I received a royalty check showing a sales price of $2.62 in May, $2.65 in June 09', no deductions. Seemed low, so I researched historical pricing and found a U.S. Wellhead price of $3.45 for both months on the Energy Information Administration website. Any thoughts / feedback?
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.
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.
As exciting as this is, we know that we have a responsibility to do this thing correctly. After all, we want the farm to remain a place where the family can gather for another 80 years and beyond. This site was born out of these desires. Before we started this site, googling "shale' brought up little information. Certainly nothing that was useful as we negotiated a lease. Read More