WAKE UP & WEIGH THE ROSES...!
I'm reading alot of complaints about the oil companies not being fair and possibly stealing NGLs from everyones coffers. Now I'm no phd but so far I haven't read any thing about anybody knowing much about Relative Weight(specific gravity) versus Cubic Foot. So for anyone who cares here's a little basic chemistry lesson. The constituants of a volume of a gaseous substance can vary greatly. So what does that mean? One (1) cubic foot of gas can contain just plain old dry natural gas OR it can contain other stuff like propane, ethane, butane, etc. BUT...whether it just contains dry gas or wet gas it is still just one(1) cubic foot. So if you are only getting paid on volume, you could be getting ripped off.
Everyone should have wording in their contract that deals with the Relative Wieght (specific gravity) of the volume on which they are getting paid. Contract wording should allow the owner(lessor) of the gas being extracted to not only know the Specific Gravity of the volume of gas but also the analysis of the percentage of the various constituants contained therein. Then and only then can one determine exactly what's coming out of the ground.
So to sum it up, contract wording should allow the lessor to audit the financial records of the lessee AND the analytical records of the gas stream of the lessee as far as those records pertain to the royalties being paid to the lessor. After all, we know for a fact that the lessee(s) have those records and that is how they know what's in the gas stream when they (the lessee) sells it. So why shouldn't we??
Does anyone's contract have wording to that affect?
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Replies to This Discussion
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Permalink Reply by Jack Straw on
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Natural gas rules are under the purview of the individual States; so rules will vary depending upon location.
What an ethical operator is typically supposed to do is pay by BTU content.
A sample of gas is obtained at the well head and analyzed and the BTU content/cubic foot (at standard temperature and pressure) is calculated.
The produced gas is measured (as produced) in cubic feet and then adjusted to BTU (using the results of the most recent gas sample analysis).
The Natural Gas is typically supposed to be retested at least once a year.
The above is what is typically supposed to occur in many States.
This is how I understand these matters should typically be handled; I would appreciate any additions or corrections from anyone more knowledgeable on the subject.
Of course, I fully appreciate that what should be done and what actually occurs are two different things.
I would suggest that interested parties contact the appropriate agency for your particular State and enquire as to what the State regulations are with respect to measuring BTU content in Natural Gas production (and how price adjustments for BTU content are supposed to be made in your State).
Then, send a certified letter to your operator asking them for a copy of their most recent Gas Analysis (with date of analysis). Ask them how they adjust pricing for BTU content.
Compare what you have learned from what the Operator tells you versus what the State tells you should be done; any serious discrepancy and you can decide how to proceed.
All IMHO,
JS
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