Our lease calls for us to bear “20% of the cost of treating oil to render it marketable pipe line oil.” Does anyone know if this 20% is somewhat standard? I’m trying to figure out from looking at statements, what, if anything, they are actually charging us for this. I know I need to talk to the company , but if they have a bunch of different percentages to deal with, it may be more likely they’d make a mistake & just charge everyone the same. That’s why I wonder if 20% is somewhat standard.
I am not familiar with such language. Presumably the royalty rate is 20%. A lot depends on the state where your minerals are located and all the other terms and provisions of the lease. Does the lease define what constitutes such treating costs? Are you being charged costs on your royalty check detail?
Thanks for your reply. Our royalty rate is 20% also. Yes we’re being charged 20% “processing” which is deducted from royalty checks. But from where it appears on the statement next to each little batch of gas sold, it looks like it is probably just to separate the gas from the oil. (The statement is not fun to read.) Our lease doesn’t define exactly what is done to make the oil ready for the pipeline. Perhaps the 20% processing charge in the lease is simply to make it match the royalty rate to keep the accounting formula simple. Thanks again for your time & response.
AJ, I haven’t seen a charge like that either. If you don’t mind saying, I’m curious which State your mineral interest is located in and how long ago that lease was signed?
Processing is generally some of the charges by the gas processing plant. Some operators break out gas gathering, transportation, marketing and other charges and others combine various costs or only charge one or more. Oil, gas and produced water are separated at the well and then gas goes into the pipeline and water is piped to a disposal well and oil may be picked up by truck or pipelined. If there are multiple wells under one lease number, then then production may go to a central tank battery for separation. A lot depends on your state and operator. All states require production reports to be filed.
Hi Dusty: Wyoming. Which is a pretty good state for mineral rights owners because of their excellent O&G web site.
Thanks Tennis. This is very helpful. I know a bit about oil wells themselves, but almost nothing about processing. I’m hoping eventually someone will address the CO2 pipeline proposal for WY that would provide CO2 to replace some of the H2O currently used in fracking & thus sequester much of it. I think Denbury is doing something like that. But that is getting off the subject. Thanks again for your response. I’ll save the info you kindly provided.
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