I just got my 1st royalty check and was disappointed.
I didn't expect a lot for several reasons but didn't think they would be taking so much out for "gathering" (34%), and also a little for "third party". Total deducts came to 37.5% which I thought was excessive.
Does this seem normal?
WHAT LEASE TERMS DO YOU HAVE, WHAT COMPANY DID YOU SIGN YOUR LEASE WITH?
The lease is with Chesapeake. As for the terms, it says, "less all taxes, assessments and adjustments on production". Then for gas it is "less the cost to transport, treat and process the gas and any losses in volumes to point of measurement that determines the revenue realized by Lessee." (The standard lease terms).
UNFORTUNATELY IT APPEARS THE TERMS OF YOUR LEASE ALLOW FOR THESE DEDUCTIONS; BUT THERE IS AN ISSUE DIRECTLY ASSOCIATED WITH DEDUCTIONS.
THE STATE OF PENNSYLVANIA REQUIRES THAT ALL ROYALTY INTEREST BE AT LEAST 12%. THE ARGUMENT IS THAT IF DEDUCTIONS REDUCE THE LESSOR'S ROYALTY INTEREST BELOW 12% IS THIS A VIOLATION OF PA'S LAW. A NUMBER OF PA LAW FIRMS ARE SOLICITING LESSORS FOR THE PURPOSE OF INITIATING A CLASS ACTION LAWSUIT.
Except that many leases suggest disputes be arbitrated. You hire a lawyer (or rep), they hire a lawyer and then both parties agree on and jointly pay for a third. I don't believe an arbitrated agreement establishes 'case law'. You win, you enjoy. I could have the same lease but it wouldn't matter. Each has to decide if its worth it to fight a fight they're likely to win but is it economical? Dunno, just sayin. I think 'they' did the math. It may not pay most to fight but of those who might benefit, only a percentage of them will. There are a multitude of law firms who might also want to exploit the landowner too in this regard. Choose carefully.
do you know of any law firms doing this? I wouldn't mind asking them about it.
I REQUESTED YOU AS A FRIEND - YOU HAVE TO ACCEPT ME AS A FRIEND - THEN I CAN - AND WILL - COPY THE LETTER I RECEIVED AND ATTACH IT TO AN E-MAIL, AND SEND IT TO YOU.
This issue has already been taken all the way to the PA Supreme Court. Lawyers have made a lot of money, but no one else.
THANKS FOR THE UPDATE - I'M ONLY WHAT ? TWO AND HALF YEARS BEHIND !!!
That's not a problem, it's just that I know a number of people who spent a lot of money to argue it.
Before you signed the lease, did you have an attorney explain the contract to you ?