Royalty Manipulation Clause (new idea??)

  1. Ok so since the shale boom there have been so many lawsuits around oil and gas companies skimming off the gross royalty and charging deductions.  How many land owner attorneys even gave their blessing to Chesapeake's market enhancement clause.  Good grief!  But there have been numerous bad royalty payers of which it seems they force the hand of royalty owners to sue for the royalty due, but then later settle in n court.  Still, a win win for the industry and it seems some companies have made the strategy part if their business model.  There are many royalty owner friendlyclauses because of past industry abuse but I have not seen one regarding royalty manipulation.  Perhaps a new lease clause should be saught by royalty owners specifying punitive damage fees for unauthorized deductions determined by a court of law or arbitration.  Perhaps the clause should read to include full back payment plus 25% punitive damages.  I think it's necessary and I'm sure a competent attorney who did not give their blessing to market enhancement clauses could dress up a Royalty Manipulation Clause to have the necessary teeth and legal language to make royalty and deduction manipulators think twice.

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Permalink Reply by WV Mineral Owner on November 2, 2018 at 4:26am
Why limit the damage to 25%? Allow a jury to set punitive damages, which can be greater than 25%.
Permalink Reply by Inchworm antenna on November 3, 2018 at 5:30pm

Ageed, but in the mean time......a clause like this could easily stipulate the arbitrator or courtmay determine if the operator was manipulating royalty that the punitive damages plus back pay be made.  

Permalink Reply by Inchworm antenna on November 4, 2018 at 10:52am

That would be good for groups to demand and when it starts gaining popularity it could be standard for good companies to start listing as standard addendum language.  Like all good clauses there was starting point inception.

Permalink Reply by PETE on December 15, 2018 at 10:14am

Mine says if I have to take them to court and win they are responsible for attorney fews and 125% of the award

Permalink Reply by WV Mineral Owner on December 15, 2018 at 10:26am

Pete,

I have never seen that clause before, but tip my hat to you for being able to negotiate it.

Congrats, Well Done

Permalink Reply by Inchworm antenna on December 15, 2018 at 3:01pm

Outstanding Pete, maybe more royalty owners will take heed in how to stop royalty manipulation.

Permalink Reply by william george allison on December 17, 2018 at 7:28am

Wv mineral owner do you have an idea on what mineral rights would be worth in Brooke county wv already into second term leased ?

Permalink Reply by WV Mineral Owner on December 17, 2018 at 8:22am

William,

I am not as familiar with Brooke County as I am other areas, but have a general idea.  There are factors in Brooke County that are not as significant in the areas I have minerals, primarily who the lease is with.  My understanding is that EQT, StatOil and what was once Chesapeake are the larger producers.  Equally, if there is a current shallow well producing on the tract and what royalty % is involved.

That said, I imagine $4,000.00 / Net Mineral Acre is a ballpark figure.  If you wish to share more details in a private email on this site, I will try to give you a better estimate as to a fair market value.

Cheers

Permalink Reply by Joseph-Ohio on December 17, 2018 at 5:41am
Nothing good about the obfuscational contractual double speak grief the E & P Companies bring to the land / mineral owners. Those that do ought to be run out of the business. JMHO.

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