Ohio Royalty Owners - Beware!

Several discussions posted on this site have discussed the outrageous deductions taken from the royalties of landowners in PA. Landowners in Ohio may feel a sense of security since there have not been many stories of similar nature here in Ohio. This is a false sense of security.

Production in Ohio is fairly new so royalty checks are just beginning to come in. However, the questions about deductions are beginning to trickle in. It won't be long until we see the same shenanigans here in Ohio that landowners in PA have become all too familiar with.

I know many reading this post feel safe since they have some form of "gross royalty" clause in their leases. You shouldn't feel safe, many of the landowners being "cheated" in PA have similar clauses. It appears that the companies involved are playing a game of catch me if you can. The companies flagrantly disregard these clauses and take deductions that are supposedly not permitted.

What to do ? When the royalty payments begin to arrive you should have your lease and royalty statement reviewed by a competent attorney and or accountant. Yes this is going to cost you money but the amount you may save will be far and above that cost. BTW, when I say competent I mean someone or a firm that specializes in oil and gas law and accounting. Don't use your cousin Vinnie or your niece that just graduated from Law school because they won't charge much, you get what you pay for.

Below is a blog posted by a knowledgeable attorney;

http://hhmlaw.com/blog/considerations-addressing-royal-frustration-...

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Replies to This Discussion

Permalink Reply by JK on February 19, 2014 at 4:47am

The 'catch me if you can' has been done by multible class action law suits in WV against CHK.

They did get majorly caught and paid out huge amounts in the millions to landowners.

And here we are again with CHK doing the same thing they were caught for before!

SO get ready because it is being discovered and there are some lawyers who will take the same course of action.  I hope they get fined big bucks too. It's the same story!!

Pay backs are h**...

Permalink Reply by Mark McGrail on February 19, 2014 at 5:15am

JK,

I'm glad you posted this response.

Landowners should always be on alert. Spending money to have your royalty statement reviewed (regularly) is money well spent.

Permalink Reply by evan on February 19, 2014 at 5:17am
This is a good reason to sell half of your royalties. So you have somewhat of a watchdog
Permalink Reply by Philip Brutz on February 19, 2014 at 5:17am

Mark, thanks for posting this link.

Permalink Reply by INVICTUS on February 19, 2014 at 7:29am

I am in the process of preparing for this via my audit rights within my lease.

The firms that I currently interviewing are strong local firms in the NE Ohio area.

Guess what I've discovered: These horizontal wells ain't nothin' like the old Belden & Blake or MB Operating Clinton/Berea vertical well Leases that we see everyday in Ohio.

This is an entirely new game - and NONE of the very good accounting firms I spoke of CURRENTLY know how to approach this unique challenge.

SSOOOO, some are preparing to partner with major national/International accounting firms in this new area of expertise.

What's it going to cost? I'm allotting $15k-$20k per year to do this.

Expensive? Yes.   But if we are talking 7 figure royalties...it's a bargain, in my view.

Farmers! This is NOT found money!  It's business and Chesapeake is our partner.

Well, treat it like a partner, expectations are on both sides of the aisle: Loyalty is a two-way street.

The one problem I see with selling a portion of one's mineral rights:

What is the plan if Chesapeake gets sold or absorbed?

And

What is the expertise of the one who bought the mineral rights or the Royalty rights and what is their obligation to the leaseholder to report the audit info to the leaseholder?

What if the right's buyer itself sells/assigns the rights to someone else?

Permalink Reply by Fred Flintlock on February 19, 2014 at 8:31am

Do you own the whole unit for 7 figures a year?

Permalink Reply by Booger on February 19, 2014 at 9:09am

you wouldn't even need 25% of the unit to realize 7 figures in the core.

Permalink Reply by evan on February 19, 2014 at 2:22pm

I agree with some of your concerns about selling. Never looked at it from the point of view that if you sell mineral rights they could re sell it and there goes the partner you thought you had.  I suppose you could get it in the paperwork stating that you have a right to Whoever ends up with it in the end. Alot to think about

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