Precedents for owner deductions
Hello all,
My grandfather bought various mineral rights in Lincoln Parish, LA in the 1950's. I am still receiving royalties on some of the interests that he purchased. Several other discussions have addressed the issue of production deductions on the mineral owners interest. I have leases that were signed in the 1970's and did not have any statements addressing how production deductions were to be handled. For the first 30 years of those leases and the first 4 producing companies, the only deductions taken from the royalty checks were for taxes. Now another company has purchased those older leases and has drilled new wells. "Pipeline gathering" charges of about $0.90 per mcf or 25% of the value produced are being deducted. It seems to me, that after 30 years of production and 4 different operators a precedent was established that no deductions for production costs other than taxes were to be charged to the mineral owners. Is this just wishful thinking on my part, or do I have a valid point? (I would be glad to pay the owner deductions if they want to renew the lease at a 1/4 owner royalty rather than the 1/8 and 3/16 that I currently get from the old leases.) Thank you for your thoughts!
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Replies to This Discussion
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Permalink Reply by Hopeful About Natural Gas on
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I am going to repost the GHS page on UMIs. There are a number of links within the post that go into more details, this post is an excellent first stop for the basics with links. There has been a LOT of good discussion here on the benefits and risks of leasing or not leasing.
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Permalink Reply by Greedy Landowner on
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Skip is correct. I have a couple of small tracts miles apart and went umi. One well was around 8.5 million to drill, the other right at 13, same operator. Fishy on the surface, but by paying attention to the documents and dnr website I learned that the more expensive one is one of those super long laterals that crossed two sections. Logically it would be more expensive to drill.
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