I have an oil company that is telling me that the cost to sale the gas from the oil wells is the same as the value of the gas produced, therefore I do not receive any royalties.
Example from one of my checks: Gas produced 905.21 mcf valued at $2,579.85, GTO1 (gather trans other excess deduct) is $2,579.85. My share of this is $37.67 with Deduction of $37.67.
How can this be right? Is there any way to fight against this?
No matter what the price of gas is going for, the GTO is always the same cost.
The company is Exco so most knowledgeable people on this site will know about them. They have not paid any royalties on the gas from these wells since 2014. They say it was due to charges from having to sell the gas to Chesapeake from the contract to purchase the wells in 2013. Then in 2016 they started flare all gas with permission from RRC. It looks like now that they have started to sell some of the gas since they are completing their bankruptcy and they have gone back to saying the GTO cost the same amount as the value of the gas.
I’m looking for suggestions or help in how to tackle this problem if there is any. Any help will be appreciated.
Location is in Dimmit County TX
I inherited this lease from my parents. Lease signed in 2006 and I know it does allow for them to deduct my share of gathering and transportation. My main concern is that the cost of GTO is the same value as the Gas sold.
Thank you for you reply. I figured as much, but attorneys cost so much. Since Exco has started selling the gas again only on a couple of wells, my royalties are at about $100.00 at the moment. I guess I could let it run for about a year to accumulate and maybe get something started within the 4 years of the statute of limitations. Gathering as much info as I can and also trying to make them come to their senses that what they are doing is not right (if that is possible with an oil company). I’m pretty sure they are doing this to all their royalty owners (I know they are with 9 of my family members) with any lease that allows for deductions. If only we could get a group together to go after them. Thank you again.
For a start try posting something regarding your problem in the Dimmit County section of the forum. You get there by going to Counties at the top of this page, then Texas, then Dimmit. If you’ll explain there the wells or specific area you are talking about, someone in that area might pick up on your idea.
Depending how motivated you are, you could also try researching the deed records to find the owner names that were listed when the operator recorded the unit formation documents, or check ownership records for your area on the Dimmit County Appraisal District’s map (although surface and mineral ownerships don’t always match). It would take some digging but get some names and calling or writing others who are leased to your same operator might get the ball rolling.
Thank you for replying, I already know the other owners in the wells. I am looking for anyone else in other wells and if this a statewide problem for other mineral owners. Also looking for any court cases pending or settled. I will re-post my questions in the Dimmit County or other sections.
Don’t know if it will help but another place to cross check the monthly gas sales revenue and expenses being reported on those wells is the State Comptroller’s website CONG. Here is a link if you aren’t familiar with that site. https://mycpa.cpa.state.tx.us/cong/checkDigitForward.do
I do know about the State Comptroller reports. I download them regularly. So far what the operator reports on the check stub matches what they turn into the State, it’s just that the cost to sell the gas is the exact amount as the value of the gas.
I have also used Google scholar. I’ve found many cases about post-production deductions but not any thing that matches my problem. Thank you for your help.
Perhaps the operator would claim the actual expenses exceed the revenues in total, but is limiting costs to the sales. Otherwise your net royalty would end up negative.
If this is true, then they are a very poorly run business and not a prudent operator. Cheaters and Thieves. Not much point in leasing your minerals if you are going to have to pay to get ride of them. Thankfully I’ve had a cost free royalty lease since inherited.
Your lucky. We have/had royalties from a well in Divide Cnty ND, decent producer. The cost of the gas processing and transport was more than the value of the oil. They shut it down. As long as they could flare the gas , all was fine. In ND you have a time limit on how long you can do that. So it was shut in.
That is bad, but I look at it as at least the oil is still in the ground so your minerals still have value and not being sold for a loss. I’m at the point now that if the oil company will not do cost free royalties then I don’t lease.