I have mineral assets in Weld County CO. I have received a oil and gas lease proposal that has post production clause. It states that the Lessor’s royalty shall be subject to Post Production Cost and will bear its proportionate share of all production severance and ad valorem taxes and applicable charges after oil and gas substances are in marketable condition. Post Production Cost include all cost of gathering, marketing, compression, dehydration, transposition, removal of liquid or gaseous substances or impurities etc.etc.etc… First question: what is a common or reasonable Proportionate Share? This looks very open ended, is there a standard formula or percentage? Second question: is it reasonable to remove this clause altogether, if not, what would be reasonable counter to this clause? Thank you Rob
Proportionate is related to your DOI for the well(s). If you strike the clause, then you are potentially subject to an allocation of these costs, but review CO statutes for this issue. You should request a clause that excludes these costs other than State and Local related production taxes.
Thanks Jim, but what is DOI
Division of Interest. This is your percentage in the entire unit and not the your tract(s) in the unit.