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Permalink Reply by RBH on January 25, 2011 at 11:30

SO YOUR "GROSS ROYALTY INCOME" that the 15% deduction  would be calculated on would be before all of the "deducts" which include severance tax, transportation, gathering, treatment costs, etc.  Many operators even have a summary line showing year-to-date totals for each item

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Permalink Reply by Polly Ann Foote on January 24, 2011 at 15:13

Henry:
When you get your checks, there is usually a statement attached which details the volume, the price received for the product, the gross, taxes and/or deductions and net. In most of my checks they are in a row and you can easily see they have subtracted the taxes and/or deductions from the gross to get the net. However, I have one check where the taxes and deductions are listed as a negative under the net and subtracted from it. The check lists my net as 36.82. Then underneath that is a -1.87 for state taxes and the check is for 34.95. Thus in this particular case their net is really my gross. I keep all my monthly checks until the end of the year because different oil companies report the 1099 information differently. Most list the gross, taxes and/or deductions, and the net. There is one, however, that reports the gross and I need to know how much I paid in taxes and deductions so that I do not pay taxes on money I did not receive. Hope this is not too confusing.
P. Foote

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Permalink Reply by Henry on January 25, 2011 at 0:27

Polly,

Chesapeake does not report the gross price for which gas is sold.  Nor do they itemize or show the amount of any deductions.  In fact, their statements explicitly say, "Deductions made by the purchaser/transporter are not shown."  The only information a royalty owner can glean from the statement is the net price he gets.  This results in much unrest among people receiving checks from Chesapeake, and has been discussed elsewhere in many threads on this site.

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Permalink Reply by Jeff on January 25, 2011 at 1:06

Henry,

Is the gross amount listed on the 1099 from Chesapeake?  Surely they will send one out.  Jeff

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Permalink Reply by Henry on January 25, 2011 at 2:45

Jeff,

No.  The only 1099 I've seen from CHK fills in one line -- Line 2, "Royalties." 

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Permalink Reply by Jeff on January 25, 2011 at 4:49

Henry,

Have you compared the amount listed on the 1099 with what you actually received?  The 1099 figure is probably the gross amount.  Maybe I am a little optimistic though. 

I would think what is reported on the 1099 is the figure reported to the IRS as well. 

Jeff

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Permalink Reply by Linda Whatley on January 31, 2011 at 8:08

Henry & Jeff,

 

I just received my 1099 from Chesapeake, and sure "nuff" they did not report the gross amount.  The only amount shown on my 1099 is the the actual net amount I received from Chesapeake for 2010.  And, like I thought, the amount they report is determined by the date of the check, not the day you received it.  .....  I verified my 1099 to my actual checks, and it is correct.  Guess I'll have to call them to get the gross amount fo my CPA can figure the depletion allowance.

 

The 1099 I received from PXP shows the gross, and the expenses, as well as the net.  There were no taxes reported.

 

LW 

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Permalink Reply by Linda Whatley on January 25, 2011 at 3:19

Jeff,

 

I haven't received my 1099 from Chesapeake yet, so I don't know what will be listed.  But Henry is correct about their royalty statements.  Chesapeake does not itemize deductions at all.  But, they do list some deduction codes at the bottom of the check statement.  Those codes are: BW- backup withholding, IT-Interest, KR-KS withholding, MT-MT witholding, NE-netting expense, MN-MN witholding, SB-OK withholding, & UT-UT withholding.   ......   

 

They also make the following disclosure at the top of the statement: "Gross Value refers to the sales price received by the operator/lessee before deduction of taxes.  It may reflect the price received from an affiliated purchaser.  Deduct refers to the deductions identified in the Deduct code below and are limited to taxes or deductions made by the operator/lessee.  Deductions made by the purchaser/transporter (affiliated or non-affiliated) are not shown." 

 

My lease is not cost free, and so far, none of my royalty statements have disclosed any deductions, or taxes.   And, since I don't have a clue as to what expenses actually are, I don't know if I'm receiving the correct amount of royalty or not!!!  However, thanks to Henry's spreadsheet anaylsis, I do know the price of gas has been consistently lower than what all the other operators are paying, so Chesapeake has to be netting expenses out of the price up front!!   ...  This practice makes it impossible for lessors to verify their royalty payments!!!!! 

 

 

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Permalink Reply by Jeff on January 25, 2011 at 4:52

Linda,

I don't have any dealings with CHK.  I know JW operating has the gross and net listed on all of the statements I have received so it is pretty easy.  I also haven't gotten a 1099 yet so I think I'll just wait and see if it is reporting the gross when I get it.  I expect it will. 

Jeff

Gotta Love Tax Season

I'll report all the income they want to send me!

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Permalink Reply by Linda Whatley on January 25, 2011 at 5:59

Oh yes, I too will gladly report all the income they want to send me!!!.....   

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Permalink Reply by Gale on January 25, 2011 at 6:15

Linda doubt you will ever know for certain if you are recieving the right amount of royalty check or not. After years of suspecting Chevron-Texaco of under paying us I was lucky enough to get an internal e-mail where they admitted that the DOI might be wrong on certain royality checks. Well after about a 6 month ordeal they did finally admit we were under paid. It then took me another 6-9 months of weekly calls to finally get payment for all of my family members. Although the under payment was on condesate and liquidfied NG which is a minor amount compared to the NG, the amounts exceeded $100.000 and that was a 3 yr under payment amount. It was an exhausting experience, which over the years we have had several experiences. I just got lucky with this internal e-mail.

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Permalink Reply by Polly Ann Foote on January 25, 2011 at 3:07

Henry;
The mere fact that such information is withheld causes one to question whether the lessor is being paid his/her fair share. You are correct - you do not get the whole 15% depletion deduction without knowing the gross. Everyone getting that type of statement is losing part of a valuable deduction. Sounds like a class action suit is in order. Some lessors in Columbia County Ar have included a clause in their lease giving them or their representative the right to inspect the records of Lessee pertaining to the production and disposition of the oil and gas. I will be adding that clause to any future leases I sign. Thanks for the explanation.
p

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