Not paying for condensates

I understand that some companies are going to take the stand that unless specifically stated in the lease, they will not pay for condensates. If your lease says just oil and gas, they are going to refuse payment for the "condensate". Does anyone know anything about this. Also, I saw a post which had a letter for a demand for failure to pay royalties. Could someone please post another copy?

Thanks.

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0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 13, 2014 at 12:16pm

Top of the page, click on FORUM, then BLOGS. It is the first item at the top of the blog. Click on it to open. If it doesn't show up I'll cut and paste a copy here.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 13, 2014 at 12:13pm

Sorry about that COOKIE JAR link, someone is taking advantage of us by sneaking it in even though it wasn't highlighted when I typed it in.

Don't click on it since it's cookie jars for sale that someone is probably getting a few cents out of curious people like me who clicked on it.

Permalink Reply by Jim White on December 12, 2014 at 6:46am

This was amazing. The parcel and lease I was worried about was involved in a partition suit that we eventually settled with the company. EQT Almost exactly 24 hours from when I made the original post, I received a check for the first 5 months of royalties. Was for gas only and I have no idea how to tell if there were condensates in any of the wells. Just so you know, the lead attorney in the Tawney case has filed suit in Wood county over a big company not paying for condensates. Judge, no jury. No decision yet. Just got that info today.

Permalink Reply by Nancy Mosley on December 12, 2014 at 8:10am
Thanks for that news Jim.
Permalink Reply by Jim White on December 14, 2014 at 9:02am

Opps. I was wrong. Sorry. The NGL case is not a Wood County case. It is around Clarksburg which makes more sense.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 13, 2014 at 12:29pm

Jim,

I gave Adam this post on page 1 but I will repeat it here for you:

   WV now requires the producers to turn in the annual volume of NGLs taken from each well.

http://www.dep.wv.gov/oil-and-gas/rr/Pages/default.aspx

Take a look at your well when the data comes in on NGLs and see if you are being shorted. If so it's lawyer time or write letters to state & federal government to find out what they can do to help you stop the theft. 

Permalink Reply by Jeff Kerr on December 15, 2014 at 1:13pm

wish PA was land owner friendly as WVA IS

Permalink Reply by Jim White on December 18, 2014 at 8:31am

Ron

I see the link going to the requirements, but how/where can we view the reported results?

Permalink Reply by Nancy Mosley on December 18, 2014 at 8:59am
I think you are referring to the reported natural gas liquids? There is now a place on the reports for the producing wells to show volume, per month, for natural gas, natural gas liquids, and oil. If you do a search for wells by API number you should see it. Remember the requirement is to report production for the previous year by the next year end of March, then the office has until August to get that online. The most recent production posted is for Dec 2013.
0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 13, 2014 at 12:20pm

Failure To Pay Royalties letter you were looking for.

To:

From: __________________________ Address_____________________

Owner Number: _____________

Well: _______ County, Ohio Your Well # ______ Property Number: __________

Date: _________

Notice of Delinquent Payment of Royalty per Lease Agreement

The Royalty Statement generated from production of ______ Well __for the months of Feb through May, 2014 contain the following issues which are contrary to the lease agreement in effect.
This notice is being provided as required Per ______ Lease Number ____________, Lease Record ______, dated April 5th, 2011, per lease ARTICLE III. PAYMENT TO LESSOR, 2. Royalty Payment, (g) Delinquency in Payment.

All paragraphs from the lease, quoted in the Items Contested by Lessor section fall under Article III. Payment To Lessor, and will not be re-stated for each item.

Items Contested by Lessor:
Monthly Royalty Payment Not Paid
Per Lease: Royalty Payment (f) When Royalties Must Be Paid.
Thereafter, all royalties on oil shall be paid to Lessor on or before the last day of the second month following the month of production, and all royalties on gas shall be paid to Lessor on or before the last day of the third month following the month of production. Royalties not paid when due shall bear interest at the prime rate as published by the Wall Street Journal as of the date payment is first due, plus five percent (5%) per annum.

Selling Well Products Below Market Value
Per Lease: 2. Royalty Payment, (b) Determination of Royalty Amount, (ii) To pay Lessor on gas and casinghead gas produced from the Leased Premises, percentages of proceeds (in accordance with paragraph (a) above) based on:
(1) the Gross Proceeds paid to Lessee from the sale of such gas and casinghead gas when sold by Lessee in an arms-length sale to an unaffiliated third party, or if sold to an affiliate, the price upon which such gas and casinghead gas was sold so long as such price is not less than that which would be received from a sale to an unaffiliated third party in an arms length transaction considering the volume available, quality, location and length of term of the proposed sale; or ….

(d) Gross Proceeds. For the purpose of this lease “Gross Proceeds” means total consideration paid for the sale of oil, gas, casinghead gas, casinghead gasoline, associated hydrocarbons and marketable byproducts, produced from the Leased Premises.

Processing Fee
Per Lease: 2. Royalty Payment, (e) Costs of Production. Lessee shall place oil and gas produced from the Leased Premises in marketable condition and shall market same as agent for Lessor. Except as expressly provided in (d) above, Lessor’s royalty shall not be charged directly or indirectly with any expense required to make gas marketable, including but not limited to the following: expenses of production, gathering, dehydration, compression, manufacturing, processing, treating, transporting or marketing of gas, oil, or any liquefiable hydrocarbons extracted therefrom.

Processing Fee Used To Reduce Oil & Gas Royalty Payment
Per Lease: 2. Royalty Payment, (d) Gross Proceeds. (iii) If oil or gas production from the Leased Premises is produced in a plant for the extraction of gasoline, hydrocarbons, or other products, the value of the gross production shall, for purpose of determining royalty due, never be less than if such had not been processed.
Severance Taxes

Per Lease: 8. Ad Valorem Taxes. Last sentence,
Lessee shall, in addition, pay any and all severance taxes or other excise taxes arising out of or relating to this Lease and/or the Lease Products.

Note: Severance Taxes on NGLs are not collected in Ohio but were charged.

Royalty Statement Understated Volume Of NGLs Produced & Paid

Per Lease: 2. Royalty Payment, (b) Determination Of Royalty Amount,
(ii) To pay Lessor on gas and casinghead gas produced from the Leased Premises, percentages of proceeds (in accordance with paragraph (a) above) based on:
(1) The Gross Proceeds paid to Lessee from the sale of such gas and
casinghead gas when sold by Lessee in an arms-length sale to an
unaffiliated third party, or if sold to an affiliate, the price upon which
such gas and casinghead gas was sold so long as such price is not less
than that which would be received from a sale to an unaffiliated third
party in an arms length transaction considering the volume available,
quality, location and length of term of the proposed sale; …

Note: Per the gas laws, NGLs produced will be no less than 2 gallons per 1 MCF of Natural Gas produced from Buck Well 1H, therefore the Royalty Statement does not reflect the true volume of NGLs produced.

Free Use of Oil and Gas From Well By Producer
Per Lease: 2. Royalty Payment, (b) Determination Of Royalty Amount,
(ii) To pay Lessor on gas and casinghead gas produced from the Leased Premises, percentages of proceeds (in accordance with paragraph (a) above) based on:
(2) The market value at the point of use, when used by Lessee.

Division Order Percent Of Ownership Not Consistent For Each Sale

2. Royalty Payment, a) Percentage. The royalties payable to the Lessor under this Lease shall be on a well by well basis. As to each and every well completed as a producer of oil and/or gas on the Leased Premises or on lands pooled therewith, the royalties paid to Lessor shall be Seventeen and one-half percent (17.5%) of all the oil, gas and casinghead gas and casinghead gasoline removed or recovered from the Leased Premises or, …
(b) Determination of Royalty Amount
Lessee covenants and agrees:
(i) To sell and execute division orders for the sale of all oil, condensate,
casinghead gasoline and liquid hydrocarbons produced and saved by Lessee from the Leased Premises, including Lessor’s share with Lessee’s share and shall pay Lessor royalty (in accordance with paragraph (a) above), where applicable, based on the Gross Proceeds paid to Lessee from the sale.

Note: My Division Order Decimal Fraction Ownership (0.000719475) shall be used for each sale per above.

________________ is delinquent in payment of royalty owed to Lessor as described above and is being reported as required by the lease per the following paragraphs contained in the lease.

ARTICLE III. PAYMENT TO LESSOR, 2. Royalty Payment
(g) Delinquency in Payment. If royalty is not paid by the date due, Lessor may give
Lessee written notice of nonpayment of royalty, by certified mail, return receipt requested, and if Lessor’s royalty is not paid on or before expiration of forty-five (45) days after Lessee’s receipt of such notice, interest shall commence accruing on the due date and be payable by Lessee to Lessor on the delinquent balance at the rate of five percent (5%) per annum above prime interest rate (as defined above).
However, Lessee may avoid any interest obligation if prior to the expiration of such forty-five (45) days Lessor is furnished an attorney’s written opinion citing a bona fide dispute or a good faith question of royalty entitlement (either as to ownership or as to amount), Lessee pays to Lessor the undisputed portion and Lessee pays the disputed royalty to an escrow account to be administered by a trustee agreed to by both parties or by the American Arbitration Association, if such trustee cannot be found.
If practical, such escrow funds shall be invested in interest-bearing accounts pending resolution of the entitlement issue, with the interest to follow the distribution of escrow.

_____Signature Here_________
_____Printed Name_____

Permalink Reply by Jim White on December 14, 2014 at 4:34am

PERFECT! and thanks!

Permalink Reply by Jeff Kerr on December 16, 2014 at 11:23am

Thanks Ron Hale we send Rice a E-MAIL stating our lease say's gas oil and all constituents from bore . waiting for a response all so I feel 1.65 a mcf is below market price even now .  I am glad you and others know how to go about getting the O&G CO. to be fair: sad we have to go this route to get whats in our lease. And they wonder why we as land owners do not trust them. thank you again.  I will keep you all posted.                                                          Jeff                                       

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