This is worth a read.  It supports our case Grissom v. Antero.  There are other oil and gas companies with the same paragraph in them that remain to be sued over this.  The link to the opinion is here.

It is also attached. 

"We conclude that some of the leases prohibit Antero from deducting any post-production
costs from Lessors’ royalties, but other leases—namely, those that contain a “Market
Enhancement Clause”—do authorize deductions in certain circumstances."

The key words in Grissom "... without deduction directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form;

Antero deliberately changed its Form 2013 Market Enhancement Clause from the way the Form 2012 Market Enhancement Clause read in the following manner:

a. The Form 2013 Market Enhancement Clause defines “other production” (i.e.,
other hydrocarbons and byproducts) to explicitly include NGLs, which shows
the drafters had NGL royalty payment calculations in mind when they
changed the language.

b. The Form 2013 Market-Enhancement Clause moves the phrase “transforming
product into marketable form” to after the word “however” in the middle of
the clause, which purportedly allows Antero to deduct some post-extraction
value-enhancing costs necessary to transform products into marketable form
(e.g., gathering costs, compression costs, and the MarkWest Fees), but only if
those value-enhancing costs are “actually incurred and charged to Lessee by a
third party.

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Would charges for fuel used at compressor stations or processing plants be considered as part of the unallowable charges in these situations?


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