At the Wellhead royalty

I am wondering if anyone out there recieving royalties, who has the language "royalty based on price of gas at the wellhead," is seeing production or processing costs deducted from their royalties.  I am particularly interested in Pa. landowners.  I am curious about which gas company is taking these deductions, if any company is.  The latest NARO bulliten is confusing to me and I did not see the term "at the wellhead" discussed as a point to calculate royalties from, if that term is part of a landowner's lease.

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Permalink Reply by Brian Day on January 24, 2013 at 2:32pm

Sound pretty typical.

Permalink Reply by Jack Straw on January 24, 2013 at 2:44pm

 

It is nice to see that WV court sided with Landowners.

The bad news for PA Landowners is in that the PA Supreme Court sided with the O&G Industry.

If you are a PA Landowner, that a big breath and say to yourself: "Screwed again!".

 

"Supreme Court of Pennsylvania Construes Statute to Allow Royalty Value Calculation at Wellhead"

 

http://www.steptoe-johnson.com/news/supreme-court-pennsylvania-cons...

 

All IMHO,

                 JS

 

Permalink Reply by bo boboski on January 24, 2013 at 3:05pm

I dont get it! Who buys or sells gas At the wellhead?  How can they come up with a price even for it "at the wellhead"? If the point of sale is down the road; or pipeline?

Permalink Reply by Larry Pearce on January 24, 2013 at 3:30pm

Right, and again, we have NEVER closed leases with this language in 8 years, and the gasco won't allow it anyway.  So maybe people need to pay attention to which gasco they are referring to.

Permalink Reply by Brian Day on January 24, 2013 at 3:37pm

What gasco are you representing?

Permalink Reply by Denver Gallentine on January 24, 2013 at 4:06pm
Larry, if you go to the Marshall Co. WV site the first sie is talking about this. Scan through and I think it's on the second page I copied the royalty section of the last lease that Chesapeke sent me so you can see the language. Also, on the first page are the listing of sites that tell about WVA Supreme Court Ruling. Hope this helps clarify what I was stating
Permalink Reply by Denver Gallentine on January 24, 2013 at 3:33pm
Bo, Exactly! You hit on what the State Supreme Court in WVA said. I have the site to go to w/the decision/explanation, but I snuck out of the basement just now that I am suppose to be cleaning and better get back down there before the wife sees me. In the decisions the court said the oil/gas co must pay the price @ market value. I think they called it first market value (I'll check and post the site) in WVA they mus give you yo royalty % of the price the sold it for and cannot deduct transportation, production cost etc. we are working w/ Chesapeake and I have heard they have been sued for millions because of this. - Denver
Permalink Reply by Brian Day on January 24, 2013 at 3:40pm

Two states, two totaly different interpritations of the same term.  One difference from what I read; in Pa, one judge alone made a hurried decision in favor of the gascos to stave off decisions in seventy or more judgements in courts lower than his own.  Seems like a very curious situation to me.  See Jack Straw's post above.

Permalink Reply by Brian Powers on January 25, 2013 at 10:25am

bo-

Gas is sold by its heat content, not by volume. The volume is measured at the meter, which in my experience is usually located about 50 ft or so downstream from the wellhead/tree. A polished stainless steel orifice plate is held between two flanges and there is some stainless steel piping the connects the meter run to the chart recorder/clock device. A meter integration device measures the "area under the curve" for a period of time recorded on the clock. The upstream pressure, pressure differential across the plate (all pressures used in this process are pounds per square inch absolute, or corrected to standard atmoshperic conditions based on altitude of your metering device. An orifice constant is used based on the opening in the plate (measured in 64ths of an inch increments) and the gas gravity is used to calculate volume per the time that the pressure is recorded on the chart). A gas sample would have been taken at some point to determine the gravity and heat content.

 

Orifice meters are best used to measure single flow phase volumes( dry gas or all liquids) and are not used to measure mixed phase gases or slugs of fluid entrained within the gas, as these measurements would be incorrect.

 

The polished orifice plates are also very delicate, any nicks, burrs, blobs of grease or dirt on them will disprupt the flow profile and will render the measurement inaccurate.

 

Brian

Permalink Reply by Robert W. Sandera on January 25, 2013 at 12:33pm

Brian's right it's called the stainless plate or jet.  Your well card should have your name and jet size .625. 750 etc that is in thousandths. The well card has day and night on it. Older wells that are not run continuous are on timers many with what they call a rabbit a device to bring water up out of the well. Problem is I caught a bad well tender tampering with the plate and he went about ballistic that I saw what he was doing even though I wrote in my lease I can inspect all equipment at any time.  They tried to lock me out of the box after they were caught without my name on the well cards etc. Range Resources seemed to have plats that may say .650 or 5/8 but would scratch paint off them and I believed take a file to them. Even a few thousands change on that jet and they are ripping you off royal.  But what else is new they are anyway. Keep an eye on that plate and its numbers comparable to the well card. It's shaped like T that is bolted between the lines going to the separators.  All our containments from Range are 800 ft from the well out by the road. I do know a few honest retired well tenders and one attorney that claim he can audit a well card, but haven't seen them lately. The problem you have is contamination after the first few years they claim they didn't have anything to do with it.

To increase development and public and landowner trust I would like to see the government mandate some sort of device as so landowners can tell what's taken out and a list of chemicals put in. 

A poor cementing job would allow gas to creep up and contaminate the water supply over time so it could be 10 years.  I would also like to see the Government subsidize these people with top of the line cement to protect the Country.  They get corporate welfare anyway so we may as well do it right. In 2006 they said one in 5 people you know would get cancer. I beat it for 7 years now and it was tough but now it's 1 in 3. 

Cleveland Clinic even told me we know everybody around here is going to get it because of something dumped in the water.  How nice.  When your waters gone it's GONE. I have pristine springs of excellent naturally soft water with watercress here and plan on maintaining water rights all my life. Remember the contract you sign is what protects your property for your life.  Do it right be advised by an attorney or whatever it takes.  I am an atty but tried to contact every PA atty I could find when I moved back here. One opened up to me but is now bought off by the energy companies. I believe the number one gas inspector was too but the number 2 wasn't and was a pretty good guy. He fined them 400 bucks when they were 1/4 mile down the road and couldn't be bothered about the frack burning a hole through the pipe spraying chemicals 40 ft into the air after they told me call them if that happens as its really bad. Ya it means you have a gusher that just salted your field and sprayed radioactive sandblast sand all over.  How nice.  My neighborhood wasn't intelligent enough to start a group with me to assure everyone got a good lease then they all wondered why I got 4 times as much. I tried to help them but many were Amish.

Permalink Reply by Denver Gallentine on January 25, 2013 at 2:22pm
Brian,
Thank you for your explanation I will admit I do not totally understand what you said with just one reading, but I hope a few more readings will give me a better understanding (not your fault, mine). At least now I know I have a resource to obtain the needed knowledge.
Thanks again. - Denver
Permalink Reply by Robert W. Sandera on January 24, 2013 at 4:29pm

Have to look at how Range Recourses wrote it as its paid 3 month after its sold I believe it says for current market value. I believe at retail value less production cost would be wellhead value.  Problem was they did exactly what I said they would they set up a dummy company and sold it to themselves then turned around and sold it for 15 percent more.

Atty Joe Altimeir in Titusville sued them for 28 million and retired with 7 million in atty fees for this very reason. The thing you want to shoot for in one addendum is if you go over a free gas limit they set like 300,000 for the year you are charged well head price not retail. You have to maintain your drip tank and regulators etc so why would you want to pay full retail for gas in the ruff.  Retail includes taxes etc.

Without your own meter and knowledge of the technology you're at their mercy to believe what is coming out of the well. We had one bad well tender peoples gusher was blowing the needle off the chart and they were paid like 35 bucks for a month of that. I couldn't get anybody motivated to sue and have all the records movies pictures etc. They pull some crap on me though and I'll break and nullify the lease for that reason and they can write a new one.

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