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 Finnbear on November 13, 2013 at 1:39pm

What law? Can you post the code number for the law so we can read it for ourselves and see what it allowed once it was passed? Is this a federal law or a state law you speak of? Once we understand what the law allows, we can have our attorneys craft lease language to compensate for it.

Permalink Reply by Darlene Newton on November 13, 2013 at 1:51pm

Please tell your attorneys I could use one myself!  I cannot afford to pay a lawyer , like I said I have to pay my federal taxes on that money and I have to pay quarterlies guys!  Look guys I am not feeling sorry for myself I am darn pissed off!  I hope that you heed my warnings!

Supposedly JR I guess I am supposed to re-coup money but it s going to take me quite a few years to get out of this THANK YOU CHESAPEAKE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

People do not complain because they are afraid of them!  They can come shoot me I really do not care cause they will have to kill me to shut me up now!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

!

Permalink Reply by Finnbear on November 13, 2013 at 8:09pm

When it comes to gas & oil leases, you cannot afford NOT to pay a lawyer.

Hiring a good oil and gas experienced attorney is a good investment if you're not completely aware of the ins and outs of lease terms.

Permalink Reply by Darlene Newton on November 13, 2013 at 1:57pm

I think it is hr1684 but double check that !

Permalink Reply by Darlene Newton on November 14, 2013 at 5:23am

Finnibar you are right, if you have the money absolutely!  Most of these people are poor farmers thinking this would never happen.  They are NOT stupid ignorant people like Chesapeake has treated them.  So because of that they are being raped and pillaged and no one cares the first thing they say is its YOUR fault!  That is soooooo wrong!!!!!!!!!!!!!!! 

These people did not deserve this! Like Heath Care that is screwed up I did not vote for the moron in office!  I knew this would be catastrophe BUT I will not rub it in the eyes of the ones that did vote for him!  The American people do not deserve to be lied to and then have everything stolen from them! 

But who cares?  Nobody!!!!!!!!!!!!!!!!!!!! It was their fault they voted for him!!!!!!!!!!!!!  It is there fault they signed up for the gas!!!!!!!!!!!!!!!!!!!!!!! See what I mean, it will only effect those when it happens to them!

Permalink Reply by NY Gas Rights on January 5, 2014 at 1:05am

NO, that never happened Darlene. The reason you are YELLING is because you are posting total NONSNENSE. Funny story that YOU are the only one this happened to. Why is that? Were you somehow committing a land fraud? Did you receive royalties that you were not entitled to? Were you lucky enough to avoid a legal investigation by paying a fee?

Permalink Reply by Darlene Newton on January 5, 2014 at 8:17am

If you know whom I am then use your name?  It most certainly it is NOT a LIE and this discussion has ended coward!  I suggest YOU do YOUR research buddy  because I have all the financial papers baking me up!  By all means YOU sir are more than welcome to do your research because I suggest YOU do! 

Permalink Reply by Philip Brutz on January 5, 2014 at 1:09pm

Chesapeake Energy describes adjustment in royalty payments

BY ERIC HRIN (Staff Writer)

Published: February 8, 2012

Chesapeake Energy has sent a letter to its royalty owners advising them of some adjustments in their royalty payments this year following a court decision.

"As a result of these adjustments, you will see a reduction in the amount you receive for your royalty share," Chesapeake wrote.

A copy of the correspondence was obtained by The Daily Review.

In the Jan. 24 letter, Chesapeake explained that the reason for the adjustments had to do with the fact that in 2008-09, several lawsuits were filed in Pennsylvania that sought to clarify whether royalty owners should share in the expense of post-production functions needed to get the gas to market.

Chesapeake wrote, "These are costs incurred beyond the wellhead after the gas is ready for sale or use. Opinions varied on this issue as it had never been decided in Pennsylvania."

The company noted that the Pennsylvania Supreme Court agreed to hear the case and in a ruling issued March 24, 2010, the court held in the case of Herbert Kilmer, et al. vs. Elexco Land Services, Inc. et al. that post-production costs such as gathering, compression and transportation are "properly shared" by royalty owners through proceeds deductions, unless the lease expressly provides otherwise.

Chesapeake noted it is complying with the decision.

The letter continues by noting that effective with the January 2012 checks, "Chesapeake will no longer absorb your share of these post-production costs and your payments will be reduced by these amounts."

Chesapeake also noted that it will also recoup the costs that have been suspended back to the date of the Kilmer decision, but not before, "which we believe is the fairest way to handle those deductions."

Currently, these costs are between 55 cents to 65 cents per Mmbtu, according to the letter.

"We know recouping past costs in a single month could create a hardship for some of our royalty owners," the letter continues. "We don't want that to happen, so we will spread the recouping of costs over a minimum of six months."

Chesapeake noted the deductions will be itemized on the check stub details.

"As a result of these adjustments, you will see a reduction in the amount you receive for your royalty share," the letter noted. "The reduction will be more significant until the past months' costs are recouped, but then should become less apparent in the future."

When asked for comment, Rory Sweeney, Media Relations Coordinator for Chesapeake, said that the company had nothing to add, noting the letter is self-explanatory.

Eric Hrin can be reached at (570) 297-5251; email: reviewtroy@thedailyreview.com

http://thedailyreview.com/news/chesapeake-energy-describes-adjustme...

Permalink Reply by Joseph-Ohio on January 5, 2014 at 2:02pm
I can't understand the 'decision'.

In my most humble opinion as a layman landowner :

1) If a share of Post Production Costs were to be paid by the lessor the lease agreement should have so stated and quantified the amount (% of value of the production x % paid by lessor).

2) If nothing is mentioned about the lessor paying any Post Production Costs in the lease it's no good deciding to come back and charge the lessor and especially if the lease states there would be no deductions from the lessor's royalty.

3) What else (that isn't mentioned in a lease) can be forced on a lessor ? Who can tell ? Perhaps in Ohio it will be anything the ODNR Oil and Gas Division Chief decides is 'just and reasonable' (if unitization applications are approved by the Chief after a lease is ratified). If so, the lease agreement appears to me to become devalued to the point of it being only something to argue about in court and no agreement at all.


How can anyone see any of the above as 'just and reasonable' ? ?
Permalink Reply by RB on January 5, 2014 at 2:49pm

Joseph-OH

I agree that the whole deduction scenario doesn't make sense.  It is bad enough that the leases do not state the amount or percentage of deductions, or at the very least a clause of "not to exceed" a certain amount, as I am sure they have their amounts budgeted.  But to then go ahead with additional deductions, whether it be post payment or additional post production seems to be underhanded.  Ethics, and the best interest of the stakeholders, should be first priority.  And landowners are most certainly stakeholders.  It is unfortunate that regulations must come into play when firms cannot maintain ethical standards.

Permalink Reply by Kevin in Belmont County on January 5, 2014 at 3:52pm

NY Gas Rights you are an uneducated complete and total moron!Darlene, I am sue that you learned this along time ago as I have. There are some people in this world that just are not worth giving the time of day to, and this goof NY Gas Rights is one of them! I fear that its going to get worse for us landowners as time goes on, not only with the O&G companies, but also the government. They want to be energy independent from other countries so they claim but are planning on doing away with the 15 % deduction on gas and oil royalties so that we are taxed on 100% of our O&G royalties. My accountant just informed me of that before he had a stroke and passed on. So if the O&G companies don't stick it to us good old Uncle Sam will. And are wonderful politicians can stand on their soap boxes and tell the rest of the country about all the wonderful things they are doing to lesson are dependence on foreign gas and oil.

Permalink Reply by Philip Brutz on January 5, 2014 at 4:17pm

Kevin, what is your opinion on selling mineral rights in the Belmont, Guernsey county area.  We have been seeing offers of $13,000 an acre for leases with a 20% royalty.  Considering the changes in the tax laws do you think it makes financial sense ? 

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