Beware of all the gas companies!

I signed two lease's back in 2011 with Gulfport Energy on 80 acres that I own in Belmont County, Ohio. Let me start by saying don't believe anything that any of the land men tell you, the are working for the gas companies and their own benefit not yours period. While I was negotiating my lease with several companies at the time in 2011. I clearly explained to them that any lease I would sign would require a Pugh clause, and that I would not except any lease that required me to pay any of the cost associated with the production or marketing of the finished product from any wells drilled onto my property. I ultimately ended up signing with Gulfport Energy because of the higher bonus payment and higher royalty percent, and the land man assured me the Pugh clause and the deduction clause weren't a problem, that a lot of people were requesting it. Well the land man was lying through his teeth after receiving my first royalty check and statement there were $14,574.11 in total deductions. Beware of any lease that includes the language below.

 

"All oil, gas or other proceeds accruing to Lessor under this lease or by state law shall be without monetary deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas and other proceeds produced hereunder to transform the product into marketable form; however, any such cost which result in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from Lessor’s share of production so long as they are based on Lessee’s actual cost of such enhancements.  However, in no event shall Lessor receive a price that is less than, or more than, the price received by Lessee."

 

It was explained to me that this was exactly what I wanted and that the second part of this clause only meant if they did any advertising to enhance the selling price of the finished product I would have some associated cost from that. Well I have since found out that this is the language that the big oil companies have adopted to lead land owners to believe that they are getting a no expense deducted clause in their lease. If you find this language in your current lease be assured be ready to pay every single cost that is associated with bringing the product to market. Don't sign it! Ask clearly for a no production cost clause and have it reviewed by a gas royalty attorney.

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on October 4, 2013 at 3:16am

People hate lawyers until they sign a bad lease and then wish that they called one.  Sorry for your situation. $14,500 is a heavy deduction and that stinks.

Permalink Reply by Darlene Newton on March 28, 2014 at 4:40am

Yes Marcus that is true but just as many with a lawyer signed with Chesapeake and they are being hit by deductions! 

Permalink Reply by David Smith on October 4, 2013 at 4:59am

If you're getting hit for $14,500 in deductions, I'm curious as to what your total payment was. Sounds to me like you're probably getting a check for more than what most people make in a year. If you're in on a Gulfport well you should be counting your blessings.

I'm sure there are plenty of people in surrounding counties that would love to be in your shoes.

Permalink Reply by lynn on October 4, 2013 at 2:39pm

What he's getting is not the point-it's what he's losing.  I doubt if the mineral owners in the surrounding counties would be happy to find they're losing roughly 20% of their royalties.

Permalink Reply by Kevin in Belmont County on October 5, 2013 at 5:00am

That is a question that is going to be answered I promise you that. I looked at it from that very perspective when I signed the lease. I was already giving them 80% of every gas or oil mineral right they could pull off my property for a mere 20% of what they make. And now through some slick gas and oil attorney's  wording in the lease and a lying land man they now feel entitled to take another 21% of what they supposedly agreed to in the lease. That is my exact reason for writing this,The gas and oil companies are raking in the cash from our properties, they throw the landowners some of the crumbs and then come back to pick some of them up. If anyone wants to research how this clause came about you can research it on line.This all came about from a law suit filed against another gas and oil company that I wont mention their name. But after they settled their suit, they changed this to the language in all of their lease's and it appears most of the other companies followed suit. If you think the gas and oil companies are your friends, think again!

Permalink Reply by Mary Albert on October 27, 2013 at 3:32pm

you need to deal with the companies direct not with landmen they are the liers

Permalink Reply by NY Gas Rights on January 4, 2014 at 6:36pm

Funny stuff, Kevin. So you think you are getting screwed by getting 100's of thousands in royalties that YOU could NEVER have gotten without the gas company. Face it, you got a very high paying lease that made you a partner in that well. You are making money on a product that YOU could never ever had gotten by yourself. And from the prices, your little 80 acres is doing a fantastic output. Again, this is happening when YOU could never ever do it yourself. Now your greed has you complaining about something that you are very very lucky to get at all. Your complaint is lie. You are a partner in your well and your are responsible for some of the expenses and profits. Try to grow up, stop being so greedy, and be thankful that you just happened to be on land that is producing such high numbers. You have no basis for a complaint at all.

Permalink Reply by Kevin in Belmont County on January 5, 2014 at 12:20am

Thanks NY Gas Rights,

Thanks much for your quite ignorant business reply to my position with the O&G company. Let me just say that this has nothing to do with production and profits. I have already informed the O&G company in question that I don't care if I make another dime off of this lease. This is about the negotiations of an agreement and then changing the meaning of that agreement with double talk from some slick talking attorney that the O&G companies pay to rip off landowners. I just found out the a large land group very close to my area ended up with the same enhancement clause in their contract and they were represented by three attorney's. Some members of this group are quite upset about this matter. And as for my little 80 acres it may be a little 80 acres, but its my 80 acres and if it weren't for landowners like myself and thousands of others where are the O&G companies going to set their rigs up. This is about corporate Americas greed and deception to rape and cheat the little guy out off what is rightfully theirs. I owned the mineral rights and it was up to the O&G company to hold up to their end of the agreement that their land man negotiated with me. And on a personal note here, I really don't care about some ones opinion that doesn't even have the guts to use their real name on here! Grow a set NY Gas Rights!

 

Permalink Reply by Joseph-Ohio on November 10, 2013 at 1:45pm
Reads like : ' ......there will be no deductions from the landowner's royalty however there will be deductions from the landowner's royalty.... '

Reads like pure double talk.

Utter nonsense.

All only IMHO.


Good luck PA landowners - set a precedent all states can reference.

Good luck OH landowners.
Permalink Reply by Darlene Newton on November 10, 2013 at 12:24pm

Well Mr Smith I am a land owner that had to pay back over 65000.00 because Chesapeake took everything back they verbally promised.  I paid my taxes , I put money into my property I signed on for the good of the people and the jobs it would bring!  Well let me tell you Mr. Smith they took all that GD money back!  I disagree with you a lot of these people with big checks have been farmers not able to pay their taxes.  When I hear comments like yours it ticks me off because I worked my butt off to have what I have and Chesapeake has destroyed our home!  Mr. Smith it is our Politicians to blame, they blind sided us , they knew they were coming!  Not one POLITICIAN stood to protect the landowner, JUST steal the money back in taxes, fees, enhancements!  The Politicians like Gov Corbett and Senator Yaw have lined their pockets and have stomped on the livelihoods of GOOD AMERICANS!  Neither of them have helped push to to fix this problem and the longer they let it go the more they steal and does nothing but create Rage in a community of good people!  It will all come back in their faces and I hope they pay dearly!

Permalink Reply by Kevin in Belmont County on November 10, 2013 at 11:02pm

Darlene,

I am very sorry to hear what happened to you and your family. and I think you are dead on with your comments about these politicians in all the states that are so called experiencing the O&G boom. My fiancé owns a 120 acre farm in Armstrong county Pennsylvania that has 3 shallow gas wells that are barely producing anything $100.00 a month royalty. But rather than giving these land owners the ability to negotiate new lease's she is locked in to a 12.5% lease and no signing bonus with no ability to renegotiate. Even though the technology never existed to recover this deep gas and oil when she signed her original lease. The fine governor of Pennsylvania stood up to the plate and really put it to the landowners. And I hope you are right when it comes time for re-election I hope the people rise up and speak with their vote.

Permalink Reply by Kevin in Belmont County on November 10, 2013 at 11:12pm

And I forgot to mention, the tax laws are changing next year on O&G royalties. Here in The wonderful state of Ohio between the feds and the state you will be paying right around 50% of every dollar you earn it royalties. So gas O&G company takes 20% in deductions, federal and state governments take right around 50% so the land owners get about 30%. Then if you spend it you get taxed, you try to invest or save any of it you get taxed. Taxation without representation there is something really wrong in this country. I don't know about anyone else on here agreeing to give up at least 70% of everything they earn, but I sure as heck don't remember doing it!

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