First, as a royalty owner, you are not to be charged with any costs of production (e.g., drilling and completion or other costs to get the hydrocarbons out of the ground), so make sure this is not what they are charging you for. "Cost of treating the oil/gas" is a post-production cost. You are charged with your share of post-production costs (e.g., compression, treating, transportation, etc..). With that in mind, are you saying the offer is 1/4 royalty with an express clause that you will be charged 25% for post-production costs? Or are saying the offer is a 1/4 royalty and you will be charged your proportionate share of post-production costs versus a 22.5% royalty with no charges for post-production costs? If that's the case, I would suggest you take the 22.5% because the costs can often times exceed the 2.5% you are giving up. Just make sure your cost-free language is specific and airtight. Others on this site may have different opinions.
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AboutAs 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 |
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