MAGNOLIA POINT MINERALS VS CHK LA AND PXP LA - CIVIL ACTION NO. 11-00854 (Decision On No Cost Royalty Language)

CONCLUSION


The Court finds that the Lease language at issue is sufficiently clear and
unambiguous. The intent on the face of the document demonstrates that the production
payments are to be determined using the benchmark calculation of “market value at the
well.” The “no cost” provision in the Exhibit to the Lease does not alter the meaning of
this term of art but applies to any other costs incurred after calculating the “market value
at the well.” Therefore, Chesapeake may deduct post-production costs, including
transportation costs, as set out in determining the “market value at the well.”
Accordingly,
IT IS ORDERED that Chesapeake’s Cross Motion for Partial Summary Judgment
(Record Document 31) be and hereby is GRANTED.
IT IS FURTHER ORDERED that Magnolia’s Motion for Partial Summary
Judgment (Record Document 23) be and hereby is DENIED.
THUS DONE AND SIGNED, in chambers, Shreveport, Louisiana on this 30th

 

Magnolia%2052%20Court%20Ruling.pdf

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Permalink Reply by Ben Elmore on August 17, 2012 at 8:28

I've been successful in getting this language in a number of leases.  As with everything in the leasing world, however, it depends a lot on how much leverage the mineral owner has in terms of tract size, nma ownership, location, etc..

Permalink Reply by bullbayou on August 20, 2012 at 15:59

This was only the decision of the wacko Judge at the Summary Judgment hearing.  This case will continue to trial, where Magnolia will probably lose again, but maybe not.  Then, if they lose, this case will probably be appealed.  Just wanted to clear that up.  This case has NOT been tried yet.

Permalink Reply by bullbayou on August 20, 2012 at 16:26

And furthermore, someone needs to organize a protest of Chesapeake on the steps of the Federal courthouse when this trial is going on.  All CHK is doing is donating money here and there and acting like the savior of the community, when is fact, they are STEALING money from all of its royalty owners.  The problem is that the little people either are not big enough to complain or really have no idea what is going on.  But if a couple of thousand people show up to protest during the trial, and get media coverage, then more people will be informed.  I am sick and tired of CHK cheating and stealing and then all the Judges ruling in favor of them because they like to donate money!!!!

Permalink Reply by Henry on August 20, 2012 at 22:42

"...someone needs to organize a protest..."

Why don't you lead it?

Permalink Reply by bullbayou on August 21, 2012 at 1:47

I wish I could, but I do not live locally.

Permalink Reply by bullbayou on August 21, 2012 at 1:53

But if someone will, and knows how to, I will be happy to donate a few thousand to the cause!!  Does anybody else out there agree that a protest should be organized against Chesapeake and try to get the word out to every Chesapeake royalty owner that they are being screwed!!!???

Permalink Reply by Andrew on September 9, 2012 at 19:03

http://www.lacoa2.org/Opinions%20PDF/47154ca.pdf

The link above is to a recent La 2nd Cir. decision regarding deduction of post-production costs under a bath lease. It's a short case, and an easy read, but the gist of it is that transportation costs can validly be deducted from royalty that is paid "at the mouth of the well."

Toward the end of the opinion, the court gives a list of the types of costs that have been held to be validly deducted. That list would be a good starting point if I were to make a cost-free royalty clause that specified exactly which costs cannot be deducted.

Permalink Reply by Spring Branch,mineral owner on September 10, 2012 at 11:37

Andrew, in this case there doesn't seem to be an Exhibit A with a cost free royalty provision, so I'm not surprised the La. 2nd circuit ruled as it did.  On the other hand, it is clear that Judge Hicks made no effort to determine the "intent of the parties".

Permalink Reply by Spring Branch,mineral owner on September 10, 2012 at 11:39

Instead, he bloviated some BS which demonstrates his lack of oil and gas experience.

Permalink Reply by Jo Ann Carter on September 12, 2012 at 2:33

I am wondering if anyone has contacted Rep. John Flemming about this issue. He really needs to come and read this site.

Permalink Reply by Andrew on September 12, 2012 at 3:28

Our state government would be more likely to get something done than our federal government, but contacting legislators isn't a bad idea.

Permalink Reply by Skip Peel - Mineral Consultant on September 12, 2012 at 11:14

Rep. Fleming is a member of GHS.

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