Thank you Martha for the answers to my questions. Have a nice day!!!
Ron, I’m slow in catching up here about my tax issue. After emailing the OTC concerning my refund, they made an attempt via phone to contact me on June 17th with the nice lady leaving a message. The problem was I failed to send copies of my 1099-MISC and a copy of my Federal form. After faxing these to her, she advised a confirmation of clearing would be sent me and that in a few days an electronic deposit to my bank would be performed. This morning I called my bank and so far no deposit has been received, guess now it’s me phoning the lady back. The delay must be my penalty for my previous ignorance concerning the forms. Live and learn for the following year!!
Yeh the 1099s in all areas can be pretty overpowering, many times just overlooked or forgotton. I just noticed there is a checkbox under our profule photograph reading “Give A Gift.” I a not sure what that is all about, but if any of you guys feel generous, my 76th birthday is just 3 days away, and I would not object to anyone giving me a portion of or even all of their minerals. THIS IS NOT A SOLICITATION, MIIND YOU, just a nice little thought. LOL
Ronald,
If it’s a notification of changes going before OCC, the attorney is required to mail you a letter 14 days prior to the hearing. I have never heard of emailing one. Also, know what you are signing, if you don’t call the attorney and ask.
Does anyone know anything about a hearing in Oklahoma City this Thursday, Dec 17 2015, it is regarding Stephens Energy in Fort SDmith Ark, not sure what it is all about, but someone from Oklahoma City called me yesterday and said he was Emailing me some for of notification for me tosign and then FA
X back to him, so he could show the court that I have been notified. Theat was yesterday, he said he would Email it yesterday, but so far I have not received it???
I have received a notice from the United States Bankruptcy Court for the Western District of Oklahoma that on February 3, 2016, Osage filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Oklahoma in Case No. 16-10308-SAH.
I posted a Discussion topic so we can all provide information on how this affects our mineral interest.
Does any one know of any court action to retrieve the Gathering Costs charged by Stephens Production after they took over from Slawson? The Court replaced them a few weeks ago with US Energy? And, Osage has now filed for bankruptcy. The following extract from the Mineral Rights Newsletter, March 2016 prompted the question, Note the last couple of lines of the article: The majority of companies do the right thing, but a struggling producer might resort to unethical behavior in order to increase their bottom line…all at your expense. Some use complex accounting and business arrangements to skim profits off the sale of resources and pass the expenses off to the landowners. Some tactics to be aware of include: Excessive deductions. While deducting production expenses is controversial, is allowable under many leases. Common deductions include compression, dehydration, and removing impurities from gas but in a recent series of high profile lawsuits, owners claimed millions of dollars in unspecified “gathering” expenses were suddenly withheld without any explanation.
Harley, Check your wells production history with the Oklahoma Tax Commission as sometimes companies make mistakes concerning who is obligated to make royalty payments during the change over months.
Harley, The National Royalty Owners Association suggests sending the letter below to determine unjustified post production expenses and/or misreported production amounts.
Upon finding questionable accountings you would need to take the calculations to a oil/gas attorney who may suggest a class action suit.
Same story here. I am trying to get my post production costs back from Stephens after paying $$$ in legal fees to prove my ownership. Grrrr.
M Barnes, OK does not have a law limiting post deduction charges. Pennsylvania recently enacted such a law and TX has good supporting case law prohibiting unjustified deducts. OK is lacking in both. I’ll do further research and post findings. May take a day or two.
from the OCC
Michael Decker
,
OCC, December 8, 2014
***For many years this was a question of what the operator could justify through presentation of evidence about the terms of leases in the vicinity of the forced pooled unit. Then a Court of Civil Appeals decision in New Dominion v. Parks Family Company, 2008 OK CIV APP 112, 216 P.3d 292, indicated the forced pooling statute, 52 O.S. Section 87.1(e), should be interpreted to not recognize the effect of implied covenants and thus would permit the deduction of post production costs from the royalty interested established by a pooling order. ***
Thereafter, in 2011, the Legislature amended 52 O.S. Section 87.1(e) to provide that implied covenants were to be recognized in the interpretation of the pooling statute and order. The provision regarding implied covenants is quoted and highlighted below:
“For the purpose of this section, the owner or owners of oil and gas rights in and under an unleased tract of land shall be regarded as a lessee to the extent of a seven-eighths (7/8) interest in and to the rights and a lessor to the extent of the remaining one-eighth (1/8) interest therein, unless and until the owner or owners make an election or are deemed to make an election not to participate under a pooling order issued by the Commission, at which time each such owner shall be considered a lessor, subject to the judicially recognized implied covenant to market found to exist by the courts of this state in oil and gas leases covering lands located in this state, to the extent of the full royalty percentage elected under the pooling order.***” ***
My reading of this says no post production costs if force pooled.
M Barnes & Harley, Here’s the OK land mark case:
MITTELSTAEDT v. SANTA FE MINERALS, INC. http://law.justia.com/cases/oklahoma/supreme-court/1998/11722.html
Courts conclude that lessee can calculate its royalty payments by using one of these two methods.
(a) the comparable sales method–a method in which the lessee determined the market value of its oil or gas production at the wellhead by averaging the prices that the lessee and other producers are receiving, at the same time and in the same field, for oil or gas of comparable quality, quantity, and availability; or
(b) the workback or netback method–a method in which the lessee determined the market value of its oil or gas production at the wellhead by taking the sales price that it received for its oil or gas production at a downstream point of sale and then subtracting the reasonable post-production costs (including transportation, gathering, compression, processing, treating, and marketing costs) that the lessee incurred after extracting the oil or gas from the ground.
Therefore, “Unreasonable” post production costs is lessor’s burden of proof. The good faith doctrine, prudent operator doctrine, implied covenant to market and implied covenant of the lessee could be used in the defense of lessor’s position.
I’ll continue to search for supporting OK case law.
The legislature amended the statute mentioned below in 2012 to clarify.
That is why I use a NO DEDUCTIONS period -no enhancements, no nothing on my lease or I wait for force pooling.
I would like to know as well as they charged me gathering costs when I was force pooled and I don’t think they were supposed to…
M Barnes, You are correct. Implied covenants disallows force pooling does post production costs. Leases without a no deduction clause are harder to defend.
Harley, OK is a “marketable product jurisdiction”. The Mittelstaedt V Santa Fe Minerals case does not support that the royalty owner be paid at the well head which would result in lessor paying a proportionate share to make the product marketable. OCC followed the land mark case for force pooling in 2012, so OK case law should follow the Mittelstaedt case for leases, but the ‘at the well head clause’ commonly used in leases is contrary to the land mark case. Leases written using ‘at well head’ language open the door for post production charges to be applied. Examine your lease.
Thanks Martha, once again my lesson is learned and your wisdom is noted and appreciated. My eagerness to sign a couple of leases seemingly worth less than the cost of running down an OK lawyer from TX was silly. Alas, ignorance is not bliss… After decades of nothing, I probably would have autographed the same leases for a pitcher of beer. ha
The facts on the ground, however, are quite interesting as follows: Leasehold number one, first producer-Slawson, a partner of now bankrupt Osage Ex, drilled and produced oil and gas for several months with no gathering charges, second companyr {Stephens Exploration] took over: added NG along with the G and O with a significant Gathering Fee for the G only. Now US Energy [ I believe one of the original OSAGE/SLAWSON threesome, the moneybags I think] is producer, due to recent court action. US Energy advises we will receive two payments in the future rather than a consolidated statement: one for gas and the other for oil. No mention of NG. Anxious to observe first check stubs. Sadly the pitcher of beer increases in value methinks.
The second leasehold. Continuous ownership, consolidated O and G production statement, no gathering fees.
The leases are essentially the same for the two leaseholds.
Richard, NARO suggests sending this letter. You will need to change dates, etc. I keep copy, copy to OCC and mail certified with return receipt.
I inherited some minerals in Logan County and a horizontal well was drilled on a section which in bound by 1/8 royalty because of HBP and deductions. I am receiving royalty checks which in some months the deductions are higher then my royalty amount which gives me a negative amount, how is this possible. The amounts are small since are area is small and I have contacted the operator Osage last year but never a respond. I figure have no recourse since they file bankruptcy in Feb.