warning: new rip-off a-borning

With all the various means employed to rip off royalty holders, a new and most serious one is developing.

Oil and gas producers contract well ahead of time to sell their anticipated production downstream at a guaranteed price. With current prices falling as much as 50%, it would be in their interest to pay royalty holders only on the current price. Of course, if market prices rose over the contracted price, they could take the opposite tack and pay on the contracted price. Only an audit of the producer's contracts could reveal this scam. If your lease calls for royalties to be paid on the revenue actually received, it might be a good idea to invoke your audit rights. Only my opinion.

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Permalink Reply by Nancy Mosley on January 9, 2015 at 2:44pm

You could say that by the time they are ready to drill, the price of natural gas will be back up. This is cyclical, and with the exports of natural gas beginning in the next few years, as well as more power plants using natural gas and the expansion of CNG for the large trucks (Pickens plan) the price will go up and they will want our minerals.

Permalink Reply by Jim White on January 9, 2015 at 11:26pm

My Queen!

Permalink Reply by Nancy Mosley on January 10, 2015 at 6:44am

Oh Jim, how you talk!

I inherited my mineral rights in 2006, so saw big increases, then huge falls, then gradual increases, now some big oil declines and moderate gas declines. I expect the pattern will continue long into the future!

Permalink Reply by Ronald Robinette on January 9, 2015 at 12:19pm

There are many corrupt producers involved in leasing and drilling wells.  They use all means to rip off the lessor and that does include 'lying about the size of orifice plates in use in meters'.  Listing a smaller plate and giving a differential and pressure that is accurate can cheat the lessor out of 50 percent of their royalty.  Any lessor should know someone who has experience that can act as a friend, or for a reasonable amount will check the meters for accuracy and tell the lessor what the flowing amount is at different times of the month.  Perhaps negotiate a check meter the lessor operates as part of the lease agreement....It is worth the effort and sign no lease for any producer who is not willing to do that for the lessor.  Protect yourself.  With all the crooks in the investment business these days it simply pays to 'watch out for yourself'...

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