I would like to know if anybody has signed a zero deduction lease. I have not yet found a company to agree to this, some say their lease is, my attorney says its not.
I agree Evan, but I have read on here before about people signing a gross lease.
I know of people that signed a gross lease and there was still deductions taken out. They will find a way for sure
We signed our lease that is a 20% gross royalty of the proceeds from an arms length transaction,in the event the products are sold to an affiliated entity,and that entity sells for a higher price,the value of royaty is figured on the highest price. under "cost of production", The lessor's royalty shall not bear or be charged with,directly or indirectly, any cost or expense incurred by lessee for exploring,drilling,testing,completing,equipping,separating,dehydrating,transporting,compressing,treating,gathering,or marketing of gas,oil,or any hydrocarbons. BUT, lessor shall bear its proportionate share of severance and other taxes assessed against its interest or its share of production. SO , even with a good lease, there ARE gonna be deductions. Don't know what the lessor's share of taxes will be. In Ohio, not too bad as of now. If the gubbner has his way, could be lots more!
not sure how this will hold up..........but this is the ALOV language;
(a) Percentage. The royalties payable to the Lessor under this Lease shall be on a well by well basis. As to each and every well completed as a producer of oil and/or gas on the Leased Premises or on lands pooled therewith, the royalties paid to Lessor shall be _________ percent (___%) of all the oil, gas and casinghead gas and casinghead gasoline removed or recovered from the Leased Premises or, at Lessor’s option (which shall be presumed to be exercised unless Lessor advises Lessee to the contrary prior to any applicable production month) the Gross Proceeds (as hereinafter defined in paragraph (d)) of the total gross production attributable to the applicable well.
(b) Determination of Royalty Amount Lessee covenants and agrees:
(i) To sell and execute division orders for the sale of all oil,condensate, casinghead gasoline and liquid hydrocarbons produced and saved by Lesseefrom the Leased Premises, including Lessor’s share with Lessee’s share and shall payLessor royalty (in accordance with paragraph (a) above), where applicable, based on the Gross Proceeds paid to Lessee or any Affiliate (as hereafter defined in paragraph (c)) of Lessee from the sale. From time to time, at the option of Lessor, to deliver or cause to be delivered to the credit of Lessor, in the pipeline or tanks to which Lessee may connect its wells, percentages (in accordance with paragraph (a) above) of all oil, condensate,casinghead gasoline and liquid hydrocarbons produced and saved from the LeasedPremises;
(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
(2) the Gross Proceeds, paid to an Affiliate of Lessee, computed at the point of sale, for gas sold by Lessee to an Affiliate of Lessee, and
(3) the market value at the point of use, when used by Lessee.
(iii) To pay Lessor on all other byproducts and/or constituents marketed or utilized by Lessee from the Leased Premises, in accordance with paragraph (a), the percentages of the Gross Proceeds paid at the point of sale.
(c) Affiliates. For purposes of this Lease, an “Affiliate of Lessee” is any corporation, firm or other entity in which Lessee, or any parent company, subsidiary or affiliate of Lessee, owns an interest of more than ten percent (10%) whether by stock ownership or otherwise, or over which Lessee or any parent company or Affiliate of Lessee exercises any degree of control, directly or indirectly, by ownership, interlocking directorate, or in any other manner; and any corporation, firm or other entity which owns any interest in Lessee, whether by stock ownership or otherwise, or which exercises any degree of control, directly or indirectly, over Lessee, by stock ownership, interlocking directorate, or in any other manner.
(d) Gross Proceeds. For purposes of this Lease, “Gross Proceeds” means the total consideration paid for oil, gas, casinghead gas, casinghead gasoline, associated hydrocarbons, and marketable by-products, produced from the Leased Premises or consideration for relinquishing any rights relating to this Lease whether in the form of payments, bonuses, premiums, pre-payments for future production or delivery of production at a future time, or sums paid to compromise claims relating to payment obligations with the following exceptions:
(i) If gas produced from the Leased Premises is processed for the recovery of liquefiable hydrocarbon products prior to sale, and if such processing plant is not owned by Lessee or any Affiliate of Lessee, Lessor’s royalty shall be calculated based upon the consideration paid to Lessee (or any Affiliate of Lessee) from Lessee’s (or Lessee’s Affiliate’s) sale of such liquefiable hydrocarbons and residue gas.
(ii) If gas produced from the Leased Premises is processed for the recovery of liquefiable hydrocarbon products prior to sale, and if such processing plant is owned by Lessee or any Affiliate of Lessee, Lessor’s royalty shall be calculated based on (a) the gross proceeds (without deduction for costs of processing) paid to Lessee (or any Affiliate of Lessee) from the sale of all products extracted from such gas, plus (b) the total consideration paid to Lessee (or any Affiliate of Lessee) from the sale of all residue gas.
(iii) If oil or gas production from the Leased Premises is produced in a plant for the extraction of gasoline, hydrocarbons or other products, the value of the Gross Production shall, for purposes of determining royalty due, never be less than if such gas had not been processed.
(iv) Lessee shall pay to the Lessor royalty at the applicable royalty rate (paragraph (a)) on any monetary settlement received by Lessee from any breach of contract by Lessee’s purchaser relating to the marketing, pricing, or taking of oil or gas production from the Leased Premises.
(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, at no cost to 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.
This protects the landowner from production deductions. Does it do the same for post-production deductions? PA landowners signing early leases have not reaped the royalty rewards they expected because this wording was overlooked.
What would be considered"post production deductions"? After the products are sold to whoever,what other costs could there be? tax is the only thing I can think of.
beware the only one offering that was Great River and Mclendons posse. Paloma did it too but only on the quick leases they sold for a profit to AEP/McClendon.
They will not honor it. The didn't even honor the lease bonus payments people are still waiting over 9 months for leases signed last summer. On the GRE lease it was 120 days.