Not paying for condensates

I understand that some companies are going to take the stand that unless specifically stated in the lease, they will not pay for condensates. If your lease says just oil and gas, they are going to refuse payment for the "condensate". Does anyone know anything about this. Also, I saw a post which had a letter for a demand for failure to pay royalties. Could someone please post another copy?

Thanks.

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Permalink Reply by Mike Fulper on December 10, 2014 at 11:14am

Condensate is oil... extremely lite oil...

and sometimes I think it is close to NGL.......hard to define....

either way... Royalties have to be paid....

Permalink Reply by rmc on December 10, 2014 at 12:16pm
Rumor I heard is if it comes out of the gas stream at the well site they will pay royalties for what ever they truck out. If it stays in the gas stream they will pay you royalties on it all as if it where all gas only they will adjust the amount paid per Mcf depending on the BTU.
If you have a paragraph in you're lease about the gas being tested and measured before leaving the unit then supposedly they will have to pay royalties on everything sold etc.
I imagine they will find a way around that also.
Permalink Reply by rmc on December 10, 2014 at 12:17pm
Maybe someone can explain it better then me or correct me
Permalink Reply by Mike Fulper on December 11, 2014 at 6:17am

EQT trucks it out with the crude.. and the API runs 45 to 46

Permalink Reply by Jack Straw on December 11, 2014 at 8:43am

At an API Gravity of 45-46, I would almost call this Light Oil rather than Condensate .... as this is at the very low (oil) end of the Condensate range.

Source: http://www.ogfj.com/articles/2012/10/fifty-shades.html

"Lease Condensate

When most people talk about condensates they are referring to lease condensates, so defined because they are produced at the lease level from oil or gas wells. These condensates can be produced along with significant volumes of natural gas and are typically recovered at atmospheric temperatures and pressures from the wellhead gas production. These “raw” condensates come out of the ground as mixtures of various hydrocarbon compounds including NGLs, pentanes (C5s, so called because they have five carbons in the molecules), C6s (hexanes), and depending on the condensate, a menagerie of heavier hydrocarbons in the C7, C8 and even heavier range.

A lease condensate has an API gravity ranging between 45 to 75 degrees. Those with a high API contain lots of NGLs (including ethane, propane and butane) and not many of the heavier hydrocarbons. These condensates are clear or translucent in color. The condensates with a lower API gravity down at the 45 degree level look more like crude oil (black or near black) and have much higher concentrations of the heavier C7, C8 and heavier compounds. In between, a wide range of condensates are colored 50 shades of gray (We had to get that in there somewhere.)

The lighter condensates (higher API gravity) can be difficult to handle due to their high vapor pressure (see Regulatory Gas Pressure Party for an explanation of vapor pressure) and are usually stabilized ‘in the field’. This means they are run through a stabilizer which may be nothing more than a big tank that allows the high vapor pressure components (the NGLs) to vaporize and to be collected for processing as NGLs.  That leaves a stabilized condensate that has a lower vapor pressure which is easier to handle, particularly when it must be shipped by truck or rail."

JS

Permalink Reply by Mike Fulper on December 11, 2014 at 10:01am

Thanks for the info Jack...

All I know is what I get from the tanker drivers etc...

and "some" official info  :)

They do keep telling me that "some' condensate / goes out on the

1267 tankers... but it "sells" $$  anyway... anything trucked out is $

since they put the High Dollar Gas lifts on these wells immediately I figure

they will produce long term....

As far as the dropping OPEC prices go....and....

Since the Saudis are trying to destroy the US ECONOMY..... I still say...

NUKE EM   :)

They are MUSLIM and MECCA is located in Saudi land.......

They are NOT our friends......

Im strictly for protecting USA interests.... Period....

Other then that... all is fine on Cubbison rd  :)

Permalink Reply by Jack Straw on December 10, 2014 at 12:42pm

Condensate ..... as you stated; "hard to define".

Another name for Condensate is Natural Gasoline.

A definition I like is: "A Mixture of hydrocarbons which are in a gaseous state under reservoir conditions and, when produced, become a liquid as the temperature and pressure is reduced."

So it is a Natural Gas in the Rocks, but Oil at the surface (under normal atmospheric temperatures and pressures). Since it is produced to the surface, I'll call it Oil.

Is it a Natural Gas Liquid or is it an Ultra Light Oil? ... An argument can made for either.

In any case, it is valuable and if an Oil & Gas Operator takes it and sells it .... they owe royalties.

If they argue that it is not specified in the lease, then we might argue that they therefore have no legal right to take it and sell it ..... and to do so (without compensation) is theft.

Perhaps the best ‘legal’ definition for Condensate is that SIMPLE definition provided in the OFFICIAL Tax Code; the I.R.S. calls Condensate ... Oil.

U.S. Internal Revenue Service Tax Code

26 U.S. Code § 4612 - Definitions and special rules

http://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleD.pdf

"§ 4612. Definitions and special rules

(a) Definitions

For purposes of this subchapter—

(1) Crude oil

The term ‘‘crude oil’’ includes crude oil condensates

and natural gasoline.

(2) Domestic crude oil

The term ‘‘domestic crude oil’’ means any

crude oil produced from a well located in the

United States.

(3) Petroleum product

The term ‘‘petroleum product’’ includes

crude oil."

 

Another definition for Condensate that I would expect to have 'legal' support would be the definition used by the U.S. Department of Energy - Energy Information Agency:

http://www.eia.gov/petroleum/workshop/ngl/pdf/definitions061413.pdf

JS

Permalink Reply by Barry D on December 13, 2014 at 12:59pm

If your lease says only oil and gas then the company has no right to sell the condensates.

But most leases have wording such as all oil an gas and the constituants thereof...

If they are taking something fro your property and not paying you it's theft

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 10, 2014 at 12:34pm

Jim,

    Condensate at our well is oil. Natural Gas Liquids (NGLs) are made up of 6 or more components that have been discussed on GMS.com, but I'll only list the ones I remember:  Methane, Ethane, Butane, Propane, and Pentane.

I've heard stories about O&G companies like yours that say we only pay for what was listed in the lease. You need to turn that around and let them know they can only take the products you leased them. I'm sure a judge would agree that the products from your property belong to you, therefore the O&G company has to lease those products in order to take them from you. It's time we set these O&G companies straight. Taking what you didn't lease them is theft not a legal loophole as they try to convince us.

As you know there are companies taking what they want even though the product, NGLs for instance, are in the lease, these folks are so use to theft that they do what they want.

Contact your state Attorney General then the US Attorney General and tell them what is going on so they will begin to see how big this theft is across the country. Find a lawyer that believes the landowners own their minerals and agree that the O&G companies have a right to take what was agreed upon in your lease, leaving something out doesn't make it fair game for theft.

Doing nothing and hoping for a change will not solve our O&G problems. We the landowners have to set them straight once and for all.

Permalink Reply by Jim White on December 10, 2014 at 2:58pm

Thanks all. I can't say how I know this for a variety of reason, but I can say that it came from "the horses mouth" to someone I trust. There may be as many as three large companies (not the small time outfits) that are thinking along these lines. We have a well in the wet gas zone that started producing over a year ago and our lease only says Oil and Gas. I asked the company to look into it and now I can't get an email or call from them concerning our royalties. In any event, I think to be on the safe side, somewhere in your lease it should state something like: 

  1. oil, gas and/or coalbed methane gas including all the constituents thereof and/or associated hydrocarbons, including but not limited to: oil, gas, liquid hydrocarbons, casinghead gas, condensate, methane gas and coalbed methane gas, present in or associated with any formations, horizons, strata or zones; and/or

It might never happen, but I have read articles in other areas where something like this did in fact happen, or at least was purported to have happened.

Permalink Reply by Adam Martin on December 10, 2014 at 2:48pm
My family has 2 wells in Paw Paw District, Marion Co WV. It is not an area that is known for high amounts of NGL's (liquids), though there has to be something. Our operator has not paid one dime on NGL's. At a WV Royalty Owner meeting we raised the issue with others who have the same operator. A royalty owner had contacted the operator to raise the issue and their respose was "They don't pay for NGL's and if they didn't like it, they could sue them." This of course is second hand information but we've been told they have a lawyer and that we would be asked to be included in a class action lawsuit. We have not met with the lawyer but plan to after the first of the year. Our lease states they will pay for everything the comes out of the well; oil, wet and dry gas.

I guess the morale of the story is, some operators will take any advantage they can. There is no real orginization that is policing these companies and make sure they are doing the right thing and paying the mineral owner what they are owed. The State DEP's are so behind with permitting and so many wells are being drilled that the production reports are not heavily scrutinized. Talk to other royalty owners in your area, find a forensic oil and gas accountant and a good lawyer who is not already being paid by the O&G companies and make sure you get what you are owed.
Permalink Reply by bo boboski on December 10, 2014 at 11:29pm

Try  NARO.  national association of royalty owners.

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