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


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.”
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



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A reading of the cases Judge Hicks cited in his order vacating the original ruling enlightened me to an important canon of interpretation of contracts. An excerpt from Clovely Oil vs. Midstates Petroleum this past june best illustrates the point:

"Louisiana jurisprudence on the inclusion of typewritten provisions in form contracts is the same as that stated in Amoco:
Under elementary principles of interpretation of contracts, the written portions prevail over the printed portions when the two are in conflict; and, therefore, we find no difficulty in holding that the typewritten sentence providing that the commission would be paid ‘at the act of sale’ suspersedes the printed clause providing that the commission is earned when the offer is accepted.
Kuhn v. Stan A. Plauche Real Estate Co., Inc., 249 La. 85, 93, 185 So.2d 210, 212, (1966).
The first circuit applied this rule of interpretation to a joint operating agreement in Martin Exploration Co. v. Amoco Production Co., 93–349 (La.App. 1 Cir. 5/20/94), 637 So.2d 1202, writ denied, 94–2003 (La.11/4/94), 644 So.2d 1048, and held that the typewritten Exhibit A to the agreement, which identified each party's percentage of interest before payout and after payout, governed the dispute at issue, not a provision in the printed portion of the JOA. The court concluded that although the exhibit's designation of the parties' percentages conflicted with a printed provision in the agreement, which read: “[i]f any provision of any exhibit, **10 except Exhibit ‘E’, is inconsistent with any provision contained in the body of this agreement, the provisions in the body of this agreement shall prevail,” the contract was clear and not ambiguous. Id. at 1207. It applied the terms of the JOA in light of the exhibit's designation of interests.

Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 2012-142 (La. App. 3 Cir. 6/6/12), 95 So. 3d 1168, 1174, reh'g denied (Aug. 15, 2012)

The sales point for the gas from the well in our area is less than 150 feet. I have pictures of the entire well site, how can we get information on the gas as it goes from well head to sales line? I would also like to know another point, the land owner own's 100% of the below ground gas/oil/etc. until a company leases it, then the land owner gets, in our case 25% with the lease company getting the balance 75%. That covers his cost of drilling and producing the product and the land owner according to MY lease is paid the price of product AT the well head, no transportation cost, etc. That cost comes out of the companies 75%.





I suggest you consult an experienced O&G attorney.

Ditto Skip's suggestion.

Kind of makes it hard to choose, do not trust Land Men and trust Attorney's even less. Plus the fact that in a case like this, the Attorney' are the only ones making money out of the crooked dealings being the Judges are all in the Pockets of the corporations.

Sorry Larry,

You posts above indicate you need a lawyer that can read a lease and who knows LA law about well head prices (really" value" since the only "prices" are sham paper sales from CHK to CEMI) and post production expenses in LA. In NW LA, NG is sold in Carthage, Perryville and S. LA in the regional cash markets. Nobody sells NG at the wellhead.

You also should get some counseling on your lack of trust for attorneys since you rank them below Land Men and your lack of respect for the Judiciary (after all, in LA you elect them). If all LA royalty owners thought judges were "in the pockets of the corporations", they SHOULD vote them out.

everyone here seems to be assuming that there is some big conspiracy going on, and that CHK, the landmen, the consulting attorneys, and the courts are all out to "get" us landowners.  I don't buy that line at all.  For Judge Hicks, it appears that he may have made a mistake in his first ruling, and had the decency and integrity to look further, and reversed himself.  Not an easy act for any judge.

I am pretty sure that the clauses added to the CHK leases intended exactly what we all thought they intended, and the landmen who suggested or even provided them, or the clauses written by well-meaning attorneys representing land/mineral owners, thought that they were accomplshing what was intended. And I don't think CHK or the other producers sat back and accepted those Addendums while saying to themselver "fools think they are getting something but we know better."  Those acts always come out in evidence when litigation follows, and both judges and juries HATE parties to a lawsuit who operate in that manner.

My theory is that all parties were on the same page when the leases were executed, but afterwards, things go awry - CHK gets into huge financial problems (a fact), is now losing money on every well (may or may not be a fact, but a pretty good guess) at today's prices for NG, and then goes to outside consultants - maybe lawyers, maybe not, and tells them to figure out how to reduce the production losses (pure conjecture on my part).  So then, the NEW lawyers scrub the language and decide it is worth an effort to parse the words in the Addendums and skew the original intent because the Addendums weren't crafted as precisely as they could have been (more conjecture). 

I would venture that this explanation is as good an any of the others that have been posted here, and perhaps better. 

so, all of us "second-guessers" are practicing 20/20 hindsight and finding fault with everyone in the process (except, perhaps, ourselves). 

and to all of those (just scroll up and find yourself) who were throwing accusations around left and right, you all seem to be mute with Judge Hick's vacating his original decision.  that act doesn't fall in line with your "conspiracy theory?"

Nuff said.






Where is the amount of gas that a well produces metered at?  What is the difference in a working intrest and a royalty intrest? Exactly what expenses does a working intrest pay? I thought, well at least I can deduct these expenses off my taxes, oh no, the company get the deduction. Now that does not sound right either.

I wish I had been smart enough to ask these question before I signed a lease. I really thought I had a good lease at the time.

To all that replied to my post above. I am sorry if I hurt your feelings but I stand by my statements of Trust. I am not alone in this feelings, CHK has been caught with their hands in the cash register in other area's and it just has not happened here, YET. Why won't they tell the Royalty Owners what the deductions are, how much do they deduct for transportation, etc., open the book and let us know if they want to build TRUST. I am an Engineer with over 50 years in the Oil Field, was 80 on Dec 6, 2012. I can read and yes, I have done work for Attorney's for lawsuits. The first thing I tell them is  that "I am not a hired gun". A lot of the time they will tell me that I would not do a good job for them. That tells me, they want a hired gun to say what THEY want to hear, not the truth.  On to the Gas glut that is being spread around for the low gas price we see. What is the volume of gas in the market place based on? We hear some very big numbers and the Stock Market reacts, I remember the late 1970's only too well, gasoline shortage, long lines of people waiting to get a few gallons of gasoline, was there a shortage or was that a planned shortage. I for one was on a job at a very large storage area for gasoline. Every tank and every pipeline was full of product. That was a planned shortage by ALL companies that had refineries, etc. to raise the price of gasoline.  Now we have a GLUT of natural gas, are those numbers based on actual amount of gas produced and in storage and does it include the gas in formation based on first year's production figures. I ask this because the production rate of these wells that I am looking at have fallen to a very small percentage of the first few months production, as with the pressure of the wells.  The first production came on with high pressure's and then started dropping (as the Frac pressure was bled off).  I have a lot of question's but no one can give an honest answer. When a person can not get honest answer's to his/her question, there must be something to HIDE. Untill landmen and attorneys start doing business like the majority of US do, they will never build trust.  If I step on toes by the way I feel prove me wrong, show the Royalty Owners what you are doing with Our money.

Competent professional services can be critical when dealing with the complexities of mineral management.  Not all landmen work for the industry, a few work for land and mineral owners. For example I've never taken an O,G & M lease or a R-O-W in my career.  Not all lawyers are O&G attorneys.  And not all O&G attorneys, or firms, are experienced.  It is difficult to overstate the fact that not just any attorney or landman will do.  Painting attorneys and landmen with a broad brush can be counter productive.  Land and mineral owners need to seek referrals, ask questions and, where appropriate, receive written expense projections.  Good O&G attorneys generally provide an initial meeting at no charge and an estimate of expenses for further services.  And they charge an hourly rate, not a percentage of a lease bonus or royalty.  A fear of "lawyers" or "landmen" is a poor reason to forgo competent counsel for something as potentially valuable as a mineral lease or legal issues regarding production payments.


I have followed your comments and contributions to this website and have been quite impressed.  You have offered a helping hand or answered questions with no apparent ulterior motive.  I trust your comments and thank you for them.

Jim Burgess


Skip, I really wish I had know you before I signed a lease years ago. I hope people will take heed to your advice and not fall for what land men or others just tell them. I have had to learn all of this the hard way which is very expensive. I just wish there was a way to go ahead of plays and tell the landowners all that they need to know. Life is not fair sometimes. Thank for all your input.


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