Deductions

General Mineral Rights Discussion
1

If my lease in Texas has the wording listed at the bottom, are they supposed to be deducting cost for Transportation and Marketing?

On my oil royalties from Shell Trading I have no deductions. From my Casinghead royalties (different purchaser) I have deduction for Transportation, Marketing and PRC whatever that stands for. Last year this totaled in excess of $1,800

(B) Deliver to Lessor, free of cost, in the tanks or pipelines to which wells may be connected an additional equal ten percent (10%) part of all oil produced and saved from the leased premises or at the option of the Lessor ten percent (10%) of the value of all oil produced and saved from the leased premises, and ten percent (10%) of the market value at the well of all gas produced and saved from the leased premises.

2

Unfortunately, Texas courts have held that the phrase 'market value at the well' means that if the gas is sold at the processing plant or other place off the well, then all costs incurred between the well and point of sale can charged back against the revenues. Some companies list those charges which at least tells you the gross sales price and costs. Other companies bury the costs by deducting them to get to net revenues and then showing only one line. So their sales price looks a lot lower.

3

Thanks Tennis I really appreciate your explanation on this matter.