Hedged Gas vs. Spot Gas

I understand that gas companies pay out 2 differant types of payments to their investors and Lessors on the production of a well.  The investors in the wells get the return on their investment from the "Hedged" gas price, while the Lessors (royalty owners) get paid on "spot" gas.  Right now "hedged" gas is over $6/mcf, while "spot" gas is hovering around $4/mcf.  Is this legal? 

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Permalink Reply by Frank Walker on November 20, 2010 at 9:26pm
It's important to remember that leases, and I mean every aspect of every lease, are totally 100% negotiable.

Thus, it is erroneous to assert there exists a single basis for payment to Lessors. Lessors are paid individually, based upon the terms of Lessor's individual lease.

If you're asking whether it is legal for Lessors to be paid on different bases from one another, and on a different basis from other classes of gas company payees . . . . . yes, it certainly is legal. What would be wrong, and possibly actionable, would be for a gas company not to honor terms agreed to . . . whatever they might be.
Permalink Reply by Mike Knapp on November 22, 2010 at 10:28am
Yes it's legal. I know that some companies pay their Lessors the "hedged" price, but most just pay the spot price. The reason being because everyone calls in and complains when the price of gas goes up and they are getting less than what the hedged price is. Not so much when they're getting better than spot price... haha...

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