My name is robert. I’m an attorney practicing in Texas. I am currently researching an issue concerning the COPAS fixed fee overhead charge. The fixed fee is charged to the non operating working interest owners to reimburse the operator for its overhead. IlAs per COPAS it is not intended to result in an operator’s profit at the expense of the non operator. The overhead fee is adjusted annually by changes in oilfield labor indexes. The result, particularly on older wells, is that the overhead fee is the single largest expense and often results in a well being unprofitable. I would greatly appreciate knowing if anyone has this issue.
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I have 42 years experience in the industry both as an operator and as a non-operating WI partner. I have seen both sides of the issue. Certainly COPAS can be abused, but it can also be challenged in most standard JOA’s. If anyone thinks they can do it for less they can demand that the Operator either turn over operations, or lower the rate. Alternatively, if a well has become uneconomic to a non-op owner, the owner can quit-claim their interest to the Operator by pre-paying their pro rata abandonment costs. No one is obligated to lose money for the benefit of the Operator.
COPAS is typically set to compensate the Operator for their administrative costs. These include receiving and paying third-party invoices, processing and distributing revenue, preparing JIB’s, and filing required regulatory reports. There are also 1099’s to be sent. All of these functions are required for an older well too. Reducing the size of the numbers in the process unfortunately doesn’t reduce the size of the process.
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