AEP royalties are a disaster

I have another post on division order acres not matching my lease or county record problems with AEP.  I told them I would not sign division order till it was straightened out.  Guess what?  got a royalty check that still has the wrong decimal (shorting my acres) and a laundry list of deductions.  I have a no deduction clause in the addendums.   No transportaion, no gathering cost, no market enhancement costs and I think several other items, but they just took out what they wanted.  They assured me in prior communications, they knew of my no deduction clause and it would be taken care of and not to worry about it.   I'm worrying now.  I can see my attorney getting rich already.  Also the royalty check is for Aug.  The wells went into production back in June???  What happened to all of that production.????  To add insult to injury they did not deduct any state or federal taxes, (just ohio g/o severence tax) even though they have my W-9's and LLC employer ID numbers on file.  Waiting on attorney to call me back.  All we were expecting this week was a copy of survey report, not a royalty check.  (since no division orders were signed)??   Looks like another chesapeak.  I'll be speaking to others on this pad this week when I'm on vacation and I'll keep updating.  Curious to see if their acres, decimals are correct and what they paid in deductions.  Can't believe what a mess this all is.  Thought it was a nice windfall, but it's becoming a real pain in the butt...........

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Permalink Reply by RB on November 14, 2014 at 10:44am

Not good to hear.  Is this upping the deductions (or adding in the case of gross royalties) a way of making up for lowered sales prices? Or is this about fudging the production numbers?

Permalink Reply by Bill Bergseid on December 1, 2014 at 6:37am

Ron Hale:

This really has nothing to do with corrupt Washington politicians or bureaucrats.  It mostly concerns mineral owners who don't know much about oil and gas and not getting, or getting inadequate, help when they entered in to an oil and gas lease.  Our family has a small company that owns minerals in several states.  While there are some small operators that still try and take improper royalty deductions, the major companies are really pretty good about not not taking improper deductions.  That may be due to the small army of lawyers around the country just looking for any defect in royalty accounting.  In some states there are statutes related to royalty payments and some actually provide for attorneys' fees if royalty accounting is shown to be improper. 

So contacting authorities in Washington isn't really going to be of much help.  What will be of help is making sure that at the time you enter in to a lease you get advice from someone who really knows oil and gas law.  Then, if you get production on your minerals and suspect improper payment, get one of the royalty accounting law firms to take a look at your situation.

A retired Oil and Gas Lawyer.

Permalink Reply by Frank Walker on November 10, 2014 at 1:39am

Hi Brian

I agree you might be getting a raw deal from AWP.  Based on my experience with my Lessee, though, there is another possibility:

My Lessee is far, far behind with their "back office" work.  It's great when something comes in within six months to a year.  When the gas price went south, their back office support was cut to the bone.  Everything takes a lot longer than once was the case.  My advice would be to check as thoroughly as you're able before going to the expense of hiring a lawyer to address your problem.  Be absolutely certain there is a problem, and not just a delay.  Good luck.

Permalink Reply by Snort Widley on November 10, 2014 at 4:41am

If you lease with McClendon or anything associated with his lack of ethics organizations then you kinda get what you deserve.

Permalink Reply by pinehill on November 10, 2014 at 4:51am

A lot of people got sold to AEU

Permalink Reply by nc man on November 10, 2014 at 5:03am

Yes, we were sold to AEU/AEP by Shell, also. Not our decision to make. I sure appreciate the info about AEP/AEU since this is the first "talking" of AEP/AEU I have seen in a long time. We have not heard a word from AEU/AEP since their takeover, from Shell, in 2012.

I wish this discussion was more positive! Please keep all of us that are involved with  AEU/AEP, updated, so we can stay on top of things. I will do the same.

What I just read from all of you makes me want to just sell my mineral rights and avoid all the headaches!! To bad that ethics have gone by the way side!

nc man

Permalink Reply by Alan Bowers on November 10, 2014 at 2:30pm

nc man,

If you live on the land that you have leased then selling your mineral rights will only make your problems increase.

The owner of the Mineral Rights has the right to access the minerals even if it means upsetting the surface rights owner and/or the person/people living on the land.

If any O & G company buys your mineral rights they can team up with the owner of the other nearby leases and put the drill rig on your land where they want.

Your lease is what gives you Legal Standing to dispute what they do to your land.

Shortly after our lease signing in 2011 Chesapeake formed several LLC's to try to hide that they were financing the effort behind the offers to PURCHASE the MINERAL RIGHTS sent out to many of the Landowners in the group who had just signed with Chesapeake.

Permalink Reply by Philip Brutz on November 11, 2014 at 2:19am

Snort, do you have a clause in your lease that forbids the company that you leased with from transferring it to another company?  

Permalink Reply by Alan Bowers on November 10, 2014 at 2:49pm

It would be interesting to find out if the staff that was working at Chesapeake Energy, when the lawsuits were filed and won against Chesapeake for cheating the Royalty Owners, are now working for Aubrey over at AEP.

If we could get a list of the State and Federal agencies that are investigating Chesapeake Energy and other O & G companies for cheating the Royalty Owners, AND THE Contact Info for those individuals/agencies that are running the investigations, there are probably enough Royalty Owners that view this web site who could provide those investigators with documentation that would aid in obtaining a conviction against those companies being investigated.

It might take input from several sources to put together that list......but............it sounds like it would benefit a great many royalty owners.

Permalink Reply by James Young on November 10, 2014 at 3:28pm
In PA it doesn't matter if you sign the division order or not. It's pretty meaningless and just a "notification" of pending activity. The royalties come along as identified in the order, whether you signed it or not. If you have a beef with it, then you pursue it legally, other than that it just goes through however it was, when they sent it to you.
Permalink Reply by WATCHER on November 11, 2014 at 2:55am

This is the latest update and last one till???  The real problem has been exposed and it's not AEP (Utica)  it appears the problem is with Chesapeak (who I signed with)  They are not conveying all the terms of the lease to AEP.  AEP bought  leases from various companies.  Chesapeak  did not transfer all required documentation to AEP and there lies the problem.  Hopefully this will be resolved.  AEP is in the clear.  

Permalink Reply by Booger on November 12, 2014 at 5:51am

Brian - thanks for the update. What about the production start date? did you get any clarity on that?

also seems strange that chk could hide any terms when assigning a lease to AEU.....a lease is on paper........did they just leave a couple pages out?.....it doesn't seem possible.

again - thanks for the updates, please keep them coming.

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