Royalty Language

Hello:

This is my royalty addendum language. Does it sound okay? What does market enhance gas clause mean?

 

Lessor’s Royalty: For all Oil and Gas Substances that are physically produced from the Leased Premises, or lands pooled or unitized therewith, and sold, Lessor shall receive as its royalty seventeen percent (17.00%) of the sales net proceeds actually received by Lessee or, if applicable, its affiliate, as a result of the first sale of the affected production to an unaffiliated third party, less this same percentage share of all production, severance and ad valorem taxes. In the event Lessee compresses, treats, purifies or dehydrates gas, including casinghead gas or other gaseous substances (whether on or off the leases premises) or transports such gas off the Leased Premises, Lessee in computing royalty hereunder may not deduct from such price the actual charge incurred by Lessee for each of such functions performed. However, if gas is processed or gathered, transported, or treated by an unaffiliated third party before or at the point of sale, then Lessor shall receive its royalty on the net proceeds received by Lessee after such third party gathering, treating and transportation charges. For royalty calculation purposes, Lessee shall never be required to adjust the sales proceeds to account for the purchaser’s costs or charges downstream of the point of sale.

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1w1vl8clda7t4Permalink Reply by 1w1vl8clda7t4 on August 4, 2012 at 3:16pm
Amen brother...Amen. Like I said previously...if it wasn't for us hard working, Christian landowners these scum of the earth diabolical POS would be lucky to get a job at McDonald's...they might as well be the gate keepers of satin!
1w1vl8clda7t4Permalink Reply by 1w1vl8clda7t4 on August 4, 2012 at 3:21pm
So much silence from the so called "heavenly saints," who bring us prosperity...go crawl in a hole...the world will be in a better place!
Permalink Reply by greg on August 3, 2012 at 10:09am

Hello -

Do you think this language is good? The atty told me we'll get 17% of whatever the O&G company sells the product for, minus taxes. But the language uses the word "net" not "gross"

 

I asked atty and he said it just means they take out taxes.

 

Also, my language doesn't protect me against selling to affiliate - what do you think about that? O&G company refuses to add any affiliate language to lease.

Permalink Reply by Frank Walker on August 3, 2012 at 10:53am

Greg

I do not like the language in your OP.  It is too garbled for my liking which is to say there exists within it a lot of unnecessary and confusing verbiage.  It sounds almost as if it were written by the industry and not by your lawyer.

Royalty language needs to be clear and unambiguous.  Quite simply, you want to be paid based on price received by Lessee at point of sale for sale only to unaffiliated third party . . no self dealing.  You want no deductions of any kind from the price actually received by Lessee.

Also, and this is new and critically important in wake of Kilmer:

You must disallow all wellhead sales.  Let me be clear.  Natural gas is not today sold at the wellhead.  It is not.  That's not how the industry does business . . never has.  But in future there is danger (to us landowners) that point of sale could change.  Your lease must disallow that.  Your lawyer might not be on top of this, BTW.  This is new and comes in the wake of Kilmer.  It is not owing to the primary focus of Kilmer, but instead to a corollary thereof.  Kilmer, FWIW, is a disaster for us.  It is a tragedy.

Permalink Reply by eric place on August 4, 2012 at 5:42am

I would just like to add...From the Kilmer decision... "properly shared".  I asked our local gas company man what OUR share of gathering fees were.  He explained that with our 12.5% lease that we would pay 1/8 of the total costs.  If someone had a 20% royalty they would contribute 1/5 and so on.  At my 12.5% royalty, MY share of gathering was over 5o cents per thousand.  So, if that is accurate, the total gathering costs would be over FOUR Dollars for gas that we were paid $1.95 for. He couldn't explain that one.

Permalink Reply by Kenny on August 4, 2012 at 5:55am
Eric

Your rep is right, partially, about your share being 12.5%. However, ypur share is only 12.5% of what you have in the unit. If you owned all 640 acres in a unit then you would cover 12.5% of those costs but if you only have 64 acres of ypur land in a 640 acre unit then you would pay 12.5% of 10% of the costs (since your acreage only makes up 10% of the total unit.

Does that make sense?
Permalink Reply by time will tell on August 4, 2012 at 12:33pm

thanks Kenny , that makes sence .

Permalink Reply by time will tell on August 4, 2012 at 12:36pm

Black Gold , thanks for putting Marcus in his place . Sounds like he works for Des .

1w1vl8clda7t4Permalink Reply by 1w1vl8clda7t4 on August 4, 2012 at 12:39pm
I'm waiting for the opportune time to share with everyone on here the letter he wrote me....god I can't wait for that moment to come!
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on August 4, 2012 at 1:24pm

Share it now.  It can go in the "I told you so" pile.  I'm sorry that things didn't work out for you but informing you of facts three weeks before they became public was a gesture of good will.  Your very adult, educated response of "go fuck yourself" told me everything I needed to know about you.  You're the kind of guy who needs to be treated with kid gloves because you're simply not mature enough to carry on a rational discussion.  I'm very sorry that this is the case, but ultimately that's a you problem.

And TWT, Des is a scumbag.  I don't know how many times I've said that but I suppose one more couldn't hurt.  

What's funny about this is the fact that I don't work for an oil and gas company.  I work on the other end of the business and frankly I think people on these forums need as much information as possible.  But if you want to stick your head in the sand and pretend that all of this happens in a vacuum then be my guest.  It's your loss, not mine.

1w1vl8clda7t4Permalink Reply by 1w1vl8clda7t4 on August 4, 2012 at 1:33pm
Who says things haven't worked out for me...I sure didn't. And by the way...I have a masters degree from Wharton...but I still have my street smarts.
Permalink Reply by time will tell on August 4, 2012 at 4:29pm

Well now Marcus looks like you met your match .I think BGJ you ruffled his feathers .

Serves him right . I remember brown marconium aka marcus  taking a jab at me when he had no clue of what he was  talking about .

BGJ what do you think about the enhancement clause on royalties .

I will share this all of you , I have some production that I had to BITE the bullet 

and go with it because they were my only choice . At that time I really didn't think it was a bad thing , well IT IS .

The gas transporter that I go threw charges a ENHANCEMENT fee so they are charging me to strip the propane and ethane from my production , they make twice as much on the enhancement than I do on my gas . Does that sound fair ?

I think it's a bad idea to go with that in your lease . Beware of this clause .

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