Replies to This Discussion

Permalink Reply by NA on July 14, 2009 at 12:14

Are the charges addressed by the lease? I realize you have said it is a standard form but read over it anyway. I can't tell you how many STANDARD OGML there are out there. If not addressed in your addendum or lease seek legal advice as to your options. Stay away from the ambulance chasers and beware of the guy that wants royalty in exchange for winning the case.

Wolf...
I think an ambulance just went by if you run I bet you can catch it.

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Permalink Reply by Cathaus on July 14, 2009 at 13:28

Wolf,
You were so much kinder than I would have been to NA. That was totally uncalled for and he should be on his knees apologizing to you.

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Permalink Reply by NA on July 14, 2009 at 13:49

And with a small nudge we get some good information. Thanks wolf!

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Permalink Reply by Cathaus on July 14, 2009 at 13:58

NA,
You play rough!

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Permalink Reply by Cathaus on July 14, 2009 at 14:29

NA=Nasty Attitude

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Permalink Reply by The_Baron on July 15, 2009 at 9:18

From Bath Form Louisiana Spec. 14-BR1-2A-NL Paid up R4/96

4. The royalties to be paid by Lessee are: (a) on oil, and other hydrocarbons which are produced at the well in liquid form by ordinary production methods, one-eighth of that produced and saved from said land, same to be delivered at the wells or to the credit of Lessor in the pipe line to which the wells may be connected; Lessor's interest in either case to bear its proportion of any expenses for treating the oil to make it marketable as crude; Lessee may from time to time purchase any royalty oil or other liquid hydrocarbons in its possession, paying the market price therefor prevailing for the field where produced on the date of purchase; (b) on gas, including casinghead gas, or other gaseous substance produced from said land and sold or used off the premises or for the extraction of gasoline or other products therefrom, the market value at the well of one-eighth of the gas so sold or used, provided that on gas sold at the wells the royalty shall be one-eighth of the amount realized from such sale; such gas, casinghead gas, residue gas, or gas of any other nature or description whatsoever, as may be disposed of for no consideration to Lessee, either through unavoidable waste or leakage, or in order to recover oil or other liquid hydrocarbons, or returned to the ground, shall not be deemed to have been sold or used either on or off the premises within the meaning of this paragraph 4 hereof; (c ) on all other minerals mined and marketed, one-eighth, either in kind or value at the well or mine, at Lessee's election, except that on sulphur the royalty shall be one dollar ($1.00) per long ton.

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Permalink Reply by Kathy Morgan on July 15, 2009 at 20:44

Fred, to throw a silver lining around the grey clouds. You get to deduct those costs from the taxable income from your royalties. So you don't pay taxes on them at tax time. Make sure you keeps those statements to bring with your 1099 at the end of the year. That's where your tax person will get your deductions.

Kathy

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Permalink Reply by Dion Warr, CPL on July 16, 2009 at 7:42

Kathy:

Be careful; most companies will net out the deductions automatically when preparing their 1099s (ie. your net royalty proceeds (less deductions) is what is reported as "royalty income". In that situation, if one subtracted "deductions", they would in effect be claiming them twice.

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Permalink Reply by The_Baron on July 16, 2009 at 8:59

The check stub attaced to the royalty check should show this. Its a good idea to compare this with the 1099 anyway.

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Permalink Reply by fred on July 23, 2009 at 14:16

I am a little confused. Did anyone actually answer my question about transportation costs?

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Permalink Reply by NA on July 23, 2009 at 14:40

"Quoted from wolf or Caliente now"
Assuming a true standard form (whatever that may be), probably no reference is made to transportation or gathering charges.
In Louisiana, a mineral royalty created by a mineral lease is defined as a no cost interest in production. But, that is arguably no production cost. The legal issue is then whether gathering or transportation costs are a "production cost." It is interesting that you comment that in the past, you were not charged transportation costs, but now you are. Some in the industry take the position that gathering within unit boundaries is a production cost and therefore not deductible from the royalty, but once the gathering lines transport off the unit boundaries towards and to a pipeline (whether intrastate or interstate), those off unit transportation charges are not a production cost and thus legitimately deductible from the royalty owner. Landowners, naturally, take a contrary position. The fact you weren't charged in the past is interesting. It would not do any harm that I can imagine to call the operator and ask why and on what basis this charge is for the first time now being deducted.

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Permalink Reply by fred on July 23, 2009 at 14:51

I understand this answer but it seems in direct opposition to Baron's answer where he quotes me section 4 of a lease.

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