Replies to This Discussion

Permalink Reply by George Brown on November 18, 2011 at 6:04pm

Gross royalty means you get paid your percentage based upon the volume of gas taken out of the ground.  Some leases try to pay you net royalties, after deductions.  Deductions can include too many things so you're better off going with a gross royalty rather than net of deductions.

Permalink Reply by owner on November 19, 2011 at 4:41am

Thanks George,

Is the 18% royaltly that shell is offering a gross royalty or the net royalty? 

Permalink Reply by 2s72s0k9mm8gd on November 19, 2011 at 6:52am

I am seeing alot of confusion on alot of threads about Royalties.

This Gross vs. Net terminology has to go.

To alleviate any more confusion let's start referring to  royalties as : With Deductions OR Without Deductions.

I have seen Gross described both ways , adding to everyone's confusion.

 

Permalink Reply by Joe on November 23, 2011 at 4:12am

So is gross without deductions the same as net with out deductions?

Permalink Reply by James Brink, Esq. on December 8, 2011 at 2:27am

Well, this is almost true.  We have seen "gross" royalty clauses where some deductions are not taken against the royalty but some are.  The most interesting version is that the gas company agreed not to deduct post production charges if it owns the stripping plant.  What if they use a third party to strip the gas?  Who pays these charges?  I'll give you one guess. . .

Permalink Reply by myles fetterhoff on November 24, 2011 at 6:37am

You must becareful with the pugh clause.  Some companies are putting another sentence in the next line behind the clause to undue the pugh clause just included in the line above.

Permalink Reply by James Brink, Esq. on December 8, 2011 at 2:24am

Good point.  We have seen Pugh clauses that will never trigger.  For example, we reviewed a Pugh clause recently that provided for the payment of $250 per acre for land not included in a unit for an additional 5 years after the expiration of the 5 year primary term and the 5 year extension.  This essentially creates a 15 year lease!  Folks see the bold title "Pugh Clause" in the addendum and think that they are covered.  This is not true.  Also, we attended an "informational" session offered by a large operator where the landman guaranteed the folks that ALL of their land will be included in one or more units eventually.  Show me where that is spelled out in writing in the lease or the addendum.  I'll save you the time - it's not.

Permalink Reply by myles fetterhoff on December 8, 2011 at 2:42am

I have a neighbor he and six other people have 340 acres pooled together and they get royalties on ten accres. while the oil company controls 340 acres and pay 50 in royalties every year.

Permalink Reply by myles fetterhoff on December 8, 2011 at 2:47am

Down in hermitage cabot working with shell.  They had a meeting and the royalties were state to be 3000 to 6000 per acre any comment on this news.  I tring attain a copy of the information from someone at work.  

Permalink Reply by James Brink, Esq. on December 8, 2011 at 3:22am

I would like to know when and where this meeting was held.  I have never heard of $6000 per acre anywhere other than in certain counties in Ohio.  And Cabot working with Shell?  This is news to me, also.  Maybe the same contract landman company is representing both companies, but I have not heard of a Cabot/Shell partnership in Mercer County, or anywhere else for that matter, at least publicly.

Permalink Reply by myles fetterhoff on December 8, 2011 at 5:49am

Well hill top offering at least 3000 per acrer with heaven - to hell clause.  the meeting was in hermitage and i will get a copy of the meeting three weeks ago held in the county. 

Permalink Reply by James Brink, Esq. on December 8, 2011 at 8:06am

I would be interested in seeing what you have.  I take it the "heaven to hell" clause you mention means that they are leasing all formations?  This is common unless you have a vertical Pugh clause.  I have seen other operators offering such clauses to the folks in Butler County. 

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