Land owners beware! This should be illegal.

"To keep royalties low, companies sometimes set up subsidiaries or limited partnerships to which they sell oil and gas at reduced prices, only to recoup the full value of the resources when their subsidiaries resell it. Royalty payments are usually based on the initial transaction."

I've read about this above issue before along with some others but this is just outright theft. We need our states to protect land owners from this. Land owners getting screwed doesn't help future development or economic development. Operators and land owners need to act with ethics for a win/win situation at all times. If they can't, then our elected officials are going to have to act. 

 

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Permalink Reply by Skip Peel - Mineral Consultant on August 18, 2013 at 1:55

Hadn't heard that one.  Very interesting. And very telling.  Thanks,  HANG.

Permalink Reply by essay on August 18, 2013 at 19:19

this thread is amusing and frustrating, all on multiple levels.

what really strikes me is gerald's actually huey's descendant, if i'm not mistaken.  i had no idea he was chairman of that committee.

2p6y7ycljui0uPermalink Reply by 2p6y7ycljui0u on August 19, 2013 at 0:47

Mr. Long also is a member of The Presidents Club as a top producing agent for an insurance company cursed and hated all along the Gulf Coast. It is not for the company's  friendly commercials it is disliked. The company screwed homeowners, blatantly. Mr. Long will discharge his duties on the Natural Resource Committee just as he did as Vice Chair of the Insurance Committee. He will be just like a good neighbor to all of the Oil and Gas operators and the landowners should not be all hopeful about any neighborly relations with Mr. Gerald Long. What really strikes me is he is the first GOP representative serving Natchitoches Parish since the 19th century.

Permalink Reply by Skip Peel - Mineral Consultant on August 19, 2013 at 4:53

Interesting.  Thanks for the particulars George.  I'm not against a grass roots effort to address the inequities being perpetrated against royalty owners.  However from prior experience I know what a huge challenge it is to mount and sustain a coordinated campaign that holds even a slight hope of success.  Mineral owners are just not a group that tends to be cohesive and manageable.  Early in the life of GHS there were discussions about forming a non-profit group to represent the interests of mineral owners.  They went nowhere.  However at that time much of the interest in protecting the rights of mineral owners came from a relatively small geographic area, the Haynesville Shale basin.  Now as other parts of the state are experiencing their own leasing and exploration activity, the interest may be more wide spread.  There is a chapter of NARO for Louisiana however it was formed by industry representatives and is sponsored by the likes of Chesapeake, EnCana and Phillips Energy to mention but a few.  Another example of astro turf lobbying.  I would be happy to volunteer my time to an effort but it would have to be well funded and directed by professionals who know a little something about political advocacy.

Permalink Reply by Glenn Kadison on August 19, 2013 at 5:55

People, land owners especially, are a diverse group. Very few are willing to call a company's bluff when the tactics get tough. As mentioned by the previous poster, when the operator or leasing agent threatened to pull the offer, the poster folded like a card table. People without surface rights are even easier to fold. The only way mineral owners will have clout is when they are all on the same page, it will not happen. I would imagine most upset with their royalty checks now were elated and busy spending five or six years ago. We are a spending society, not a saving society. Even landowners with active and existing concerns in their tract are loath to pass up a bonus check, especially one perceived as fair. Families with undivided interests in forty acre tracts cannot come together to negotiate, try gathering Louisiana landowners to a common ground and strong lobbying effort. That is a task. I would imagine most Louisiana landowners would hate to work with plaintiff attorneys on instituting punitive damages on these operators. This is the lobbying group to merge with. That is the only thing that would work, as was pointed out earlier. However, most of the good folks in Louisiana who happen to own land would avoid plaintiff attorneys and their clients like the plague. 

Permalink Reply by Chris on August 19, 2013 at 7:14

There is a clause you can put in your lease to prevent this. Chesapeake is the main company that does stuff like this so please don't act like this is standard practice in the oil industry because it is not.

Permalink Reply by Glenn Kadison on August 19, 2013 at 7:31

There are clauses that can be placed but do not think the clause will prevent an operator like Chesapeake from doing what they are doing. Besides, how many landowners hold out for an ironclad assignment clause which will not allow the original operator to skate?

If an operator like Chesapeake can get away with what they are doing, do you think for one minute others will not, also? Who is to guarantee your new assigned operator will not do the same thing? Do not pretend this could not become standard practice. Not everyone is a car thief, so why lock your car?  Right?  I would think even Ms. Katie locks her car. Mineral ownership is more valued, or should be, than a car. 

Permalink Reply by Keith on August 19, 2013 at 7:59

I think that most landowners expect when the natural gas comes out the well they should get paid based on henry hub prices. As long as energy companies treat us fairly we should treat them fairly, but what could be expected next from these guys, paying us in yen without adjusting for exchange rates? I better not give anyone ideas.

Permalink Reply by Glenn Kadison on August 19, 2013 at 8:04

I am sure they are a few steps ahead. I am also sure there are global players and producers a few steps ahead of them on the currency front. Frightening to contemplate.

Permalink Reply by Hopeful About Natural Gas on August 19, 2013 at 8:25

Keith, I too would join with a group that was brainstorming ideas about this issue - but this thread already has a lot of the hard realities any group would face.

A uniform method of pricing - like the Henry Hub price could be written into law - but there could be downsides to this that I do not know.

HOWEVER - we should all realize that we have a common "enemy", which is OPEC. They are funding movies like Promised Land and others. OPEC has become the biggest lobbyist against natgas/fracking world wide - they claim it's because they care for the environment. BS. They want the money and the power that whomever controls oil and gas will have.

Is there any way that we can organize domestic producers and land owners? Would this even be a benefit or would we have better luck herding cats?

Permalink Reply by Skip Peel - Mineral Consultant on August 19, 2013 at 8:35

Case law will determine, state by state, whether No Cost Royalty clauses can be worded in such a way as to be enforceable..  Cases that will set that precedent are still awaiting trial or appeal.  I had dinner yesterday with my O&G attorney who represents plaintiffs in some of those cases.  I asked him whether this issue was basically limited to Chesapeake or whether it was more wide spread.  He said it was not limited to Chesapeake.

2p6y7ycljui0uPermalink Reply by 2p6y7ycljui0u on August 19, 2013 at 9:16

It is my understanding the overriding concern is the royalty owner getting screwed. An outside bogeyman like OPEC and a united front against it sounds like something tailor made for egos and frustrated PR folks. It would also help cover the thieves of the industry. I think the domestic industry can handle this front against the OPEC and show business shills. We should hope for some relief against the sharp practices of some domestic players. 

Sounds like flash, bling, and distraction to me. Form a group and bloviate about OPEC? Make them a scapegoat while we rub shoulders with Carl Ichan?

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