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Permalink Reply by The_Baron on September 11, 2009 at 4:45

The best I have to offer is from this clause in the standard form lease.

"the market value at the well of one-eighth of the gas so sold or used, provided that on gas sold at the wells the royalty shall be one-eighth of the amount realized from such sale; "

The idea is that the amount realized from the sale is the sale price less expenses, since gas that needs dewatering, treatment, compression, etc. is not marketable. This is widely accepted. These can be excluded with a cost free royalty clause.

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Permalink Reply by Grillin' - MmmMmm on September 11, 2009 at 6:12

some leases specifically reference a sales price marker. I have even seen some that make the price the highest of 3 different pricing points! These are pretty tough to adhere to and we have simply stopped drilling on these and refuse other leases like them. These were low cost leases so it didn't really matter too much.

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Permalink Reply by j garrett on September 13, 2009 at 6:51

So, the "Sale Price" reflected on most royalty checks is an after-tax amount? Also, how can I find out which hub my gas is flowing to?

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Permalink Reply by The_Baron on September 14, 2009 at 2:47

MAybe after severance taxes. look at the check stub to see. Remember you still owe the irs.

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