Royalty payments cause concern BY STACI WILSON Susquehanna Independent - GoMarcellusShale.com2024-03-28T21:46:08Zhttps://gomarcellusshale.com/forum/topics/royalty-payments-cause-concern-by-staci-wilson-susquehanna?commentId=2274639%3AComment%3A481960&feed=yes&xn_auth=nomaryjane, are you familiar wi…tag:gomarcellusshale.com,2013-08-07:2274639:Comment:4826752013-08-07T00:33:52.690Zwyalusing jimhttps://gomarcellusshale.com/profile/wyalusingjim
<p>maryjane, are you familiar with the cost of an audit for royalties?</p>
<p>I have heard conflicting stories and would like to get to the bottom of that subject.</p>
<p>wj</p>
<p>maryjane, are you familiar with the cost of an audit for royalties?</p>
<p>I have heard conflicting stories and would like to get to the bottom of that subject.</p>
<p>wj</p> I understand the legal obliga…tag:gomarcellusshale.com,2013-08-06:2274639:Comment:4820022013-08-06T14:29:17.208ZMaryJane Reynoldshttps://gomarcellusshale.com/profile/MaryJaneReynolds
<p>I understand the legal obligations for the production costs. I am merely suggesting that without examining the documents you do not know if the producer has allocated the costs in compliance with the leas and state law. </p>
<p> With respect to downstream transportation, your producer will allocate the costs it pays for transportation over all the gas it has transported. There are two questions. First, has the pipeline allocated costs based on the volume each shipper put into the system…</p>
<p>I understand the legal obligations for the production costs. I am merely suggesting that without examining the documents you do not know if the producer has allocated the costs in compliance with the leas and state law. </p>
<p> With respect to downstream transportation, your producer will allocate the costs it pays for transportation over all the gas it has transported. There are two questions. First, has the pipeline allocated costs based on the volume each shipper put into the system at the wellhead meter or is it using some other method? Second, if there is shrink so that the producer is charged for line loss during transportation, how is that cost being allocated between shippers on the producer line? likewise, if there is a gain in volume even if your contract says you are to get part of the gain how do you know the gain is being allocated to you and whether the allocation is correct? </p> I know what happened to the b…tag:gomarcellusshale.com,2013-08-06:2274639:Comment:4821442013-08-06T04:04:59.074ZJohn Harrisonhttps://gomarcellusshale.com/profile/JohnHarrison
<p>I know what happened to the bill referenced by Rick. It has powerful language for lessors and the passage of SB259 makes it very clear that any law passed will not help lessors. All of the royalty stub information that the SB259 requires is the same information already reported on the copy of the royalty statement from Bradford County in the NPR StateImpact article. I am sure nothing will change on royalty stubs due to this law.</p>
<p>Obviously the last minute pooling amendment was the…</p>
<p>I know what happened to the bill referenced by Rick. It has powerful language for lessors and the passage of SB259 makes it very clear that any law passed will not help lessors. All of the royalty stub information that the SB259 requires is the same information already reported on the copy of the royalty statement from Bradford County in the NPR StateImpact article. I am sure nothing will change on royalty stubs due to this law.</p>
<p>Obviously the last minute pooling amendment was the reason for the bill. I suspect that uproar caused by this amendment could have been avoided if the bill had been a few hundred pages of unreadable lawyer speak instead of 4 or 5 readable pages. I am sure our legislators will not make this mistake again and the next bill to "help" royalty owners will be hundreds of pages will some well hidden "gotchas"</p> This would have helped... sim…tag:gomarcellusshale.com,2013-08-06:2274639:Comment:4818702013-08-06T03:14:18.559ZRickhttps://gomarcellusshale.com/profile/Rick465
<p>This would have helped... simple, short, but clear... I dont know what happened to it though... <a href="http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=HTM&sessYr=2011&sessInd=0&billBody=H&billTyp=B&billNbr=1410&pn=1684">http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=HTM&sessYr=2011&sessInd=0&billBody=H&billTyp=B&billNbr=1410&pn=1684</a></p>
<p>This would have helped... simple, short, but clear... I dont know what happened to it though... <a href="http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=HTM&sessYr=2011&sessInd=0&billBody=H&billTyp=B&billNbr=1410&pn=1684">http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=HTM&sessYr=2011&sessInd=0&billBody=H&billTyp=B&billNbr=1410&pn=1684</a></p> I am not aware of any product…tag:gomarcellusshale.com,2013-08-06:2274639:Comment:4819602013-08-06T00:24:08.307Zwyalusing jimhttps://gomarcellusshale.com/profile/wyalusingjim
<p>I am not aware of any production costs being deducted from anyone's royalties, only post production costs.</p>
<p>an implied covenant to produce lays the costs of getting the gas to the wellhead on the lessee, beyond that point the lessor may have obligations to bear their proportionate share of certain or all post production costs depending on their lease.</p>
<p>meters are calibrated regularly. some companies calibrate weekly. they depend on the accuracy of those meters the same as us to…</p>
<p>I am not aware of any production costs being deducted from anyone's royalties, only post production costs.</p>
<p>an implied covenant to produce lays the costs of getting the gas to the wellhead on the lessee, beyond that point the lessor may have obligations to bear their proportionate share of certain or all post production costs depending on their lease.</p>
<p>meters are calibrated regularly. some companies calibrate weekly. they depend on the accuracy of those meters the same as us to ensure full payment. beyond that, there are revenue meters operated by other companies, midstream operators and transportation pipeline companies to ensure that the producer is actually shipping what they say that they are. a bigger issue than meter accuracy is whether or not mineral owners are given the benefit of any line gains which occur downstream. differences in metering are common at various points in the system, but it needs to be spelled out in your lease if you want to benefit from it.</p>
<p>wj</p> Thank you for your intelligen…tag:gomarcellusshale.com,2013-08-05:2274639:Comment:4819502013-08-05T22:54:06.621ZRichard Droskehttps://gomarcellusshale.com/profile/RichardDroske
<p>Thank you for your intelligent response and useful information. Refreshing change from anti-frack rants.</p>
<p>Thank you for your intelligent response and useful information. Refreshing change from anti-frack rants.</p> I wish you the best on the l…tag:gomarcellusshale.com,2013-08-05:2274639:Comment:4816022013-08-05T18:02:50.025ZMaryJane Reynoldshttps://gomarcellusshale.com/profile/MaryJaneReynolds
<p>I wish you the best on the legislative efforts. In the mean time, there are ways you might increase your royalty payments even before new legislation. </p>
<p></p>
<p>I expect most of the leases have an audit clause. Under that clause you can (and should) demand an accounting of the cost of the well and the royalty payments with the back-up material. It is entirely possible that the royalty payment is not being calculated properly and that the cost of the well was understated so that costs…</p>
<p>I wish you the best on the legislative efforts. In the mean time, there are ways you might increase your royalty payments even before new legislation. </p>
<p></p>
<p>I expect most of the leases have an audit clause. Under that clause you can (and should) demand an accounting of the cost of the well and the royalty payments with the back-up material. It is entirely possible that the royalty payment is not being calculated properly and that the cost of the well was understated so that costs could be capitalized and included in production costs. In addition, the lessee may be including inflated prices paid to affilites for production, transportation and marketing costs used in the royalty calculation. You should be able to get information on affiliate payments in your audit request. You also may want to request the back up data for the cost of drilling the well and see if any of those costs are being treated as current production costs and being charged against royalties.</p>
<p>As to the metering being done by the producer, you probably have the right to put in you own meter. However, that can be expensive. You could ask when the producer last calibrated the meter and ask the meter be calibrated again. </p>
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