Deductions from royalty check any Idea????

Does anyone have a Idea.Just got my first check they took almost 50%.

 

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Permalink Reply by Billy Park Whyde on July 26, 2012 at 6:52pm

No statement with it?

Permalink Reply by PHILIP ANGELO on July 27, 2012 at 2:22am

yes there wwas a statement very hard to understand.

Permalink Reply by PHILIP ANGELO on July 27, 2012 at 2:24am

chesapeake (line variance) what ever that means. Will that be there every month ?

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 27, 2012 at 3:05am

Philip,

Assuming you have the ability to do so, why don't you redact the sensitive information from your statement, such as any personal information, and then post a scan copy here for review and comments.

Line variance typically refers to the difference in readings between a wellhead meter and a sales meter, sometimes that variance can be positive, sometimes negative.

And just so Tom doesn't jump down my throat... when I said "assuming you have the ability" wasn't a reference to your intelligence or knowledge, it was merely a reference to your having a scanner/copier/fax machine.

Permalink Reply by JK on July 27, 2012 at 4:31am

Philip,

It sounds like you have a 'net' instead of 'gross' royalty clause in your lease.

It's a license to take from you..

Permalink Reply by DONALD MCNAUGHTON on July 27, 2012 at 10:36am

THEY ARE PAYING ROYALITES AT THE WELL HEAD. THIS IS PROBABLY IN YOUR LEASE. THEY DEDUCT ALL EXPENSIVES  ANYTHING AS SMALL AS GASOLINE FOR A COMPANY TRUCK TO DRIVE TO THE WELL SITE. SO YOU ARE PAYING ALL THEIR EXPENSIVES RELATED TO THE WELLS OPERATION.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 27, 2012 at 12:45pm

Donald,

That is a ridiculous assertion.  No producer deducts anything other than the "direct expenses" associated with being able to make the sale from royalty owners...assuming the pertinent lease language allows for it. 
The type of "indirect expenses" you referred to are not even remotely allowed under any lease language I have seen in 35 years of reviewing lease language. 

Fear mongering about the types of deductions you raise are not productive. 

Permalink Reply by Gary L on July 27, 2012 at 1:38pm
Permalink Reply by Frank Walker on July 27, 2012 at 1:48pm

Philip

I am very sorry for your loss.  You deserve better, that's for sure.  All landowners do.

However, we are operating now in the wake of the Kilmer decision, recently handed down by the PA Supreme Court.  Though you do not give us your state, and even though that makes a HUGE difference, I'm betting you are in Pennsylvania.  Pennsylvania royalty owners with 12.5% royalty fraction leases have been very badly damaged by Kilmer.  What has happened is a terrible shame that can only be put right by the PA Legislature.  Phillip, please do not hold your breath as you wait for the PA Legislature to act on this matter to protect Lessors.  You are a valuable member here.  We would not want to lose you.

For more information on Kilmer you can click on this link.  Before you do, sit down and prepare yourself for some bad news:

Kilmer link

While we are at risk of having all gas companies seize this windfall, Chesapeake has been in the forefront of doing so.  As always, they are among the very most aggressive gas companies when it comes to confronting and milking Lessors.  But everyone is at risk from this regardless their Lessee, even Lessors with leases having more generous royalty fractions.  Kilmer is a real kick in the head for all of us.  It hurts.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 27, 2012 at 4:37pm

Frank,

Sorry for Philip's loss??  If Philip lost his wife or a loved one, then I too am sorry for his loss.  If by "loss" you are referring to his getting what he signed a written contract to receive then I don't have quite the same level of empathy for him.  If he did sign a lease that allows for the deduction of his proportionate share of various post production expenses then yes, he would in fact receive less than a similarly situated lessor that signed a lease that did NOT allow for the deduction of post production expenses.  Does this make Philip stupid or the oil and gas company crooked or overbearing... no, they merely got a better deal than a lessor whose lease didn't allow for those deductions.  There isn't really any magic wand when it comes to these types of matters.  Lessors who leased relatively early in the Marcellus or Utica Shale development in all likelihood leased for a lower bonus per acre and perhaps a lower royalty percentage.  Was there a gun held to anybody's head when it came to signing leases... I don't think so.  Did some landmen make unsubstantiated claims, or inflate certain claims... possibly, probably... does your contract state that there are no verbal representations that apply and that only the written contract governs the parties... yes, likely so.  None of you ever had a used car salesman tell you that the car was a one owner... a little old lady who only drove it to church on Sunday... of course you have.  In the world of business this is referred to as "puffery"  (Puffery as a legal term refers to promotional statements and claims that express subjective rather than objective views, which no "reasonable person" would take literally.[1] Puffery serves to "puff up" an exaggerated image of what is being described and is especially featured in testimonials). 

Quite frankly, until I began doing business in PA I had never run across a situation where a state government had established a "minimum royalty".  It kind of struck me as being the same type of legislation that the federal government implemented to preclude another occurrence of the American Indians selling Manhattan to the settlers for beads and trinkets.  Do you really perceive yourselves as being as similarly subject to being taken advantage of?  Are you that devoid of knowledge of how business works that you need government protections to survive?  You can farm your land for hundreds of years, sell your crops, sell your milk, etc at fair market prices but you are incompetent when it comes to obtaining what you think is a fair price with regard to oil and gas leasing and development?  Of course, I also never dreamed of the day in America where a fast food restaurant could be sued (and lose millions) for serving hot coffee that some idiot spilled on his crotch and burned himself. 

Did subsequent lessors derive a higher bonus or a larger royalty percentage... did they get lease terms that were more beneficial to them... likely so, that is what generally occurs when the level of knowledge increases and the competition between companies gets more intense.  On the other side of the equation there are lessors that leased early, took the money and no development whatsoever took place.  Other landowners who didn't jump on the bandwagon received absolutely nothing.  This isn't necessarily a one way street, there are generally winners and losers in every transaction and it rarely ends up being a win-win proposition where everybody thinks they came out on top. 

Nobody is handed a road map to the future in life.  I have had countless lessors tell me that I was paying them money for nothing... meaning that they thought the Shale gas movement was a bunch of hooey and they actually felt bad for taking my money (but the took it nonetheless).  In some cases, they were exactly right... some of the areas we leased were in fact devoid of any shale potential and they did get "money for nothing".  If you could live your life in the rear view mirror you could likely avoid a number of mistakes.  I wish I had not fallen for the dot.com investment hoopla.  I'm sure a fair number of Bernie Madoff's friends wish they had it to do over again.  You cannot bitch and complain simply because you didn't sell your house for as much money as your neighbor ended up receiving, nor are you brilliant because you did sell your house at a time, and for a price that exceeded what your neighbors ended up getting.  It is simply luck of the draw. 

You are "at risk of having gas companies seize this windfall"??? Sorry, but where do landowners invest the $8MM per well to drill, where do landowners pay lease bonus monies for leases that may result in no production whatsoever?  Where are landowners at risk of being paid gas prices that will never allow a producer to recoup their investment?  Come on guys, there are risks associated with your end of this partnership and there are also risks associated with our side of the partnership.  You don't hear gas companies whining about it when they drill dry holes or they can't raise enough capital due to low commodity prices and their leases expire when they don't drill them.  We're all adults here... or at least most of us are. 

Permalink Reply by Billy Park Whyde on July 27, 2012 at 5:05pm

 There is an alternative to this which has been subject matter in GOMS. That is perhaps the Land Owners who own whats beneath them need to unionize or become a cooperative.  Why it looks as though they have very little choice. Already we know that CHK is under the microscope for possible violations of anti trust laws in a effort to take advantage of Land Owners, acts such as this are criminal acts, not contractual issues but when the act is designed to impact a contract by design it amounts to theft!

  I do not know if your post was to peeve off individuals or what. But if it wasn't for property owners the O&G industry would have very little land to drill upon. Without the land land owners have the O&G would not be making money. 

  It's a two way street , if I had a landsman approach me as a  without us your nothing attitude I would tell him, you see those trees in my back yard, they can heat my home, they can build a home as they did way before the O&G came along. Without me or others signing your lease you will need to find an other job I suggest you start looking as soon as you get off my property. 

Permalink Reply by Frank Walker on July 27, 2012 at 10:58pm

Agreed, Billy.

Chesapeake is about as close as you can come to being a criminal enterprise, without formally stepping over the line.  Chesapeake is pernicious and evil.  But cockiness and hubris drip from the company throughout.  Chesapeake is on the front lines of screwing over landowners, regardless venue.  This GoMarcellusShale website is all about the Marcellus.  But Chesapeake is on the offensive against landowners and royalty owners in every venue in which they operate.  Look here, for example, at what posters to our sister Haynesville website have to say about the Chesapeake scourge:

Link to Chesapeake mistreatment of Haynesville landowners

The Haynesville shale is a thousand miles away.  But Chesapeake's treatment of landowners there is also God awful.  Read those posts carefully.  In some instances Chesapeake has actually brought suit against their royalty owners there for recovery of royalty money paid out due to Chesapeakes's own errors!!!  That documentation, and so much more, is there for all to read who are willing to take the time.  

In this internet age, Chesapeake can still screw over royalty owners, and they do.  But they cannot today do so in secret.  Warn your neighbors.  Avoid this evil company to whatever extent you can.  Resist them.  Fight back and deny them the money they crave beyond all else.  And never, ever, trust Chesapeake.

I am a leased landowner within the Marcellus play.  I am not leased to Chesapeake, thank goodness.  So you might wonder, why the vendetta against Chesapeake from this guy who has no dog in the fight?  It's because they are in the forefront of aggressiveness against royalty owners.  I confess to you, if they are successful and get away with the crap they are pulling everywhere, I'm afraid their practices could spread to gas companies which today treat Lessors properly and with respect . . . and today that's most of the other gas companies.  I don't want to see the situation degrade.  Chesapeake must be stopped.  And one way to do that is to get the word out regarding their bad behavior.

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