The Uncertainty of It All
I think I posted this to the wrong group, so I am reposting it.....
I had an interesting conversation with someone last night about the gas and oil business. I'm just a landowner thrown into this, so much of it went over my head. But I hung up the phone with these basic concepts: even IF you get into a unit, and IF there is a well drilled, there are a thousand and one ways the gas and oil company can screw you. You might have a pad and get no royalties. You might be in a unit and get no royalties. You might not get royalties for all the wells in your unit. Plus, no one REALLY know what they are pumping out because there are no "meters" on the wells. So you are automatically screwed there--yeah, they're going to give you royalties on the whole amount--not.
Honestly, it seems that selling the mineral rights (if the price gets high enough) and just selling the whole mess and getting a new place somewhere is beginning to make more sense. Can anyone comment on the above? If it is all true? And how often does it happen? And what is the difference between a drilling unit and a production unit?
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Replies to This Discussion
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Permalink Reply by Susan A Tippel on
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Does anybody know? I would think that it would be important to know!
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Permalink Reply by Eric on
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it has to be ODNR because they are the only Government entity with jurisdiction. Whether they do it or not is probably up for debate. I doubt they have they resources to keep up with every well. There would need to be some certified document somewhere in their possession of meter readings. Meters need to be calibrated and certified also so that would or should need to be submitted. One should also ask why the auditor for the County(s) is not involved with the meter work as they are with fuel station and scales like used in certifying weighed amount of product like the post office or bulk stores.
http://www.caao.org/WEIGHTS/index.html
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Permalink Reply by Susan A Tippel on
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The bottom line is, everyone is probably getting shafted on their royalties.
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Permalink Reply by Markus on
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I think that there is merit to what Tony stated previously. A lease is an agreement between the landowner and the producer. It should be in this lease where the terms of how production will be metered/ monitored are defined. ODNR is not responsible for ensuring private agreements between landowner and producers are enforced. ODNR focuses on ensuring compliance with Ohio law. As said many times before on this site, entering into a new oil and gas lease is a significant step, a voluntary act (in almost all cases except when force pooled) and guidance should be called upon when doing so.
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Permalink Reply by evan on
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A friend of mine who used to work In The oil and gas business says this " the only difference between timber companies and O/G companies is you can actually see what the timber guys are stealing from you. Always loved that quote
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Permalink Reply by Eric on
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i disagree entirely. it is and should be ODNR responsibility to know how much of their natural resource is being extracted. TAX purposes especially.
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Permalink Reply by Susan A Tippel on
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Why don't we call ODNR and try to find out? Unfortunately, I am at work during the day...
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Permalink Reply by Tony Yurina on -
One concept to consider may be that as part of the almost certain severance tax coming at the gas and oil production and royalty, we propose some of the tax revenue for regulatory audit oversight of production volumes and E&P back office accounting procedures.
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Permalink Reply by INVICTUS on
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I know for an absolute fact that Gascos are buying: One example is MAC.
Chesapeake plus VERY big pocket investors. Thrice THRICE they've attempted to buy me out.
They were 2nd to top dollar offer. Other was......I cannot say. BIG O/G
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Permalink Reply by INVICTUS on
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Folks, In reading this I have some advice: If you REALLY believe that your potential payoff is anywhere above whatever you were paid in whatever your job or career was or is - then please treat this like a job.
Or a second job.
Put the time into really getting a grasp of this line of work (it's brutal and FULL of pitfalls) and realize that you will get out of it what you put into it.
My Lease is with Chesapeake.
It is business and I treated as such when I signed.
They are neither the enemy, nor are they some beautiful savior. it is a business and, in my experience with corporations this size, you simply must get serious about what your risk tolerance for partnering with
either CHK or any other Oil/Gas company is.
I'm telling you from the heart: This was never easy money. No matter how big the bonus was.
Look at it this way. NO Landowner PAID anything to get the bonus.
But you will work for that royalty check. Either in phone calls, letters, lawyers, court, heartache, whatever.
Chesapeake is my partner. Rather they like me or not.
They WILL be audited. It will average me about $10k-$15k/year. That's the price of doing business with them, particularly with their dubious track record with landowners.
The oil tanks DO have meters on them for measuring liquid volume. When the truck pulls in, the driver marks the beginning measurements and the ending measurements, creates a Bill of Lading, then hauls it off. The Paper trail for THAT item (oils) is now established.
I'm still working on getting info on the lighter hydrocarbons regarding specifically how volumes are measured.
There is onsite telemetry equipment that transmits data live via some sort of lower frequency (800-900MHZ) microwave network, probably for any parameter that you can think of for pressures/flow volumes of contents/constituents in those pipelines.
Please hang in there. I'd love to see a landowner/leaseholder profit mightily from this crazy business.
If you sell your subsurface rights (even a portion) you lose much control over surface rights.
Now you have a partner that you have to deal with who has say-so for your property.
Permanently.
For goodness sake's - look what these people are investing in facilities and pipelines! It's staggering!
Something's down there. But the rewards follow the risks. Each must decide for one's self.
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Permalink Reply by Tony Yurina on
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Typically, each well would have a gas meter connected to each well output. The meter will have a static pressure transducer and a flowing temperature transducer and a flow computer.
The pressure transducer accounts for the gas pressure (compression) above atmospheric pressure.
The temperature transmitter accounts for flowing gas temperature that deviates from the standard 60 degrees F (actually 520 degrees Rankin in the flow computer software).
Each of the two factors have significant impact to the metered volume of gas.
These two device connect to a on site flow computer that calculate many times per second the corrected flow volume at the prevailing pressure and flowing temperature.
Another important input is gas quality data...this input to the flow computer provides for a supercompressibility flow correction in the flow computer calculation routine.
This process is highly technical and requires a very skillful understanding of numerous concepts and computer programming type of things, each of which leads to gas measurement accuracy.
Meter tube size, measured to four or five decimal places, orifice plate size or particulars of an ultrasonic meter, these are only a fraction of the parameters that must be accurately programmed into the flow computer. Errors in programming will lead to erroneous data.
The flow computer crunches all the data and telemeters the data via radio signal, satellite or telephone data circuit connection back to the E&P company central computer systems. This data is housed for accounting and used to pay not only royalty owners, but each stakeholder in the well.
If one was smart, that individual would have audit rights for both, office accounting and field audits for fiscal meter accuracy.
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