Beware of all the gas companies!

I signed two lease's back in 2011 with Gulfport Energy on 80 acres that I own in Belmont County, Ohio. Let me start by saying don't believe anything that any of the land men tell you, the are working for the gas companies and their own benefit not yours period. While I was negotiating my lease with several companies at the time in 2011. I clearly explained to them that any lease I would sign would require a Pugh clause, and that I would not except any lease that required me to pay any of the cost associated with the production or marketing of the finished product from any wells drilled onto my property. I ultimately ended up signing with Gulfport Energy because of the higher bonus payment and higher royalty percent, and the land man assured me the Pugh clause and the deduction clause weren't a problem, that a lot of people were requesting it. Well the land man was lying through his teeth after receiving my first royalty check and statement there were $14,574.11 in total deductions. Beware of any lease that includes the language below.

 

"All oil, gas or other proceeds accruing to Lessor under this lease or by state law shall be without monetary deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other proceeds produced hereunder to transform the product into marketable form; however, any such cost which result in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from Lessor’s share of production so long as they are based on Lessee’s actual cost of such enhancements.  However, in no event shall Lessor receive a price that is less than, or more than, the price received by Lessee."

 

It was explained to me that this was exactly what I wanted and that the second part of this clause only meant if they did any advertising to enhance the selling price of the finished product I would have some associated cost from that. Well I have since found out that this is the language that the big oil companies have adopted to lead land owners to believe that they are getting a no expense deducted clause in their lease. If you find this language in your current lease be assured be ready to pay every single cost that is associated with bringing the product to market. Don't sign it! Ask clearly for a no production cost clause and have it reviewed by a gas royalty attorney.

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Permalink Reply by Darlene Newton on January 6, 2014 at 12:02am

I am not sure what NY gas rights motives are.  He or she sounds like a lawyer in need of work.  For the last time people, it does NOT mater if you get a lawyer, it does not matter if you sign with a gas company or not and if they want to go through you land there is nothing you can do!  The gas companies can do whatever they want period!  Until people realize the best thing to do is NOT sign anything or allow anyone on YOUR land under it as a GROUP they will do what ever they want!  So until we all decide t work together as a team Landowners will NOT win!  Politicians have been bought and paid for by the Gas Companies!  When everybody want to work together let me know because I am not gong to keep telling people whom think I am a greedy bitch to watch their asses!  Phillip and Jr you guys give good information, the PEOPLE need to know the facts !  Thank-you  

Permalink Reply by Darlene Newton on January 6, 2014 at 12:11am

One more thing JR , DEP has checked where I live and do NOTHING about the geysers in the large body of water I [ive on!  Yes DEP backs the gas company!  Methane Migration will someday suck up the lake or a large explosion is going to take place!  So tell me NY big mouth I do NOT own the water we all do and all this CRAP that it is OK is BS!  All you have to do is go see the body of water for yourself!  Nothing I do does a damn thing!  If Mr. Mouth knows me so well than they need to go check it out cause I do NOT lie! I am able to do nothing about it and when they tell you that YOU need to be the one to fight the gas company good F-ing luck because YOU CAN"T I am just letting people understand what they are in for!

Permalink Reply by Darlene Newton on January 6, 2014 at 12:18am

Kevin I thank you the people have to know what is going on and if we want change we must fight as a group!  A TEAM and that is what is wrong with America, everybody is all out for themselves , if we do not work together we will have NOTHING left, and it is coming! When everybody wants to work as a team let me know cause I have a big mouth but I am NOT willing to do it alone!

Permalink Reply by Darlene Newton on January 6, 2014 at 12:24am

Kevin in PA,  Eminent Domain , Gas Companies want to store their gas wherever they want!  They are fighting in the PA court system and what do you think will happen?  Do you think people are going to be pissed when they store gas in your front yard and YOU cannot do a damn thing about it! I love America:)  Rock on Gas Companies!

 

Permalink Reply by Kevin in Belmont County on January 6, 2014 at 12:51am

Philip,

I know we have talked before but I am not sure of the amount of acreage you have. If I had an O&G company lease offer presented to me for that amount per acre, I would not sign anything until I found a very experienced  O&G attorney. And one thing I have learned very quickly is to make sure that the attorney doesn't have any connection to the O&G company making the offer. I would have it reviewed by no less than two O&G attorney's. If at all possible, I would not sign any form of a lease that includes a Market Enhancement Clause. But from a lot of my research I believe you may find that very hard to have removed from the lease, unless you have a large amount of acreage or the O&G company is in need of your property to complete a unit or possibly to place a pad on. I have read on here that a large land owner group in the area with over 7000 acres in their group ended up with a Market Enhancement Clause in their lease's and they were represented by multiple attorney's. I have not seen any of those lease's but that's what I have read and been told. As far as the taxable amount of the royalties you are not going to avoid it. I actually think Uncle Sam is worse than most of the O&G companies. They claim to want energy independence from foreign oil and gas but instead of giving land owners incentive's to sign oil and gas lease's by giving landowners deduction's for doing so, they are removing deduction's so the land owners and also the O&G companies will pay more taxes. The government is removing or has removed the 15% deduction that has been allowable on O&G royalties, so now landowners will pay taxes on 100% of their royalties. As I stated before my accountant informed me about a month ago that the tax rate for O&G royalties will be right around 50% before its all said and done. Unfortunately not long after that he had a stroke and passed on. I have done a lot of estate and tax planning through out my career and I am certain of this.The federal government has found a new horse to ride in the O&G energy boom and they are going to ride it. There is not much wiggle room on the taxes and what was there they are closing or going to close soon. But I guess because I didn't put the oil and gas under my property that gives them the right to do this as some morons have suggested on here. It's as simple as this, the deck is very quickly becoming stacked against the land owners and I don't see that changing anytime soon. I contacted my state representative multiple times months ago and have yet to receive a return call or email. That in it self says it all. Land owners do not matter, its all about corporate greed and political corruption!

Permalink Reply by JREwing on November 13, 2013 at 7:34am

After re-reading through all of this for a second or third time, it would seem that after the PA Supreme Court ruled in favor of ElexCo in the Kilmer case, Chesapeake went back the first royalty checks paid these landowners and is deducting enhancemnent costs retroactively for them out of current and future royalty payments until the amount Chesapeake claims is owed is paid in full.  Her royalties should increase again once this arrearage is taken care of.  It's absolutely reprehensible business behavior, even for Chesapeake.  I think you are right though.  She should have some recourse through tax filing to recoup some of the tax paid on the gross vs. net royalty. 

Permalink Reply by Ragnars Repo on November 13, 2013 at 7:41am
Disregard my previous law question. Thanks JR.
Permalink Reply by Darlene Newton on November 13, 2013 at 7:56am

Thank JR Ewing;

They are scum scum scum!  I guess i see myself suing the crap out of them when people do start talking about the water with methane in it1  We never ever had the geysers where I lived until they drilled right under my crapper straight to the neighbors well!

Methane had been detected prior to any drilling but now it is too far gone in our area methane is found in areas of PA but what they have done is unleash the beast!

Permalink Reply by Joseph-Ohio on November 13, 2013 at 8:07am
What kind of ' law ' is it that permits retro-active charges to earlier contracts ?

It's like buying a car 3 years ago and with the passage of a new law the dealer being legally permitted to charge you additional money for say an automatic transmission that was included in the original deal.

I for one still don't follow - it just ain't makin' sense.
Permalink Reply by JREwing on November 13, 2013 at 8:19am

No law J-O.  It was the Kilmer decision that blew up the 1979 Guaranteed Minimum Royalty Act Law.  The 2010 Supreme Court decision that allows deductions to be taken from the miniumum 12.5% royalty.  Chesapeake is just billing amounts retroactively that the Kilmer decision now allows them to collect.  I can assure you, there is nothing in Darlene's lease that forbids it.

Permalink Reply by Darlene Newton on November 13, 2013 at 8:25am

God Bless Chesapeake!

Permalink Reply by Joseph-Ohio on January 5, 2014 at 3:01am
Ok not a law.
A decision then.
A decision that blows up existing contracts.
How can that happen ?
What can be done ?
Add a clause that says no new court decisions will impact this agreement ( or something ? ) ?
Have to keep this kind of stuff from happening in Ohio.

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