YOUR SOFT MARKET RIGHTS/ ROYALTIES in Leases (ethane, butane, etc...)

We have been advised by an industry expert who also controls adjoining parcels to ours to make certain a ROYALTY INTEREST in the "Soft Market by-products. i.e. ethane, butane, propane, etc" is included in any new LEASE AGREEMENT. He says that can sometimes DOUBLE the royalty check!!!!!

Why has there been no discussion on this to date?

None of our mineral attorneys ever heard of it and do not know how to phrase that in an Agreement ?!?!?!

What percentage? How is it calculated?

ANYONE out there have such a clause in their Lease Agreement and/or any links to resources to help us ALL?

Thanks!

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Thank you for posting Al.

Hope we soon have a chance to negotiate a lease.

I really want to know also..

Glad you brought this topic up!

I have never seen this issue in PA for wells that produce saleable NGLs.  The landowner statements I have seen (XTO and Rex) call out the amount of NGLs from each well, and the sales price of each individual product.  The royalty percentage is applied to the total sales amount.  And, yes, the NGLs increase the royalty nicely.  Because the NGL's have to be processed out of the gas stream the deductions for methane and NGL sales is higher than an all methane well.

Is something different in Ohio!

Phil

It reads to me like there is Phil.

Unleased so can't prove it by me.

Wonder what the land groups were / are trying to negotiate in my neck of the woods - or even if any negotiations are taking place.

al raptoria,

Why has there been no discussion on this to date? 

You haven't seen any of my posts. I've been jumping up and down about NGLs. I'm the guy who people don't understand when I say Theft By Deception is in progress in Ohio, and my producer is committing multiple felonies according to the Ohio Revised Code.

Every Associated Landowner Of The Ohio Valley lease has the below statements about NGLs. When you say Hydrocarbons you cover any product that has the element Carbon - C in it, which is everything.

The problem will be getting your producer to read the lease when they decide it's time to increase their profits. They will pencil whip you on your royalty statement by underpaying NGLs (25 cents a gallon on one GMS.com royalty owners statement), under report NGLs on your statemnt (What?? No one is looking!), charge you for processing a huge volume of NGLs (You only paid me for a few gallons, where's the volume I paid for processing on at Buck Well 1H). If your producer is really brazen they will tax you on that large volume you paid to process but didn't make a dime on as our producer did to us at Buck Well 1H.

What are you going to do when your producer charges your well $8,000 to take an estimated $85,000 in NGLs.

CALCULATING YOU NGLs:

 Volume of Natural Gas reported to ODNR in MCF (don't trust your statement) multiply each MCF produced by 2 and as if by magic the NGLs missing on your statement will appear on you calculator in Gallons.

If you want to know how much money you didn't get paid, multiply the number of gallons by the open market value of the NGLs or use the producers bogus sale figure. Either way it will meet the amount of cash that exceeds a Felony level theft in Ohio.

--------------Lease Contract Wording ALOV--------------------------------------

Royalty Payment,

(d) Gross Proceeds: For the purpose of this lease “Gross Proceeds” means total consideration paid for the sale of oil, gas, casinghead gas, casinghead gasoline, associated hydrocarbons and marketable byproducts, produced from the Leased Premises

(ii) To pay Lessor on gas and casinghead gas produced from the Leased

Premises, percentages of proceeds (in accordance with paragraph (a) above) based on:

(1) the Gross Proceeds paid to Lessee from the sale of such gas and

casinghead gas when sold by Lessee in an arms-length sale to an

unaffiliated third party, or if sold to an affiliate, the price upon which

such gas and casinghead gas was sold so long as such price is not less

than that which would be received from a sale to an unaffiliated third

party in an arms length transaction considering the volume available,

quality, location and length of term of the proposed sale; or ….

(e) Costs of Production. Lessee shall place oil and gas produced from the Leased Premises in marketable condition and shall market same as agent for Lessor. Except as expressly provided in (d) above, Lessor’s royalty shall not be charged directly or indirectly with any expense required to make gas marketable, including but not limited to the following: expenses of production, gathering, dehydration, compression, manufacturing, processing, treating, transporting or marketing of gas, oil, or any liquefiable hydrocarbons extracted therefrom.

 

 

Wow! Thank YOU Ron!

It was my sheer ignorance of the correct terms that made me miss your other posts! Will catch up on ALL you've offered us on this forum! Thank you, and Best to You, Ron!

al,

   Go to alov.us and look at the pdf at the bottom of the page SURE March Lease. It has the full lease developed by the Associated Land Owners Of The Ohio Valley.

Thanks Ron - ALOV was among the first to open our eyes - again, there was just so much there and so much still foreign to us that I missed that part because the words/terms were different. We have mainly oil in the Utica pickle, not gas, so I am not sure how much "soft market" byproducts there will be - but I know enough to get EVERYTHING we might want over the next 100+ years in the Lease now! Thanks again Ron!

Ron,

The SURE lease and the ALOV lease are different - at least the versions that I have found.  The ALOV lease runs more than 26 pages, the SURE lease just 17 pages.  I'm interested because I have a parcel in Adams Township, Butler County, PA where a Landowner group is forming.  The Landowner group is just starting up and is looking to develop a common lease.  I found an older scanned copy of the ALOV lease and would like to find the newest version, hopefully in true electronic form so that it could be converted into Word and modified if need be.

Regards,

Phil

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