Wetzel County EQT Deductions

Our EQT Big 333 well pad went on line in April.  We have received our first two royalty checks. We have a 1901 lease with a flat rate of 1/8th.  Our pooling agreement makes no statement one way or another about deductions of any form.  EQT has been withholding 8-9% for what they list as "Gross Deducts".  For just two months this amount is $905,752.  EQT claims that they are allowed "Deducts" because our original 1901 lease is a "flat lease".  Is anyone else having problems with EQT taking improper deductions?  I know we need to hire a competent O&G attorney... just checking to see if there are enough others in a similar situation to warrant a class action lawsuit.

Views: 4033

▶ Reply to This

Replies to This Discussion

Permalink Reply by Jim White on July 21, 2014 at 3:24pm

Just a word of caution for others with these old flat rate leases or just any lease without a pooling agreement. We were in this exact situation with the same company. You need to think of/treat any pooling amendment just as if it was an original lease and get as many concessions added into the amendment as you can. Issues such as deductions should be specifically dealt with in the amendment. 

Permalink Reply by Nancy Mosley on July 21, 2014 at 3:29pm

Thanks for that good advice, Jim. Wish I had thought of it a few years ago.

Permalink Reply by Marcus Huey on July 22, 2014 at 12:16pm

UPDATE...

My cousin, who is also on this lease, just spoke with EQT.  EQT is claiming that our 1901 lease is 1/8th for oil only.  The lease only requires EQT to pay $300 per year for gas.  So they feel that they are entitled to take whatever deductions they want since they are paying us more than $300 per year for our gas.  

I will NEVER sign another lease with EQT.

Permalink Reply by Nancy Mosley on July 22, 2014 at 12:51pm

As I understand it, around 1980 the WV legislature ruled that any future gas wells drilled on old flat rate leases would be minimum of 1/8 (12.5%) royalty. Old flat rate wells would continue to be flat rate (in your case $300 / year). So the problem apparently is not the flat rate but the fact that the lease does not clearly say no deductions. Same problem as the Pennsylvania leases. As I understand it!

Permalink Reply by Jim White on July 24, 2014 at 5:39am

Nancy

A flat rate lease ceases to be such once an amendment is signed and a new well is drilled. I can't imagine EQT not putting in language about deductions. Without it, it seems that if they say 1/8, then they will have to pay 1/8. This is unless there is some court case saying that they can do otherwise. Their amendment will probably state that the original lease is ratified as valid. I suppose you then go to any terms in that lease, but there won't/shouldn't be any terms as to deductions if it was a flat rate. This sounds like a "we are going to do it until a court says we can't" type of argument. Costly, but with that much money at stake, a necessary must do.

Permalink Reply by Marcus Huey on July 24, 2014 at 11:07am

We just got off the phone from another conversation with EQT.  The EQT rep stated "because the 1901 lease does not say that we can not take deductions, then we are interpreting the lease to mean that we can take deductions".

The 1979 WV law was written specifically to address this issue and to guarantee that WV royalty holders received a minimum of "1/8 at the wellhead".

I have no doubt that EQT knows they are 100% in the wrong, they just want to hold onto our money until a judge tells them that they have to give it up.

I believe in Karma.  EQT will get what's coming to them some day.

Permalink Reply by Kyle Nuttall on July 28, 2014 at 4:45am

EQT knows all about Tawney.  Document every communication you have with them.  Email when possible, and write letters that summarize your phone and face-to-face conversations with them.  That way, when they do take deductions, you can throw a paper trail at them when you threaten to take them to court.

Permalink Reply by Marcus Huey on July 28, 2014 at 6:25am

Thanks Kyle.  We have been sending letters to EQT...registered mail. And saving emails and writing down phone conversations.  We have also filed complaints with the West Virginia Attorney Generals office. I will keep everyone posted.  Hopefully others will not have to go through this.

Two other things EQT is doing to us...

Taking out "Severance" from checks for people who reside in West Virginia.

Not paying an increase for wet gas.  Our wells are in the richest wet gas region in America and our wells are less than 2 miles from the Mobley processing plant.  EQT is making a killing from breaking down this wet gas and keeping the profit for themselves, in my opinion.

Permalink Reply by Jim White on August 6, 2014 at 5:26pm

Was searching for HBP/paying quantity issue and ran across this.

http://www.klgates.com/files/tempFiles/ae65b741-ef13-440e-a24f-9184...

Talks some about WV law. In wellman vs. energy resources Inc.

552 S.E. 2nd 254 (WV 2001) the court held that unless it is in the lease, the leasee bears all costs for exploration, marketing, and transporting the product to the point of sale. Download the pdf above and go to page 184 and keep reading till you get to the royalty calculations part. Hope this helps.

Permalink Reply by Nancy Mosley on August 7, 2014 at 4:18am

Thanks a lot for that, Jim! very informative. I think I need that information...

Permalink Reply by Marcus Huey on August 6, 2014 at 5:45pm
Thank you Jim! EQT refuses to budge..time to lawyer up. Will keep you all posted.
Permalink Reply by bungalow_steve on August 7, 2014 at 4:23am

Marcus,

It all depends on whether you lease says "royalty based on proceeds received by the lessee" or "royalty based on wellhead price".

 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service