Deductions from royalty check any Idea????

Does anyone have a Idea.Just got my first check they took almost 50%.

 

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Permalink Reply by Carol on August 8, 2012 at 8:49am

I should have included that information in my first comment since the unit size, number of wells, and amount of land owned, among other factors, all affect the amount of royalties received.   I am glad I signed with no deductions - the checks have varied so much that I can't even imagine deductions being taken out of them.  I know most, if not all, of the other people in the unit have 12.5% royalties and deductions - I signed for 16%, no deductions.   

Permalink Reply by joe pierson on July 29, 2012 at 6:36am

Philip,

The deductions are a fixed cost per 1000 cubic foot of gas produced, typically 50 cents to $1.00. Since gas is very low now, selling under $1 at some places in the country, that represents 50% or more of the total gross money gas companies receives. If gas was selling at $10, the total deductions would be 5% to 10% of the gross. Since gas has been rising recently, your percentage deductions will go down. Good luck.

 

Permalink Reply by PLOVER on July 30, 2012 at 11:25am

HAS THE ORIGINAL QUESTION THAT PHILIP ANGELO ASKED, BEEN ANSWERED? I TO RECEIVED A ROYALTY STATEMENT WITH - A CODE- UA - LINE VARIATION SHOWN AS A DEDUCTION - I HAVE THE BELOW INFORMATION, BUT I'M NOT SURE IF IT APPLIES ? -- OR IT'S JUST A PIECE OF THE PUZZLE .. Paid royalties for all gas produced from a landowner's lease is based on the Unit Value of the Natural Gas. After metering the gas the royalty rate is adjusted and based on the BTU content of the gas. The BTU content, which refers to British Thermal Unit, is a measure of the heat content of the gas. For a variance in the BTU content either above or below the standard of 1,000 BTU's per cubic foot. the energy company increases or decreases landowners royalty payments proportionately, based on the gas rate paid.

Permalink Reply by PHILIP ANGELO on July 30, 2012 at 12:27pm

Still don't get it. why all the smoke and mirrors

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 30, 2012 at 3:05pm

Phillip it only appears to be "smoke and mirrors because you are unfamiliar with all of the terms of your lease (what the lessee is contractually allowed to deduct from your royalty proceeds.  Only you can answer what John has asked.  Have your question(s) been answered? 

Permalink Reply by PHILIP ANGELO on July 30, 2012 at 3:15pm

So the basicly you are getting paid for btu's not mmcf of gas pumped out of the well? they make the adjustment

 

 

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 30, 2012 at 3:42pm

Again Phillip, it would depend upon what your lease states, but 99.999% of the time, yes... you get paid for MMbtu's not MMcf's.  This generally operates in your favor since more often than not the Btu's exceed 1,000.  Which would mean you get an upward adjustment, not a downward adjustment.  Chances are you are getting hit with deductions for gathering, compression, dehydration, etc which are all post production expenses... the legitimacy of these deductions will be dictated by your lease terms.  As somebody else has stated, the vast majority of these costs are on a MMbtu or MMcf basis and as natural gas prices increase the percentage that these represent will decline. 

Permalink Reply by PHILIP ANGELO on July 30, 2012 at 3:47pm

Thank You.

2pwt9ru4672sqPermalink Reply by 2pwt9ru4672sq on July 30, 2012 at 4:36pm

Philip, you are very welcome.  I likely didn't provide you with the answer you wanted to hear but hopefully it provided you with insights into how you are being paid and what your statement means. 

Best of luck

Permalink Reply by PLOVER on July 30, 2012 at 4:42pm

UNFORTUNATELY THERE ARE A NUMBER OF OTHER FACTORS THAT ENTER INTO THIS EQUATION - CHESAPEAKE USES UA - LINE VARIANCE -

STATOIL - USES LEASE GROSS DEDUCTION - BOTH DEDUCT AMOUNTS FROM THE LEASE GROSS VOLUME AT WELLHEAD - THIS APPEARS TO ENABLE THEM TO PUT IN AMOUNTS THAT THEY ALONE CAN CLAIM WITHOUT VERIFICATION - THE LANDOWNER HAS NO METRICS TO EVALUATE THESE FIGURES.

DEPENDING ON YOUR LEASE YOU MAY BE ABLE TO  REFUTE THEIR FIGURES.

MY LEASE (A FRIENDSVILLE LEASE) STATES -

"Royalty", "Royalty Interest", "Lessor's Royalty" or "Royalty Share," wherever used herein, shall mean twenty percent (20%) of one hundred percent (100%) of the Sales Price of all Oil and Gas produced, saved or sold from a Well on the Leased Premises or a Unit in which a portion of the Leased Premises is located. The Sales Price for the Oil  and  Gas  shall  be  determined  at  the Wellhead,  adjusted  for  BTU  content,  without  deductions  for,  gathering, separation, transportation, marketing, compression, dehydration, line loss, Production Taxes of whatever type and kind, compression fuel, pumping costs or other costs of the Lessee, of whatever type or kind, associated with the production of the Oil and Gas.  The volume and/or heating value of the Oil and Gas produced from a Well or the Leased Premises or a Unit in which a portion of the Leased Premises is located shall be measured before the Oil and Gas leaves the Leased Premises and/or Unit.

 

SO I AM IN A POSITION TO QUESTION THE VALUES OF THEIR DEDUCTIONS. 

 

BUT IT APPEARS THAT THE METERED BTU AT WELLHEAD, NOT THE VOLUME FLOW,  IS THE

DEFINING FIGURE ON "WITCH" TO QUALIFY AND QUANTIFY THE DEDUCTIONS THE ENERGY COMPANIES ARE CREATING TO ENHANCE THEIR PROFIT MARGIN.

 

 




Permalink Reply by DONALD MCNAUGHTON on July 30, 2012 at 4:53pm

JOHN I GUESS YOU JUST HAVE TO TRUST THEM ! HAVE THEY EVER OFFERED TO LET YOU LOOK AT THE METER THAT THEY ARE GETTING THE READINGS FROM?

Permalink Reply by Jack Straw on July 31, 2012 at 2:14pm

Around fifty years ago, one of the jobs that I had in order to work my way through college was working as a Roustabout for what was (at that time) one of the larger PA producers.

At that time, the state of PA did not check the accuracy of meters on gas wells - they checked on the scales in the corner meat market, but not gas well meters.

At that time, if the operator wished, the operator could charge a landowner with tresspass should they enter the meter house (a small tin shack, the size of a one-hole outhouse). They could be threatened with charges of tresspass for entering a meter house located on their property.

Many wells had drying tanks on wells that produced only a small amount of water to remove the water that the particular well would produce. The company I worked for had the habit of placing the drying tank after the meter. In this fashion, the meter was prone to freeze up during the colder winter months. When the meter freezes up, it does not record production - and the operator got the gas royalty free. There is no reason why the meter should not have been located after the drying tank - except to cheat the landowner. The winter months are the months of lower line pressure, and when the wells should normally produce at their highest rate - but if the meter was frozen, no production would be metered.

Another much more insidious trick was to place an inappropriate orifice in the meter. You can think of the meter arrangement as a "shunt resistor". Particular meters were designed to be used with an orifice of a particular size. What they would do is place a 3/8" orifice in a meter that was designed/calibrated to use a 1/4" orifice. In this fashion the meter systematically under reported the amount of gas going into the pipeline. There is no reason why a meter should not have the correct orifice - except to cheat the landowner.  

Encouraging the meter to freeze up was a "sin of omission"; installing an oversized orifice was a "sin of commission".

Fifty years ago, the fox was in the hen house and the farmer was asleep.

Fifty years ago, the state of PA did not check the accuracy of meters on gas wells.

Has anything changed in that regard?

Would someone knowledgeable please post whether (or not) the state of PA does today check the accuracy of meters on gas wells.

Some who read what I have just posted will likely question the veracity of what I state I observed around fifty years ago - but I assure you that I was there and I know what I saw occur.

 

JS

 

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