Got a proposed lease from EQT. Their thing now is that they won't do leases without some post production deductions. The royalty clause reads.."our percentage"....."after deductions for costs incurred by Leasee or its affiliates for transportation, taxes (including severance taxes), gathering, processing, line loss, and compression."
I have a lease from another company with the same thing, but it says "our proportionate share" of these costs. Isn't that how the deduction "should" read, IF (big if) we were to agree to this? Does anyone know what kind of money we are talking about as to expenses for transportation, processing etc.?
Somebody I know who negotiated a lease with EQT through a lawyer said his lawyer estimated that an 18% royalty in a lease with the typical EQT deductions would result in about the 1/8 royalty (12.5%) which used to be standard. If they would accept a minimum royalty clause it would almost be worth it to take the minimum 1/8. I heard they don't accept that either.
And remember, any company can sell (assign) their leases to Chesapeake or another of the notorious deducting companies.
The leases are mostly the same until they change a word here or there that makes a big difference. They will deduct anything they can if you do not challenge them. No, is a word they don't want to hear. The company says they will give you this when they should say "here is what we are going to take from your royalty". How and where they pay royalty is one of most important things needed in the lease. How about the free use of gas that they use to run all the stuff at the well.$$$ Most do not have that paragraph changed in their lease. The payment of royalty is also a big problem. Most people do not have a penalty and time frame for when royalty is paid in their lease. That is why lessors are upset that the company is taking years to pay them. They want to pay on methane (gas) and you just give them the other high dollar byproducts like ethane, butane. They just take it over to Mark West and you get nothing. Done.....
Steph. What the company gets from the ground Is not just methane gas. There are other valuable gaseous materials that are separated and are valuable. Mark West (Google them) is one company who has the Cryo processing facilities. They separate and process the "goodies" (NGL's) and more money is made from the products the oil/gas companies did not pay you for. If you did not get all this in a lease then you just gave it to them. Most companies balk because they want to pay you just for the gas. (methane) Research, is key to how the mineral owner is taking a beating and losing money from their mineral property.
Interesting. Below is a paste of part of a Memorandum from EQT. This is not in the lease which is silent on the subject nor is it in the Exhibit. They talk about an "Agreement". I wonder if the "Agreement" constitutes the lease or just effects the Memorandum, which simply says they have the right to extract, not that we get paid royalties from their definition of gas. Maybe I am being paranoid.
"Lessee's exclusive rights under the Agreement include rights to explore for, operate for, transport, produce and market, oil and gas, using all current and future methods; "gas" as the term is used in the Agreement includes but is not limited to all gaseous (including but not limited to natural gas and coalbed methane) and liquid hydrocarbons and non-hydrocarbons emitted by, contained in, or associated with any formation or strata (including but not limited to rocks, gob areas, mined-out areas, coal seams, and communicating zones), and their liquid or gaseous constituents (whether hydrocarbon or non• hydrocarbon), and all products related thereto or derived therefrom"
Very hard getting a company to pay for the byproducts. These companies have gotten so many "easy" leases in Wv. that it makes it difficult to get what you want. The non assuming, non caring mineral owners set the bar low on getting a good lease. The companies moved in and signed people right and left with a lot being out of state owners. Most of those owners signed leases with little or no changes. Guess were that leaves those that are now informed and trying to lease? That leaves owners negotiating with companies for good terms and not getting as much as the deserve. If this state passes a forced pooling type bill the owners who have not signed will be pressed even more.
L's