reports. I would suggest for every royalty owner in PA to do that. The reports are issued every six months. The cost to run this check, aside from the time needed to perform the math, is zero. The return can be thousands and thousands of dollars.
Thanks, I am not leased, I talked to some other landowners and lawyers, and honestly, the fancy oil lawyers know less about this stuff then you do, probably because they are not real Texas oil lawyers. I know someone who joined a landowner group, had a lawyer write up the lease with "no deductions", but their first check had a load of deductions on it, all legal as it turns out, due to the wording (wellhead vs market price, or volume deductions due to a compressor indirectly implied by other parts of the lease). I believe the best way is to do what you did, write an Addendum at the end of the lease which completely overides everything else in the lease.
In the future I may offer to purchase your Addendum lease language (I know you spent a lot of time on it). It seems like you have everything covered. Of course, I know they may not accept it, that's a whole other issue.
thanks you been very helpful.
Agreed, This Addendum would be nice to see and helpful to all.
I am going with my original statement.
Mr. Rourke and Tattoo would probably not accept it with 2.20 gas and no reasonable end in site for an upswing in price.
The good O&G lawyers know more about this stuff than I do. Period. You can take it to the bank. I know enough to know I don't know enough. However, a story:
Back when I leased my land I sought legal help. It's idiotic not to hire a competent lawyer. I tried hard to locate a lawyer I believed knew enough to help me. I had no luck here in PA, but remember this was several years ago. I found a lawyer I liked out of state. I was willing to hire him and pay him. He refused to assist me because I lived in PA, not in his state, and he was not licensed to practice law here in PA.
I needed, at that point, to lease my land pronto. I had no choice but to learn as much as I could and do the lease on my own. I was frightened and I knew what I was doing was not smart. But my options were limited. It took me weeks of study and effort, writing and re-writing, especially certain critical portions of the lease. I got some stuff wrong. Other items I did OK on. I'll know better five years from now how I did bottom line, but so far so good. If I had it to do over and I could locate a good lawyer here in PA I would hire that lawyer in a nanosecond. As it is, I just have to hope for the best.
As for unleased landowners in NEPA today, well, I didn't know there were any remaining. It's a really poor time to lease, unless you have something compelling you, a reason you must lease right now. The bonus money and lease terms you can demand today are not great. It's because the gas price is so low and gas price prospects looking forward are horrid! The NG supply overhang is astonishing. I tell you this from personal experience. And in NEPA you are in dry gas territory, which is a significant negative. So I wish you luck. You're gonna need it.
I just re-read your post. It would be against the law for me to sell you my Addendum. Not being a lawyer, I could go to jail for practicing law without a license. As for making it available gratis, I have given my word to keep my lease confidential. And I most generally keep my word.
You should be able to locate a good PA O&G lawyer by now. They have had time to get up to speed. That would be my suggestion if you must lease right away. A better suggestion, if your situation permits, is to sit tight, remain unleased, and hope the market improves for Lessors. It cannot get a lot worse for dry gas landowners.
Thanks Frank, the boom bust aspect doesn't concern me, Barnett was Boom, now Bust, Marcellus Gas was Boom, now bust, Marcellus Liquids were Boom, now starting to Bust, Utica Oil now Boom... but just wait until the rest of the world starts drilling shale oil, just part of business cycle. Something that pays the monthly utilities is fine with me! See Ya!