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Permalink Reply by The_Baron on July 13, 2010 at 3:23

More than likely, as I would have to read your lease, but the gross price you receive would be the same gross as the operator receives at the point of sale.

Should the price be discounted by the pipeline, to account for transportation or any other costs, you would be out of luck. The cost fre royalty clause will only protect you from deductons by the operator (or in some cases related parties). Whatever happens downstream would not be subject to provisions in your lease.

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Permalink Reply by adubu on July 13, 2010 at 4:05

lease says average posted market price at the mount of well. lessor shall never bear any part of cost directly or indirectly in processing or transporting gas to market.

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Permalink Reply by The_Baron on July 13, 2010 at 4:18

What is the definition of market? Could it be that it is when ther gas is first sold to an unrelatd party?

Also, what is the the mount of well?

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Permalink Reply by adubu on July 13, 2010 at 4:33

Baron---Great question Don't know LOL----sorry typo---should be " mouth" of well---- average posted market price--definition ?? what do you think it means?? Could it be posted market price to nearest brench mark to well like Houston Ship Channel being closer than vs Henry Hub or visa versa. If operator on contract thru broker receive price A and then deduc all transportion and other cost to then get price B (net) that is then paid to royalty owner who receive standard price vs another owner in lease that has royalty free clause then this owner receive price A gross. If operator sell gas to pipeline owner near well and passes this to both royalty owners with or without royalty free clause the operator comes out ahead and doesnot have to pay any cost for royalty free owner. The royalty free owner gets screwed and doesnot get any benefit from the royalty free clause is this what you are saying?

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Permalink Reply by DrWAVeSport Cd1 on July 13, 2010 at 5:55

adubu: Just some interesting read per post production costs per royalties to lessor; this is a Tx case, but imo is germane to topic: Paying attn to paragraph "What is the lesson in this case for royalty owners?":

http://www.oilandgaslawyerblog.com/2009/02/postproduction-costs-par...

Great reading at this site per oil & gas lessor (Tx lessors). Still, imo very helpful for La Lessors too.

DrWAVeSportCd1 7/13/2010

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Permalink Reply by VSC DeSoto South on July 13, 2010 at 6:11

Interesting and informative, I will have to see if ours was changed to "market value at the point of sale".
Thank you.

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Permalink Reply by adubu on July 13, 2010 at 15:11

DrWAVeSport-- very interesting court ruling case thanks for posting

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Permalink Reply by VSC DeSoto South on July 13, 2010 at 6:04

It would be nice to see an example of a royalty payment stub of 2 people in the same section with the same operator, going to the P/L reasonably close in proximity to each other, one 'cost free' and one without the 'cost free' clause and what the difference is.

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Permalink Reply by adubu on July 13, 2010 at 8:01

this is new unit should get DO this month and then when payments received will see if can get comparison

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Permalink Reply by Henry on July 13, 2010 at 12:37

VSC,
I posted a discussion a few days ago, offering to collect info on the price of gas everyone received, and whether or not they had "cost free" royalties or not. But I needed a lot of shalers to provide info, so I could generate some statistics. So far, I have not received a single response of anyone offering up that type of information.

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