Good Morning! I have searched everywhere for the answer to this question so am putting it out there to see if anyone else has an idea. With the shale gas industry being fairly well matured and a LOT of natural gas being pumped out of the ground, many landowner's who have leased their property to gas drilling companies are receiving royalty payments. By definition, we are, essentially, consigning our natural gas to the gas company to sell in exchange for a percentage of the sale. So, we own the gas. We hire a gas company to come in and get it out of the ground and to market (which we, of course, couldn't do without them), and we pay them a LARGE percentage of the sale of our gas for their service. My question is, what is the landowner's occupation title? We are called "Landowners" but we are landowners whether or not we sell our natural gas for market, with or without the gas companies, and that is NOT an "occupation". Landowners receiving royalties... when filing your income taxes, for example, the royalties paid are classified as 1099 INCOME. What would the occupation title be for this income received? Another example; if you are applying for a loan or other income based application, what is your occupation from which this income has come? "Landowner" doesn't apply. I honestly think there should be a general term for a person receiving royalty income from the sale of their leased gas as a monthly income. Maybe there IS one out there and I just haven't found it. Any suggestions or does anyone know? Sure would appreciate some input. Thanks!
From some/most of the O/G companies view....we are sheep
Landowners Exist to be taken advantage of by Domestic O&G companies, while paying taxes on your Real Estate to the county.
The 1099 should be listed as Rents & Royalties and the form for R&R is found on IRS.gov by doing a search.
You are a Royalty Holder. If you are like most of us you are being "short changed" a nice way of saying being stolen from, so your royalties will be minimal compared to what they should have been.
I estimate that my 2 acres should be pulling in $9,000 a year based on my ownership decimal times the value of a typical Utica Well of $13,000,000 per year using 2014 values of well products and magazine articles on the topic of cost to drill and how fast that return should be recovered.
Your producer should have included Rents & Royalties on the 1099 to help you out. REMEMBER there is a Depreciation Rate on Royalties for each year you file. Don't forget to use it. You might include a note to the IRS that your royalties were greatly reduced by your Producer, or you would owe Uncle Sam a larger amount than shown on the 1099.
Thanks, Ron. "Royalty Holder" sounds correct. Our 1099 does show Rents & Royalties and our monthly statements are pretty detailed so can easily be used as "income verification" just like a pay statement. We have been pretty fortunate in regards to having good lease terms - or at least, a producer who agreed to our terms - so have NO deductions taken from our royalties calculated from our decimal (and I make sure I check each and every month). The SALE PRICE is what I feel is the ripoff as we are not getting anywhere near Henry Hub, however have been advised that that is because our market is confined to a tri-state area (PA/OH/WV) that is already over-supplied so they cannot get Henry Hub market prices until the infrastructure is in place to market to other areas. Production has been decent but has backed down about 15% (we hear because the company's board ordered it until prices go up a little bit - which I SUPPOSE is good for the landowners as well as the company, ultimately) but I figure we are getting about half of what we should be getting because of that. Without the pipelines to get the gas to the markets they can't sell it competitively and that stinks. None the less, we have a large portion of acreage in our unit (67 acres) so even at the reduced sale prices (just $1.44 mcf for June production compared to Henry Hub's $2.75) we receive enough royalty income for my husband to leave his "regular" job and work on the farm full time. Although he could cite "Farmer" as occupation, in reality our income is from the royalties so as income verification designation/occupation, we have been at a loss for exactly what we should be called. I think "Royalty Holder" is probably the best I've seen.
Assuming you are the one that signed a lease, your "Title" as defined by 99.99% of leases would be "Lessor".
I am glad to hear you feel you are getting a fair royalty, even though it is below Henry Hub levels.
We are due to begin receiving royalties very soon. I am eager to report that we are being treated fairly if that is the case.
Are you being paid separately for your NGL's, or does your lease not cover that ?
David, our gas is dry so we don't have NGL's, at least at this point in time, however our lease DOES specify that we would be paid for any NGL from extraction. Not so sure I feel that the royalty is "fair" when in comparison to the rest of the country, but I do not blame the producer or our contract terms. I don't think that it's fair that we, here in the NE, are getting so much less for our gas because there isn't a transport to get it to market to the rest of the country, AND that those pipelines have been delayed due to a lot of red tape and govt hold ups. Our producer does it's best to get the best price it can each month from a limited market but because we are so over supplied (being unable to get it to other markets as we are) we are forced to take what we can get. I can only complain about the lack of supply lines to the areas that need the gas, though, as I mentioned.
Thank you for replying Lori. My point was more that you believe your producer is playing fair, because other of us are constantly assuring all of us that we will be stolen from in every conceivable manner by every shale gas producing company.
Your points about the distribution are well founded as well as your contentions about the insanity that is our government and the cretin currently running us into the ground.
The only solace to take is that this natural gas dynamic has a long view that is going to end up with natural gas displacing coal as the method of producing electricity.
We around Guernsey county Ohio are told of many new gas fired power plants in the planning/permitting stage, I feel that once the market is developed for using the copious quantities of natural gas that are currently available we will see better pricing for us and better royalties.
As an aside, if we would have been drilled and producing during the very high oil pricing term we would have been millionaires in short order.
A lot of us have not realized what we had once thought to realize but life goes on. Besides, it is really not polite to root for higher prices even though they benefit us because to the greater part of the population these higher prices are a tremendous burden.
I have enjoyed your thread thank you.
Call yourself Retired.
The IRS has seen a huge number of these 1099s from Domestic Producers, so they know why you are being paid BOGUS royalties.
Too Bad they don't have the intestinal fortitude to notify the Feds that Landowners are being cheated resulting in Uncle Sam having less money to give away to our Friends and Enemies overseas. Even though we can scrape up $190,000 Billion to pay Iran. Did we ever request a REFUND for all the money we spent during the IRAN Hostage Crisis?
We could have deducted that money from the $190,000 Billion, thrown in some Damages Money for holding our people illegally and Iran would more than likely owe us. We currently don't have a government that puts it's own country first which is obvious when handing out money to Terrorist supporters.
Your well products can be found in Louisiana, WV, and Canada where the market is better than the Price Controlled Appalachian Basin, so you should have been paid a fair royalty from your products that went out of the area, which is most of them. More than likely you paid to have the products shipped but that doesn't show up on your Royalty Statement.
Enjoy your royalties, but consider writing your Congressman or maybe those folks in the White House and let them know you aren't being paid fairly since Domestic Oil & Gas companies have the same corporate greed you see every day on the news, or when you need healthcare, a cancer drug, a college, consider Geothermal or Green Energy, need an Eppy Pen the list keeps growing,..want a new vehicle, need a lawyer.....to be continued.
Ron, can't disagree with your frustration and share it, believe me. We SHOULD be able to deduct more than depreciation because we are selling our gas at reduced rates below market value set by the EIA based on Henry Hub pricing due to the inability to get to market due to inadequate infrastructure. You're preaching to the choir on the govt inefficiency and outright dishonesty and greed. It has ALLOWED these greedy corporations to rape the consumers through special interests and cronyism.
Are you Ron's twin sister?