It is important to specify how royalties are to be calculated and paid as well as insuring that you are given the right to have a third party auditor verify the records of the production from your wells.

Your royalty should be free of the costs of drilling and producing

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Comment by Grillin' - MmmMmm on June 23, 2008 at 4:50pm
Deductions from royalty payments are based on what your lease terms are. Some leases give the O&G company the right to deduct certain transportation/marketing fees while other leases do not. Most leases will contain few of these anymore. Older leases may allow the company to deduct many other things, depending on how hard a bargain the landowner drove. If he was savvy, there are few deducts. If he wasn't, there could be many! Kind of like buying a car. One guy goes in and buys a car for $30,000; a second guy goes in 10 minutes later and buys the same car for $25,000. Did the car dealer rip off the first guy or did the first guy not do a good job negotiating?
Comment by RAY on June 23, 2008 at 7:40am
the follwing was taken from the Kassi Fitzgerald presention

a. Royalty payment shall be “cost free” (royalty based on the gross, the O&G Company shall bear the burden of all costs related to production (expenses related to gathering, treating and compressing of gas, marketing, transportation and all other costs to make the product salable as well as marketing costs)

b. Any other costs subsequent to production that are removed from the land owner’s royalty shall be reimbursed to the land owner on a quarterly basis
Comment by dreamcatcher on June 14, 2008 at 11:54pm
Its called a Cost Free Royalty Provision and just as it implies, it excludes you from any finacial costs from your royalty percentage.
Comment by Mom A1 on June 14, 2008 at 4:13pm
??? We have received small royalties and were under the impression that expenses for drilling, etc. were taken from royalties for everyone in the mineral lease. ?????? Are you saying that we may have had to pay for expenses that we should not have???? :( :-0 :-( Can you clarify this? Also, if we needed an auditor to verify our production records, who do we call?

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