Replies to This Discussion

Permalink Reply by Steve on December 1, 2013 at 2:54

Bad publicity hurts any company. CHK, as a publicly traded company, is certainly not immune to criticism  - so don't underestimate the effects of a vocal grass roots effort to bring negative attention to them. A local newspaper needs to get behind the landowners. I a landowner gathers the facts and brings them to a news reporter he probably will not have to beg them to do a story - reporters are always hungry for a story. That would be a good start, especially if the reporter asks in his article, why the AG, the Revenue Dept. and the State's oil and gas regulator's are letting CHK get away with this. At least one landowner being ripped off by CHK needs to start a snowball headed down that hill - it has a chance of gaining some momentum. IMO.  If someone could just think of any angle for any attorney to make any money with it, then it would happen without anyone else's help. Why not use some of that mailbox money to encourage a lawyer?

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Permalink Reply by Skip Peel - Mineral Consultant on December 1, 2013 at 6:52

The news media will report news but they will not make news except in rare instances.  Their corporate lawyers would dissuade them from making any allegations without some iron-clad evidence.  They will never take the lead on this issue.  I suspect they would be happy to cover grass roots protests and legislative tugs of war but don't expect them to lead the way.

There are suits winding their way through the legal system now.  It takes years for experienced O&G attorneys to attempt to build a potentially winnable case and then to get it to court. What gets lost in the debate here on GHS is that only a relatively small percentage of the experiences described qualify as actionable by plaintiffs who have standing to bring a suit and have the patience and financial resources to see the action through to a conclusion.  Those with a strong case who persist often get to a point where the defendant offers to settle.  When settlements are reached the court makes no ruling and therefore sets no legal precedent.

In a state as red as Louisiana don't expect any interest in pursuing this issue from the administration or from any state-wide elected officials. 

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Permalink Reply by RONNY on December 1, 2013 at 0:54

Start here.  Good Luck.

http://www.ag.state.la.us/Article.aspx?articleID=36&catID=0

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Permalink Reply by Francis Mayo on December 1, 2013 at 3:13

I would hope that would work, but having Buddy Caldwell's picture with a shiite eating grin is not encouraging.  

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Permalink Reply by Steve P on December 1, 2013 at 7:34

I suspect that there is very little leasing, at least for NG, going on anywhere in the US right now, or anytime in the near future due to the glut.  So warning landowners - the horse is already out of the barn.  thus, the blog idea, which isn't a bad one, will have very limited effect on warning potential lessors. 

There may be some small indication that the oil and gas lobby in La doesn't control everything with the lawsuits being filed in S La over contamination and loss of wet lands. It will take a few years to see how this plays out, but this seems to be the mostly likely avenue to put a crack in the grip that the O&G companies hold on governments. 

I get (small) royalty checks from CHK, Comstock, EnCana, and Shell.  CHK's price is always the lowest per MMBTU, although I'm not sure that the difference approaches $1/MMBTU.  My leases (at least the ones I signed in the last 10 years) have an addendum related to gathering/treating etc. so I should be "free" of those deductions.  But I'm still getting that lower price from CHK.  And Skip is right - CHK sold their captive gas gathering company.  Perhaps the terms of that sale included some grandfather clause on gas prices for some period of time.  I don't know (but assume not) if the terms of that sale are publicly available documents?

The New York Times has done 2 front-page articles about the HS.  60 Minutes did a feature.  Those were all focused on the "little guy makes a killing" aspect of the early leasing days.  Not sure the "little guy is now getting screwed" will have much sex appeal in today's media market.

And, finally, we should all remind ourselves that we are a different slice of the "1%" in that very few Americans get ANY royalty checks, and it will be a steep hill to climb to get any general sympathy on this subject from the public, or maybe even from the La. Legislature.  There is a delegation from NW La.  Anyone talking to them about this?

 

 

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Permalink Reply by Steve on December 1, 2013 at 7:58

There is some truth in everything said, but, if landowners do nothing but moan to family and friends, which other operator will start following CHK's example? Hey - they get away with it- why can't we? None of the shale operators like seeing their industry in the news. They already get enough negative publicity with the fracking and CHK is already on the black list in many places. If a few old  HS grandmas with small acreage and very small royalty checks , and who otherwise are living on a meager SS check, come out and tell everyone they are getting cheated by an oil company, you will find a sympathetic ear from the public and even give the liberal Democrats another reason to say you can't trust the oil companies. Everyone likes to hear about someone getting justice against a thieving Corporation. The oil industry itself may put some pressure on CHK for making them all take the heat.

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Permalink Reply by Skip Peel - Mineral Consultant on December 1, 2013 at 15:47

For most HS grandmas with small acreage HBP'ed by a single unit well the facts that would be most important are natural steep production decline and low nat gas prices.  Any CHK hanky panky aside, a good Haynesville horizontal that produced an average of 10 MMcf/d in year one (2009) will produce less than  0.1425  MMcf/d in year five (2014).  In January of 2009 the price was $6.136 and just beginning to free fall.  The price was $3.496 for November, 2013. Plug those numbers into Keith's Royalty Calculator and see what you get. 

Recently I noticed at least one post stating that CHK had stopped paying a member.   There have been others over the last year or so.  Many lessors are not aware that all O&G operators/lessees have policies that call for the cessation of monthly royalty checks when the amount owed falls below a set level.  When royalty payments fall below that minimum monthly amount, operators/lessees send checks quarterly.  If they fall far enough there may be only one check sent each year.

As a general example of the impact of deductions on royalty payments, a deduction of $0.70 per mcf in January 2009 represented 11.4% of the total.  That 70 cents in November, 2013 would be 20% of the total.  At $2.036 in May, 2012 it was 34.38%.

CHK justly deserves a good bit of the ill will manifest on GHS however there are still a lot of misconceptions and lack of knowledge on the part of lessors that gets lumped in with the facts.  Those that would care to solicit the assistance of the AG or one or more legislators had better know the facts and stick to them as the misconceptions are easily refuted by the industry.

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Permalink Reply by tc on December 2, 2013 at 1:42

LA landowners should also be very thankful for the pipeline industry.  At a PA price hub NG in Oct. was going for only $1.83, half of Henry Hub due to the lack of pipelines for the glut of Marcellus natural gas.

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Permalink Reply by Steve on December 2, 2013 at 2:22

Very good point Skip !  Get all your facts straight for sure or any complaint will lose all credibility quickly.

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Permalink Reply by Steve on December 3, 2013 at 3:48

 Apparently the State doesn't even know if operators like CHK are even paying severance taxes at all, much less the correct amount of tax. Good luck with them helping landowners verify fair royalty deductions :

Today's Advocate article( link below) lets you know just how poorly our State is managing one of our most valuable assets:

 http://theadvocate.com/home/7739927-125/auditor-questions-severance...

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Permalink Reply by Nixon Dow on December 3, 2013 at 6:40

The problem is a little more complicated than the article leads one to believe. All horizontal wells are exempt from payment of severance tax for the first 24 months or until payout, whichever occurs first. This 2 fold statute is the real cause of the problem.

In order to become eligible under statute the state requires each well to apply for the exempt status (see WELL STATUS APPLICATION in wells files) and submit a well completion cost report. Well the Rev department can do that as they have no clue what are proper well completion cost. So the application process go through the DNR first then it goes to the Rev department, who now  have to keep up with the balance each month. Considering the amount of wells that have been drilled this is no easy task. Unlike the simple calculation used to determine severance tax (production x sev rate) the "payout requirement" requires the state to  not only  review and inspect the intial completion cost but they also have to do the same when inspecting the so called "net income" provided by each company to calculate the to-date net well cost. Can you say nightmare? And just think all this work is going to attribute to zero revenue because these wells just don't payout in less than 2 years.

The simple solution that would fix this red tape nightmare and have all the haynesville shale wells be exempt for the first two years. Then the only thing that needs to be approved is the fact that it is a horizontal well. The revenue department doesn't have to keep up with whether or not wells are paid out or not. 

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Permalink Reply by jim weyland on December 3, 2013 at 6:55

here, i learn something new almost daily. thank you, sir.

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