Here is my situation. I have a property that was leased to Chesapeake in July 2008 with the following clause:

TRANSPORTATION CHARGES: It is agreed between the Lessor and Lessee that, notwithstanding any language herein to the contrary, all oil, gas or other proceeds accruing to the Lessor under this lease or by State law shall be without deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and marketing the oil, gas, and such other products produced hereunder to transform the product into marketable form; however, any such costs which result in enhancing the value of the marketable oi, gas or other products to receive a better price may be deducted from Lessor's share of production so long as they are based on Lessee's actual cost of such enhancements.

A well was put into production in December 2011, and from that time until January 2018 the royalty checks were without any deductions. Chesapeake sold the lease to Indigo MInerals, and beginning with January 2018 began to deduct for gathering, compression, and treating even though they were bound by the same lease language as Chesapeake. Chesapeake came back as the owner of the lease in February 2015, and to this day the deductions continue. (By the time Indigo assumed the lease in 2018, royalties were down around $100 per month and the deductions averaged 9%, so I didn't try to fight it. MY MISTAKE.)

Now a new well has been drilled, the royalties are much more substantial, and Expand has continued the deductions, but now those deductions are averaging 17% of the total payment. I have reached out to Expand through owner relations and received a reply from Kate Ferguson, Lead Land Analyst, who says the deductions are in line with the lease language due to "enhancements to the value" I am receiving. Yet they ignore the 6+ years they paid without deductions.

I would welcome advice as to how to proceed from here, especially from anyone who has faced a similar situation with them.

As a bit of additional information I have a second property less than 5 miles away that was leased to Penterra under the exact same lease language in 2017. Penterra paid royalties without deductions. Chesapeake became the owner of the lease in 2022, and since then has paid royalties without deductions. 

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I initially contacted owner relations support via email.

  • When / If I got no response, I then contacted them again PLUS sent certified letter to the main office.

After no feedback to this - I sent my request to multiple managers of the company (including CEO's, VP production, VP operations, VP Land, CFO)

  • This got their attention and the deductions were reversed.

Note that all these communications included a detailed description of the issue plus a copy of the lease with the "no cost" information.

Hope this helps. Every company is different as to how they respond to issues like this.

Persistence and detailed request is key in my opinion.

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