The Post Production Cost Deduction Debate
An on going topic on this site is the post production cost deductions taken by companies. Taken even when the landowner believes their lease prohibits such deductions.
Of course the favorite villain in this discussion is Chesapeake; Several challenges to the practice have been filed in courts across the country.
(As a point of clarification, I take no stance on whether or not the actions of the company are right/wrong, legal/illegal and do not mean to imply an opinion either way)
I have attached a blog that, I believe, sheds some light on this subject.
http://www.oilandgaslawyerblog.com/2013/11/chesapeake-and-post-prod...
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Replies to This Discussion
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Permalink Reply by 0ym9x5ag7ury2 on
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Barry,
Nice post.
I have to wonder how Chesapeake is justifying not paying a royalty for NGLs in Ohio.
There's no case law to fall back on for this, no judge in their pocket, no one throwing their hands up saying "Royalty Is Undefined" as one judge did when the money was right.
There is one quote that should interest all Chesapeake produced landowners in the Appalachian Basin:
"It's a good business practice not to pay landowner royalties then go to court and only pay what the judge orders". Farm & Dairy Sept 2013, Chesapeake VP for the North East. Good Business practice, maybe. Illegal, Definitely.
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Permalink Reply by Barry D on
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Ron,
Have you ever asked if the royalty for NGL's is combined with that of the royalty for Natural Gas?
I see that on your spread sheet that there is a designation for BTU content. Could a higher BTU content indicate the content of NGL's in the gas ?
I have no idea and have always been puzzeled by this issue.
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