Andy and Jeffrey: Regarding possible violations of the "no deductions" clause, could that information be shared here so everyone can see it, or is there a reason to keep it private? I receive royalties from Devon and am curious about this issue too.
Lanny E. Sells. It usually takes about a month to drill after spud date and it depends on the frac schedule to determine when they will frac. It takes about 2 wks to fac but once they pull the plugs it may take anywhere form a few days to a month on flowback of water till U see Oil and gas production.
Angela, violation of the deduct clause is like most rules and regulations in the O&G business....no enforcement! Your only recourse is the courts. Since most people can't afford to fight the big companies class actions are about it. One such case in Oklahoma is set to finalize a settlement this month. Billy J Strack etal. v. Continental Resources contains several components including deductions, it will be interesting to see how it plays out.
Thank you Richard Pruitt !
Thank you for the reply, Michael. I was wondering also what specific types of illegal deductions to look for on royalty pay stubs. Just this past year I saw something I'd never seen before on 1099's: several oil companies included a category labeled "other deductions" (besides OK state tax and production tax). Of course this made me wonder what exactly those "other deductions" are.
The other issue: If you inherited mineral interest, some old leases didn't include all the protections (like the "no deductions" clause) we can ask for now. We get royalties on several tracts that were leased way back in the 1960s through 1990s, before we knew about asking for the "no deduction" clause. There's definitely no way to protect yourself on those, and something tells me some unscrupulous oil companies can exploit for their own gain.
The deductions are not necessarily illegal, not all no-deduction clauses are created equal and are subject to interpretation. The most common ones I see on my stubs are compression and transportation. What's more worrisome are the ones you don't see.
Angela and Michael, we have some production from the early to mid 80's that never charged post-production deductions and those old leases made no mention of such. So early in 2017, XTO suddenly finds it necessary to reduce the royalty rate agreed upon years ago to one more to their liking. In my opinion, a 3/16 royalty is no longer 3/16, and what should be very alarming is that when they think they can take more, the mineral owners royalty interest will be milked to the extent they want. Chesapeake set the standard with their well publicized excesses in North Texas, Pennsylvania, and elsewhere.
The OK-NARO conference last year had a lot of discussion about “no deduction clause” wording, but recently I have had companies who will not discuss the matter, and indicate my option is to sign their lease or be force pooled. And for those who may not know, force pooling does not address post-production deductions, and deductions are being taken.
I will be interested to hear what will be said at the 2018 OK-NARO meeting early next month in OKC.
Some Landmen will try to get you to agree to post-production charges by referring to them as enhancements i.e. "you want enhancements to get a better price, don't you?"
Thanks for the helpful info, Michael, Wesley, and Ann. I understand we don't have much power against the big corps, but I admire those who examine their royalty check stubs closely to find inconsistencies or inaccuracies. I admit I don't do this--those long lists of figures are pretty ovewhelming.
The main thing I check, besides accuracy of all info on a lease and the addition of standard Ex. A clauses, is the accuracy of the decimal interest figure on a division order. I sometimes get a different number. That's when I call the division order office. I've found most companies are good about getting back to me to explain how they arrived at the decimal interest figure, and their explanations always make sense.
I believe the majority of oil/gas companies try to be honest. We've even had a couple of companies contact us *after* we signed a lease to let us know they owed us more money--one time it was because we had more acres in our tract than our records showed or that they originally found...it was quite a large increase, and a nice surprise.
Angela, keep checking those things. I did find a decimal error on a small check my husband had been getting for a long time. Asked them about his two cousins and they agreed to correct theirs also.
PS Angela - due to amounts being very small I did not request they pay back royalties. On another situation the amount was considerably larger. I demanded statuatory interest and when I did was immediately referred to their legal department. I received the few thousand they owed me plus $1,500 and change in interest.
Thank you for additional information, Ann. Good for you in catching an error!
In my experience, figuring decimal interest can be tricky at first, but gets easier with time. I found the well spacing on a well report for the first time recently (instead of calling oil co. to ask), so I'm making progress.
The recent issue that made my decimal interest figures different from what was shown on the division order involved wells that were multi-unit. I had neglected to take that into account, but the DO office was helpful in showing how they should be figured in. She mentioned the "tract factor" came into play, something I hadn't heard of before.
Addition to my message below: The more correct term for the situation I experienced recently that affected decimal interest figure is "allocation wells" (which I don't believe is the same as "multi-unit" wells...can anyone clarify the difference between the two?). The division order analyst said allocation wells affect the decimal interest because of what's called the "tract factor."
Allocation wells are described in an easy-to-understand way in the last paragraph of this page: https://www.oilandgaslawyerblog.com/2016/02/division-orders-know-de...
To muddy the waters, the same lawyer from the blog above (from Texas) says that in Texas at least, allocation wells are in violation of the mineral interest owner's rights; see last two paragraphs of the following: https://www.oilandgaslawyerblog.com/2016/07/debate-allocation-wells-continues.html
Apparenly Oklahoma laws allow for using the "tract factor" in the case of allocation wells? I will search "allocation wells" at this board to see what other info I can find.
Can someone tell me if the big drilling rig on a 2 mile horizontal well, stays in place while it is being fracked ?
Lanny, no, the rig would be in the way.
I recently found out that I am the legal owner of a percentage of the mineral rights of a lease in Major County that was signed in 1972 by my uncle who has since passed away. The inheritance is a result of my aunt's passing in 1994. I was just contacted and made aware of this lease by a company that will not say where the money has been going for the past 23 1/2 years. What is the best way for me to proceed without spending a fortune on a lease that may have been only a 'break even' well.
It should be either in Unclaimed Properties or the purchaser(s) suspense account(s).
Hi Angela, you can private message me,I would be most happy to help you. My email is: I have information which may be useful to you.