Hello,
I’ve been trying to negotiate a leasing contract on the mineral acreage I own in Roger Mills County and can’t seem to get a true gross royalty/no deductions clause accepted by the leasing companies. My offer is for $$$$/nma @ 1/4 royalty My understanding is that a true gross royalty is after all the enhancements, storing, compression, cleaning, etc; then I 25% and whoever is my lessee gets 75% of it’s sold value to a third party. Is that correct?
One party sent me and agreed to the language in the Mittelstaedt vs Sante Fe Minerals, Inc. I’ve read through the judgement, and think I understand. It seems like a well put together enhancement clause? It somewhat strictly limits what can be deducted can only increase its value to increase my royalty, and specifically and shared proportionately of the actual cost paid by lessee. So I would pay 1/4 of those costs.
Here is the clause offered to me:
1.GROSS ROYALTY/NO DEDUCTIONS: It is agreed between the Lessor and Lessee that, notwithstanding anything to contrary, the cost of selling, producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing said oil and gas, condensate, distillate, and any other substance covered hereby and costs or expenses associated with the construction, operation of depletion of any plant or other facility or equipment for processing or treating gas from the leased premises may be deducted from Lessors royalty payment if and only if the added revenue from the additional costs enhances the net royalty payment. The guidelines for any costs should be based on the guidelines established in Mittelstaedt v. Santa Fe Minerals, Inc., 954 P .2nd 1203 (Okla. 1998).
My first question is who has experience with royalties received with this clause in place. What kind/amount percentage of deductions if are displayed on your royalty checks?
The other question I have is; are people getting a true gross royalty/no deductions clause where your minerals are fully enhanced and you get your exact royalty percentage without any severence taxes or deductions from it’s sold value to a third party? If so could someone share with me what the heck to say or what yours says?
I try using this and they say no way:
BlueStone Natural Resources II, LLC v. Randle, No. 19-0495
Gross Royalty/No Deductions Clause
“LESSEE AGREES THAT all royalties accruing under this Lease shall be without deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and otherwise making the oil (including but not limited to distillate and condensate), gas (including but not limited to casinghead or coalbed methane gas and helium and all other constituents), hereunder ready for sale or use. Lessee agrees to compute and pay royalties on the gross value received as both a valuation method and a valuation point, including any reimbursements for severance taxes and production related costs.”
Thanks!