How can you verify that the operator is paying you correctly on your royalty----
The decimal interest is correct on division order. How can you obtain itemized statement showing all details of NG price the operator received and all deductions taken out or if royalty free clause in lease are you getting gross price minus only taxes. Is operator required to give you this information on your written request? Is email considered written request? Is this a normal recommendation royalty owners should due? I have heard royalty department has been know to "accidently" make errors in calculations.
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Views: 307
Replies to This Discussion
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Permalink Reply by Les Bamburg on -
Kat, of course "hedging" does not have any real relevance to wellhead prices since it is not part of the sales price calculation for royalty.
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Permalink Reply by Kat Bloomfield on
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. . . really?
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Les B: How can anyone state that market manipulation downstream doesn't impact upstream pricing? That's like saying the commercial rate of lending has no relevance to home mortgage pricing. That's like saying the crash of the home mortgage derivative market had no impact on the financial markets or interest rates. That's like saying the secondary consumer debt market has no impact on credit card pricing and terms. Sorry. But, we disagree on this!
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Permalink Reply by Les Bamburg on
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Kat, I just didn't want people to be confused and believe that "hedging" is part of the wellhead price calculation.
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There is no "definitive" answer to what is wellhead price calculation. According to standing case law, it is indeed a fluid concept; depends on the circumstances; depends on the field; depends on the infrastructure. . . And, as of this date, there is no ruling that finds that a hedged price is the wellhead price. That does not lead to the conclusion that market manipulation downstream has no impact on wellhead price. Nor does it lead to the conclusion that downstream prices will never be "relevant" to the wellhead price. Indeed, the industry itself often has "worked back" from downstream pricing to determine wellhead pricing: and, I quote myself as follows: "One basic reason that “market value” at the wellhead is difficult to ascertain is because the physical market for natural gas is generally not at the wellhead. Rather, mineral lessees typically sell natural gas downstream of the wellhead in pipelines or at hubs, a hub being a point where several pipelines or storage facilities connect. The wellhead may be located a long distance from any pipeline. Even a well located near a pipeline has no market unless it is connected to that pipeline and has capacity and a buyer on that line. For an example of calculating “market value” at the wellhead in light of comparable sales in the area of the gas field versus calculating it based on an actual downstream market, see Wall v. Public Gas Service Co., 178 La. 908, 152 So. 561 (1934). There, the court held that the royalty owner’s share of production should be calculated based on market value determined by comparable sales in the area and not on the higher sales price lessee obtained downstream, although the court noted that had there been no comparable sales, the royalty share would be based on the higher downstream price less transportation expenses."
Wall is a 1934 decision. Times have changed (in case no one noticed). - Attachments:
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To quote the "industry," "We may raise more questions than answers and we advocate more of a case by case analysis than a bright line rule. But we believe that this is a fertile area of the law that deserves discussion and debate."
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Permalink Reply by The_Baron on
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you must be one of those lawyers....
" Rather, mineral lessees typically sell natural gas downstream of the wellhead in pipelines or at hubs"
really??, I gues we have been selling our gas at the wrong place all these years...
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That quote is straight from the industry, my dear friend. Are you actually suggesting otherwise? Are you contending that operators do not sell n.g. at a pipeline . . . ever? Please cite your source. Meanwhile, check the mineral law institute paper on these topics (2007), uploaded with a previous post in this discussion thread. Notably, the industry itself recommended debate and discussion; it did not recommend this nonsense. So, how about a real debate and discussion?
and what is a "those" lawyer, anyway? I'm enjoying retirement; currently rocking to Jeff Beck and Hendrix. If that is a "those," then I am one.
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You previously stated in response to a question directed to you as to what/how wellhead price is/is determined,
"Typically it will be at the meter where the gas is turned to sales."
Where is the gas turned to sales? At a pipeline? Thought so . . . . Oh that's right, you then stated:
"the price you will receive is the price paid at the wellhead. Most likly when it is sold into the pipeline owned by LA Midstream."
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Permalink Reply by JD on
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After studying the links on Sonris under "Production Information" that relate to "Gas Disposition" I have come up with questions for the experts. When is the price set for the gas? Is it when it enters the pipeline or when it arrives at the Henry Hub? My Chesapeake wells dispose of their gas into a pipeline owned by Louisiana Midstream (an affiliated company of Chesapeake). Does the income flow from the Henry Hub back to Louisiana Midstream and then to to Chesapeake and then to the Lessor? Also, how often do the pipelines dispose of their gas thru the Henry Hub?
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Permalink Reply by Jack Blake on
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Jack Blake says it can not be good for you if CHK is affiliated (that's a high fallutin word for "in cahoots") with Louisiana Midstream.
There is lots of good info on here about gas sales prices, etc.. It seems to Jack Blake that Les B knows alot about that.
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