Deductions from royalty check any Idea????

Does anyone have a Idea.Just got my first check they took almost 50%.

 

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Permalink Reply by PLOVER on September 7, 2012 at 11:39am

  ... I BELIEVE "The Sales Price for the Oil  and  Gas  shall  be  determined  at  the Wellhead,  adjusted  for  BTU  content, without deductions " WAS A PHRASE FOR THE DAYS WHEN GAS WOULD BE PUMPED DIRECTLY TO A TANKER VEHICLE AND NOT INTO A PIPELINE,

ALSO IT COULD BE INTERPRETED THAT  "The Sales Price for the Oil  and  Gas  shall  be  determined  at  the Wellhead,  adjusted  for  BTU  content, without deductions" WHEN SOLD DOWNSTREAM IS THE VALUE OF THE GAS, (see Section (g) below .

THE PRICE THE GAS IS SOLD FOR IS NOW CONSIDERED THE WELLHEAD PRICE, WITH NO DEDUCTIONS ALLOWED -- THE FRIENDSVILLE LEASE CLARIFIES THIS IN IT'S VERY NEXT "DEFINITION" SECTION OF IT'S LEASE -
(g)  "Sales  Price," shall mean the price received by Lessee for its Oil and Gas sold in an arms-length transaction.
In the event Lessee elects to sell gas produced from the Leasehold

to an affiliated party, then for purposes of computing royalty hereunder, the

net proceeds after taxes shall be at least equivalent to the price paid for gas

entering the Tennessee Gas Pipeline ("TGP") in North East Pennsylvania under

a Zone 4 designation.   Lessor and Lessee acknowledge and agree that there is

no published index price for TPG Zone 4 as of the effective date of this Lease.

Lessor and Lessee further agree to use a price proxy for the TPG Zone 4 index

until such time as a published index is established for TPG Zone 4, or any

replacement zone, should TPG modify its description of such pipeline zone.

The price proxy to be utilized hereunder shall be the Dominion South Point,

located in the pricing table entitled "Appalachia" under the column heading

"midpoint" as published in the "Daily Price Survey" ($MMBtu) portion of the

McGraw-Hill publication, "Platts Gas Daily."   Royalties shall continue to be

paid on a monthly basis, but for purposes of computing royalties, the sale price

of gas shall be calculated on a daily basis by multiplying the allocated daily

sales volumes in mmbtu by the published gas index price per day.

THIS CLEARLY STATES THAT IF THE GAS IS SOLD NOT AT THE WELLHEAD "sales price" BUT TO AN "affiliated party" which in this case is TGP - ZONE 4 - THIS IS THE "sales price" FOR COMPUTING ROYALTIES.


IF THIS SECTION WAS NOT IN THE LEASE IT WOULD APPEAR THAT SINCE THE GAS WAS NOT SOLD AT THE WELLHEAD, THE ENERGY COMPANIES COULD CLAIM DEDUCTIONS FOR THE COST OF BRINGING THE GAS TO A POINT WHERE IT COULD BE SOLD.   BUT SINCE THIS SECTION STATES SALES TO AN "affiliated party" THE SALES PRICE COULD BE  - (IS) -   NOW CONSIDERED THE (WELLHEAD PRICE).

SINCE IT'S BEEN AWHILE FOR RESPONSES TO THIS ISSUE I AM GOING TO SEND THIS REPLY TO OTHER MEMBERS OF THIS DISCUSSION ALSO - THANKS  

Permalink Reply by PLOVER on September 7, 2012 at 11:45am

... I BELIEVE "The Sales Price for the Oil  and  Gas  shall  be  determined  at  the Wellhead,  adjusted  for  BTU  content, without deductions " WAS A PHRASE FOR THE DAYS WHEN GAS WOULD BE PUMPED DIRECTLY TO A TANKER VEHICLE AND NOT INTO A PIPELINE,

ALSO IT COULD BE INTERPRETED THAT  "The Sales Price for the Oil  and  Gas  shall  be  determined  at  the Wellhead,  adjusted  for  BTU  content, without deductions" WHEN SOLD DOWNSTREAM IS THE VALUE OF THE GAS, (see Section (g) below .

THE PRICE THE GAS IS SOLD FOR IS NOW CONSIDERED THE WELLHEAD PRICE, WITH NO DEDUCTIONS ALLOWED -- THE FRIENDSVILLE LEASE CLARIFIES THIS IN IT'S VERY NEXT "DEFINITION" SECTION OF IT'S LEASE -
(g)  "Sales  Price," shall mean the price received by Lessee for its Oil and Gas sold in an arms-length transaction.
In the event Lessee elects to sell gas produced from the Leasehold

to an affiliated party, then for purposes of computing royalty hereunder, the

net proceeds after taxes shall be at least equivalent to the price paid for gas

entering the Tennessee Gas Pipeline ("TGP") in North East Pennsylvania under

a Zone 4 designation.   Lessor and Lessee acknowledge and agree that there is

no published index price for TPG Zone 4 as of the effective date of this Lease.

Lessor and Lessee further agree to use a price proxy for the TPG Zone 4 index

until such time as a published index is established for TPG Zone 4, or any

replacement zone, should TPG modify its description of such pipeline zone.

The price proxy to be utilized hereunder shall be the Dominion South Point,

located in the pricing table entitled "Appalachia" under the column heading

"midpoint" as published in the "Daily Price Survey" ($MMBtu) portion of the

McGraw-Hill publication, "Platts Gas Daily."   Royalties shall continue to be

paid on a monthly basis, but for purposes of computing royalties, the sale price

of gas shall be calculated on a daily basis by multiplying the allocated daily

sales volumes in mmbtu by the published gas index price per day.

THIS CLEARLY STATES THAT IF THE GAS IS SOLD NOT AT THE WELLHEAD "sales price" BUT TO AN "affiliated party" which in this case is TGP - ZONE 4 - THIS IS THE "sales price" FOR COMPUTING ROYALTIES.


IF THIS SECTION WAS NOT IN THE LEASE IT WOULD APPEAR THAT SINCE THE GAS WAS NOT SOLD AT THE WELLHEAD, THE ENERGY COMPANIES COULD CLAIM DEDUCTIONS FOR THE COST OF BRINGING THE GAS TO A POINT WHERE IT COULD BE SOLD.   BUT SINCE THIS SECTION STATES SALES TO AN "affiliated party" THE SALES PRICE COULD BE  - (IS) -   NOW CONSIDERED THE (WELLHEAD PRICE).

SINCE IT'S BEEN AWHILE FOR RESPONSES TO THIS ISSUE I AM GOING TO SEND THIS REPLY TO OTHER MEMBERS OF THIS DISCUSSION ALSO - THANKS  

Permalink Reply by Doug Duffield on July 31, 2012 at 4:47pm

Steve, i think this may have been asked of you from another person, but in regards to double deductions did you ever come up with an answer?

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 31, 2012 at 5:43pm

Doug,


I have never been asked, nor do I have any clue what a "double deduction" is?  Can you clarify?

Permalink Reply by PLOVER on July 31, 2012 at 7:00pm

... this reply is to Steve - to me Friendsville Lease states clearly - no deductions of any type or kind .. from the well head price ...... the confusion is the "well head price" .... how those words are defined ... but regardless, whatever the gas is sold for .... no deductions ...

.. unfortunately I always seek a definitive answer and "UA likely" doesn't do it for me ..

I certainly appreciate your knowledge and the time you invest in answering my questions, ...

and I know I speak for other members of this site when I say thanks ! ...

Permalink Reply by PLOVER on August 1, 2012 at 9:56pm

HELLO ... I RECEIVED THIS INFORMATION - As far as the UA deduct code, LINE VARIANCE, this is for what we call line gain or line loss. This is the reduction in the quantity of the gas flowing through the pipeline that results from leaks, venting and other physical operational circumstances.

...  AND EVEN THOUGH IT IS STATED - LINE GAIN OR LINE LOSS - ... IT IS A "DEDUCT CODE"  -

...... IS THAT BECAUSE IT WILL BE A LOSS 99.9% OF THE TIME ?!  ...

.... WHETHER YOU WANT TO ACCEPT IT OR NOT, THE ENERGY COMPANIES ARE IN A POSITION TO MANIPULATE YOUR ROYALTIES,  AND HAVE A MULTITUDE OF OPPORTUNITIES TO DO SO  ...  LINE VOLUME, BTU CONTENT, WELL HEAD PRICE, ARMS LENGTH SALE, HUB POINT, FORWARD CONTRACTS, BACKWARD CONTRACTS, LINE VARIANCE,   ......  YOU NAME IT ,,, AND THEY ARE ALREADY USING IT, BECAUSE THEY THOUGHT THEM UP IN THE FIRST PLACE .....

... ONLY IF AN OVERSEEING AUTHORITY (GOVERNMENT) HAS A VESTED INTEREST IN YOUR ROYALTIES WILL YOU RECEIVE THE ACTUAL VALUE ASSOCIATED WITH THE GAS FROM YOUR WELL PAD ...... BUT THEN IT WILL BE REDUCED BY THEIR OVERSITE COST.... POSSIBLY ADDING ADDITIONAL TAXES ..

.... SO IT SEEMS WE SHOULD COUNT OUR BLESSINGS AND THE DOLLARS  ....  "DON'T WORRY, BE HAPPY" ... AS THE SONG GOES .....

Permalink Reply by Donald on August 2, 2012 at 9:19am

ROYAL CHECKS WILL BE GEETING SMALLER AND I'M SURE, NOT ANY EAZYER TO UNDERSTAND. CHECK OUT THIS LINK.Gas Liquids ‘Bloodbath’ Brings Shale Pain to Oil Market - Businessweek

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