Ohio: Carney&Cera introduce HB 400; to require specific info to be provided with your royalty payment

HB 400 is introduced and the article will tell you that the Republicans may not even get this out of committee;  Landowners if we really want this uniform reporting to us from the O&G companies it is time to speak to this committee and other legislators.

First link is to article:

http://www.bizjournals.com/columbus/blog/2014/01/lawmakers-want-dri...

This link is to the proposed bill:

http://www.legislature.state.oh.us/bills.cfm?ID=130_HB_400

GMS we need to discuss this on this site as I feel certain a number of groups read these discussions to see what landowners are thinking. 

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Permalink Reply by The Hiker on January 17, 2014 at 1:16pm

Thanks for the information Searcherone:   I'll send a note to Gentile (like I have done a few times on other O/G matters).   It sounds like a good thing, something all of us should support.

Permalink Reply by Joseph-Ohio on January 20, 2014 at 10:07am
Noticed that the Bill speaks to itemization and includes an entry for a 'Windfall Profits Tax' that is to be listed as a deduction from the 'Holder's' royalty payment.1st place there should be 0's listed under any entry identifying deductions from any Holder's (Lessor's) royalty payment statement. Royalty payments are paid to the Landowner Lessor without deduction.Any lease we would sign (me and my Mrs.) would assign all production / post production / market enhancement costs / severance taxes / any taxes or other costs wrought by the development of our minerals / natural resources as paid by the O & G E & P Company / Companies / Lessees.How is a return on a Landowner's / Lessor's investment in Real Estate / Land / Minerals / Natural Resorces (including Natural Gas and Oils) interpretted as a 'Windfall' ?  Why is it not a 'Windfall' to the Oil & Gas Exploration & Production Company ? IMHO it's because it is a ROI (Return On Investment) in both instances.These legislators are spinning everyone's wheels as they manipulate / maneuver for new ways to fleece the Landowners and the Industry if you ask me.Also all the accounting assignments of deductions are controlled by the Oil & Gas Company generating the Statement. If it' s incorrect and does not honor the Leasehold Agreement the only recourse is Court - which everyone should know is expensive (in both $ and time).All as always only in my most humble opinion and from my landowner's / prospective lessor's perspectives.
Permalink Reply by Tony Yurina on January 19, 2014 at 5:15pm

I would favor the proposal where the E&P company must report the sales amount from the oil purchaser and gas company sold to from Meter Station No. Ohio 123456.

Detailed enhancement costs must be detailed on the royalty statement.

State auditors & lessors should be allowed to review production cost deduction records and comparisons of the raw information to the royalty owner statements and payment. 

Royalty shall never be less than some %. ?

Transparency is badly needed.

Permalink Reply by Joseph-Ohio on January 19, 2014 at 6:11pm

Tony,

Reading the Bill and interpreting the word 'Holder's as synonomys with the word 'Lessor's' - is that a good interpretation ?

If so the Bill seems to assume that the 'Holder' ('Lessor') is paying all those charges / deductions.

What then would the rules / proposed laws be for a 'no deductions' lease agreement (where the Lessee pays and not the Lessor) ?

Permalink Reply by Tony Yurina on January 20, 2014 at 4:58pm

The "Holders" may be a mineral interest owner and not the Lessor or surface owner, so the language in the statue must be generic enough to cover all parties with one word.

Also, any new statute can not break an existing contract which permits market enhancements costs, so the statute will have to cover those who pay M.E. costs buy providing detail statements and those who negotiated a lease without paying M.E. costs as well.  This is a multi dimensional issue.

I think the state auditor concept is very powerful, and would go a long way to providing transparency.  I think the "proposed fear of the burden" would be ample persuasion to make some of these companies show their numbers to the royalty owners or eat most of the cost when calculating how much royalty they are willing to pay without M.E. costs.

I have to wonder why forensic auditors are not crawling over the opportunity to get rich by finding huge miscues in this M.E. and Post Production deductions green pastures?

Most forensic auditors take a % of what they find.  Not a bad profession & one might think about this option.

Permalink Reply by Joseph-Ohio on January 21, 2014 at 12:06am
'Multi-dimensional' is an adjective that I for one am apprehensive of being too mild a term.

I for one perceive it as another crobar 'door opener' type of legislative manipulation being applied in attempt to pry open / break in and pave the way to burden Landowners / Lessors with costs that they have no choice as to whether or not they want to bear.

When combined with 'Forced Pooling / Forced Unitization' empowerments recently bestowed upon the ODNR Gas & Oil Division Chief + new 'Severance Tax' rule changes being discussed + the newest 'Windfall Profit Tax' term also now suddenly thrown into the arena (introduced attached to this HB 400); I sense a huge offensive being prepared to be launched by the O & G industry against Landowner / Lessors everywhere in the State.

Thinking the next steps (if they are successful in gaining all of these modifications / foothold legislations) could be : throttling / shutting-in wells / marketing oriented strategic / purposeful stalling of development / renegotiation of existing leasehold agreements all so to enjoy their newly legislatively acquired advantages.

I say tell our legislators to disable the provision of unfair advantage to O & G interests over Landowners / Lessors.

What do the rest of you say ?
Permalink Reply by searcherone on January 20, 2014 at 10:34am

Tom, any particular group scheduled to speak?   Any real time video or audio broadcast of this hearing?

I am in agreement with Tony's post.   Great idea that auditors and lessors could review the production costs--should be in the law--not in the lease.   lol If the auditors could look they would know how much the state is not getting in tax revenue.   That would be a win for the State of Ohio and landowners.   To those who would say these are private contracts between a landowner and O&G company, its actually a triangular situation as ODNR is right in the middle of it all.

Obviously you read this forum and I am glad, perhaps in your reporting points of view from landowners could be included.   And thanks for proving that many people in all areas connected to O&G read this forum.

Permalink Reply by Joseph-Ohio on January 20, 2014 at 12:45pm
The implication I'm picking up from this new Ohio HB 400 being discusssed is that the Holder's (Landowner's / Lessor's) deductions from there royalty payments will be detailed / itemized but says nothing about the Lessee's being disclosed.Why not ??
Permalink Reply by Booger on January 21, 2014 at 6:56am

 the reasons cited in the article for why this may not even get out of commitee....

"But the bill asks for a lot of information from companies that might not be readily available and could trigger administrative costs.".....

i don't see anything in the bill that asks for any information above or beyond what is needed to create the royalty payment........am i missing something?

 "The bill also allows for legal penalties if the driller does not provide the royalty-holder the required information. That, Warnock said, could be another point of contention."

this just gives the law teeth........without repercussions for noncompliance, there is no need for the law. 

there must be some better reasons why this would put undue burdens on the e&p's - to the point of stalling develpment.

also there is no mention of NGL's........gas is only to be accounted by MCF........maybe somthing should be addressed there.........that would also be nice to see on the ODNR production reports........again - not asking for information that they don't already have.

Permalink Reply by Joseph-Ohio on January 21, 2014 at 8:00am
Appears to me there could be many ulterior motives driving all this.

Pull the plug on ulterior motives.

Who decides to levy a 'Windfall Profit Tax' ?

If such ever is levied it should be paid by the O & G E & P as it is wrought by development.Then the cost of their product would rise and by virtue of that the people end up paying the new O & G E & P Tax.

If landowners have such a tax levied against them then they should be paid a higher royalty % and it follows then that O & G E & P Companies will charge more for their product to make up the increased royalty % paid to the landowner.

Any tax is inflationary.

Say NO to any new taxes. NO. Just say NO.

IMHO
Permalink Reply by Joseph-Ohio on January 21, 2014 at 9:11am

Where does language in the Bill speaking to 'Windfall Profit Tax' clarify anything for anyone ?

As it is now there is no 'Windfall Profit Tax' and there should be none.

A Landowner's / Lessor's / O & G E & P Company's income from developed Natural Resources is not a 'Windfall' in the 1st place - it is a Return On Investment - a 'ROI'.

All only IMHO.

Permalink Reply by Booger on January 21, 2014 at 11:37am

thanks for keeping us posted..................that sucks...........seems our reps could care less about us.

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