Our EQT Big 333 well pad went on line in April. We have received our first two royalty checks. We have a 1901 lease with a flat rate of 1/8th. Our pooling agreement makes no statement one way or another about deductions of any form. EQT has been withholding 8-9% for what they list as "Gross Deducts". For just two months this amount is $905,752. EQT claims that they are allowed "Deducts" because our original 1901 lease is a "flat lease". Is anyone else having problems with EQT taking improper deductions? I know we need to hire a competent O&G attorney... just checking to see if there are enough others in a similar situation to warrant a class action lawsuit.
I just got a letter from one of our lessees (assigned several times) about one of our old flat rate wells. He said that by WV code 22-6-8 they feel they are paying according to the statute. (they just started taking "owner trans" deductions last Sept and have up to now ignored my requests for clarifications). Here is the part he referred to
e) To avoid the permit prohibition of subsection (d), the applicant may file with such application an affidavit which certifies that the affiant is authorized by the owner of the working interest in the well to state that it shall tender to the owner of the oil or gas in place not less than one eighth of the total amount paid to or received by or allowed to the owner of the working interest at the wellhead for the oil or gas so extracted, produced or marketed before deducting the amount to be paid to or set aside for the owner of the oil or gas in place, on all such oil or gas to be extracted, produced or marketed from the well. If such affidavit be filed with such application, then such application for permit shall be treated as if such lease or leases or other continuing contract or contracts comply with the provisions of this section.
Yes, but gas law usually interprets, for better or worse, wellhead price = market price - Gross Deducts.
So in your case you're getting 11% of market price but 12.5% of wellhead price, so they will claim they meet state law.
Some state laws now specifically say you must get at least 12.5% of market price because of landowner complaints.
For new lease just use the words market price with no deductions (there is some good legal wording on this site).
It's when the term "wellhead" price is used, you open up a can of worms concerning interpretation.