Deductions on Royalty checks

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?

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Replies to This Discussion

Permalink Reply by PLOVER on November 25, 2012 at 9:56am

 WHAT LEASE TERMS DO YOU HAVE, WHAT COMPANY DID YOU SIGN YOUR LEASE WITH?

Permalink Reply by Stan G on November 29, 2012 at 3:55am

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).

Permalink Reply by PLOVER on November 29, 2012 at 7:04am

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.

Permalink Reply by Tug Steward on November 29, 2012 at 8:06am

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.

Permalink Reply by Stan G on November 29, 2012 at 8:37am

do you know of any law firms doing this? I wouldn't mind asking them about it.

Permalink Reply by PLOVER on November 29, 2012 at 11:34am

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.

Permalink Reply by Wayne Miller on November 30, 2012 at 4:45am

 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.

http://oilandgas.jacksonkelly.com/2010/03/pennsylvania-supreme-cour...

Permalink Reply by PLOVER on November 30, 2012 at 8:09am

Permalink Reply by PLOVER on November 30, 2012 at 8:10am

Permalink Reply by PLOVER on November 30, 2012 at 8:14am

THANKS FOR THE UPDATE - I'M ONLY WHAT ? TWO AND HALF YEARS BEHIND !!!

Permalink Reply by Wayne Miller on November 30, 2012 at 10:43am

 That's not a problem, it's just that I know a number of people who spent a lot of money to argue it.

Permalink Reply by st. croix on February 23, 2014 at 2:20am

Before you signed the lease, did you have an attorney explain the contract to you ? 

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