I just received my first rolalty payment from Chesapeake for a well in my section-14 17 15

small lot in west Shreveport.

months of

3-11, 4-11, 5-11, 6-11, 7-11, 8-11

two deductions fuel and gathering?

Gross of $498.27

                  -5.85 fuel

                -52.62 gathering

11.735%    Is this normal, seems a little high

I know Henry was getting info together about  such charges

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Hi Gale,


For CHK, this seems about normal.  They seem to deduct about 50 cents per mmcf for fuel and gathering.  So if your price was $4.00, this would take it down to $3.50, or 12.5%.  So your numbers are about what I would expect.


Now what I cannot yet tell is this:  CHK now reports (for some people, like you) the deductions for fuel and gathering.  But I never see that deductions for dehydration, treatment, or any other item appear on the bill.  I cannot tell if they are deducting for those before they post your gross price, or not.  It seems strange that fuel and gathering are the only two things I ever see reported.

Henry, the average price for the 6 months was $4.04, from a low of $3.54 in March to a high of $4.19 in

July,  and the deducts were for fuel and gathering. Explain gathering..

Thanks for all the help we get from you and others on GHS.



I am not the expert.  But I'll guess that "gathering" refers to the use of a gathering line to get your gas to a bigger pipeline where it is sold to market.  (If I'm wrong, I'm sure someone will jump in and correct me.)  Unless your lease calls for cost-free royalties, and prevents deductions of this type, you are hosed (see comment by The Baron).  There isn't much you can do but gripe like everyone else.  You are not alone - many people are furious about the level of deductions taken by CHK.



Market Enhancement:It is agreed between the Lessor and Lessee that, notwithstanding any language herein to the contary, all oil and gas or other proceeds accruing to the Lessor under this lease  or by state law shall be without deductions for the cost of producing, gathering, storing, separating, treating, dehydrating,sompressing, processing, transporting, and marketing the oil, gas and other products produced hereunder to transform the product into marketable form; however any such cost incurred on an unaffiliated interstate or intrastate gas pipeline which results in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from the Lessor's share of production so long as they are based on Lessee's actual cost of such enhancements. In no event shall Lessor receive a price that is less than, or more than, thje price received by Lessee.

That HOWEVER may be our problem...

Any thoughts.


Here's my thought, for what it is worth.  I could easily be wrong here (and I hope others chime in if they have better thoughts), but....

The sticking point is what comes after the word "however" in your lease.  What if the cost of gathering, storing, separating, treating, dehydrating, compressing, processing, etc., are incurred on the unaffiliated pipelines?  Even though the first part of your lease says you should not pay for them, it may be that the unaffiliated pipeline is charging for them, and CHK is passing that cost back to you. 

I've seen leases which have the first part of your language that forbids deductions for all those things, and then it has a "however" part immediately afterward, which says the cost of any "enhancements" will be deducted.  The lessor intended "enhancements" to be things like costs of separating liquids out from the gas.  CHK argued that "enhancements" included all those things that the lease just said should not be deducted.  The landowner was stuck.  There was no way to get this fixed, short of going to court (very expensive).  This happened to more than one landowner in my survey.

In fact, a couple of landowners in my survey, when negotiating their leases, asked their landman for cost-free royalties.  The landman, who represented CHK, said yes, and here is the CHK language you need to get it.  These people put this language in their lease, and later found that it did NOT get them cost-free royalties.  It was not the case of a rogue landman -- the people this happened to were from different locations, dealing with different landmen.  The common thread was CHK.

So for anyone who has yet to sign a future lease:  Do not allow for any exceptions -- CHK will find a way around it if you do.

You have to read each clause separately and the key word is "marketable." 99.9% of the NG produced in the HA is sold to intrastate and interstate pipelines at various pipeline interconnect sales entry points located throughout NW LA. The .001 may be sold off lease premises to power a rig or some facility. There is no market at the wellhead and pipelines will not accept NG into their system and purchase the NG until it meets certain pressure and quality standards.

Hence, the need to gather, treat, dehydrate, and, at some point, compress, the NG in order to sell the NG. At this point it is "marketable" NG; i.e., deliverable and salable into the pipeline. Under the language of the first clause above, CHK cannot deduct any of the costs to make the NG "marketable."

The second clause deals with "enhancing" the value of the NG only AFTER  it has been made "marketable"  and ONLY if it is a COST incurred to an unaffiliated interstate or intrastate gas pipeline which results in enhancing the value to receive a better price.

In other words, the producer must make the NG marketable. Then, the producer has two options: 1) sell  the "marketable" NG to the pipeline at the pipeline sales entry point without deducting the costs to make it marketable, or 2) it can then pay an unaffiliated pipeline to take the NG further downstream which results in enhanced value for the "marketable" NG to receive a better price and it can deduct the lessor's proportionate share of the actual costs of the enhancement.


There are numerous incidents of CHK deducting "post-production" expenses when the leas contain a "no-cost" clause and at least one case in litigation contesting CHK's deduction of "post-production" expenses. The language above seems fairly simple. Costs to make NG "marketable" are not deductible. Costs after the NG is made "marketable" are deductible if such costs are paid to unaffiliated pipeline and if the costs result in enhanced value and a higher price.


CHK may contend otherwise and litigate, but, I believe, CHK will lose.


My Chk gas is sold to CEMI.  100%   Under column "Well Purchaser" it is "CEMI" 100% of all the nat gas "Product" column...100% of the time.  First sale of my nat gas/Chk HS well in my Section.

That's the way CHK does it.

DrWAVeSport Cd1 11/5/2011

Don't know what you are referring to. Are you in TX? My royalty statement in LA does not identify any purchaser of the NG. CHK may do a transfer (not a sale) to CEMI in order to charge a marketing fee to working interest owners, but the non-royalty statement info I have obtained from CHK shows no CEMI marketing fee charged to my royalty interest.  It does, however, indicate that CHK takes deductions for gathering, treating, compression, etc.

None of this is disclosed on the royalty statement.





Failed to note, I am LA UMO with Chesapeake as Unit Payor.  "Transferred nat gas to CEMI"???   NO.  CHK's Quarterly Reports state quite clearly that the "PURCHASER" of the CHK "PRODUCT" (nat gas in my case) is 100% of the "PRODUCT," 100% of the time...CEMI.   Black and White as it can be.  I have 4 Quarterly Reports that state the same...Notarized and Everything...For whatever weight that carries. 

CHK Royalty Lessors, unfortunately, don't get this kind of information.

Believe me, W.R.F., there is a "CEMI MARKETING FEE" lurking somewhere out there.  CHK shows "moneys" made by their "CEMI" Group on their financial statements. 

Just FYI, Give CHK a call, and ask who YOUR nat gas/oil is sold to.  It would be quite interesting to me and other GHShalers, just what CHK's answer is, to a CHK Royalty Lessor. 

Check out lawsuit that got "voluntarily dismissed" per same questionable practices:  Tarrant County, Tx woman sues CHK, Robyn Coffey v. Chesapeake Exploration.  You can find http address on GHS if you query a search in the "Discussions."  Or, Google.

I say, "voluntary dismissed" means settled out of court, payoff by CHK.

Just my opine, however.  I am still looking for the answer.


My name is Robyn Coffey.  Coffey v. Chesapeake was dismissed without my knowledge until after the dismissal was filed and with no explanation on my attorney's part, in writing or otherwise at that time.  I have in no way received any so-called "payoff" by Chesapeake or any other party whatsoever as a result of Coffey v. Chesapeake.  I, too, am still attempting to determine why the suit really was dismissed, and have recent (March 2013) emails in my possession from Mike Howell and Brandy Bramlett, attorneys who were representing me in the aforementioned lawsuit, who have made such outrageous and outlandish statements to me in writing as to why the lawsuit was dismissed as to defy logical explanation.  I intend to pursue grievances against Mr. Howell and Ms. Bramlett against the State Bar of Texas immediately.  I also intend to expose their actions to the media outlet of my choice in due time because such behavior should not be kept hidden from the public, as it has since 2010, but should be exposed for the entire world to see, as it rightly should be.

What CHK does is criminal, I'm sure thats the reason McClendon is gone with his Millions, my statements only show the gas price and taxes, last month 1.32 for the gas, insane, all other company's I recieve royalties from were between 3.30 and 4.00.  I have complained to CHK and ask for a detailed ststement, takes months, the gas from my Johnson Co, TX well is sold eight times, according to them, I'm sure to CHK owned company's to siphon off all the profits.  Sounds like Robyn Coffey's attorney's got paid off by CHK This company is a house of cards, and will fall.  Just hope whoever winds up with their assetts is honest!!

You must send a demand letter to find out who they are selling it to and the price. Also they deduct your portion of the cost from the gross volume of the gas in order to get your net volume of gas. They get to claim all the expense doing it that way. If they are going to take away from my volume, I at least would like to be able to deduct that cost from my taxes.


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