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Permalink Reply by tc on September 3, 2015 at 12:22

80% is perfectly fair if the operator is paying the same amount for its gas.  For most operators the transportation charge (and other 3rd party charges) has a per mcf rate, but they also have a fixed minimum amount that must be paid.  For example if this fixed minimal amount is $5m then the 1st $5m of sales goes to transportation whether that gas is worth $5m or $20m.  So the transportation charge can be 100% or 25%.  As a royalty owner be thankful that you are not responsible for the extra costs if the gas is not worth even $5m as the operator is still obligated to pay the $5m.  Unlike drilling contracts which usually at most only had a 1-2 year timeframe, transportation contracts were usually for much longer terms like 10-20 years and the operators are paying for bad contracts signed during the boom years.

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Permalink Reply by JHH on September 3, 2015 at 13:38

Yes.... sabine.  Their tpsd charges have been high ever since they took over from NFR... who bought the leases from Chesapeake.  Go figure!

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Permalink Reply by 208ef0t5wi05p on September 3, 2015 at 13:32

If your producer has filed for bankruptcy, you might not be considered a creditor.

Do as search for the following:

Texas Land And Mineral Owners Association

WHEN YOUR OIL & GAS PURCHASER GOES BROKE

Be careful, it says not for internet use but is on the internet. Go figure.

If your producer has not filed for bankruptcy they must be imitating the producer that follows no laws. If so find a lawyer and recover your loses.

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Permalink Reply by JHH on September 3, 2015 at 13:44

I'm told royalty owners must be paid. ... even during bankruptcy.  if not... it is considered theft of property and actionable.  but i'm not a lawyer and haven't stayed in a Holiday Inn in a while.

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Permalink Reply by Skip Peel - Mineral Consultant on September 4, 2015 at 2:48

If an operator that is also the lessee wishes to continue to operate a well I think as a practical matter under US bankruptcy law you are correct, JHH.  If however the operator/lessee chooses to shut-in a well, I think that creates a different situation.  Here's where we may get away from federal bankruptcy law and into state mineral law.  It appears that the TRRC will allow an operator to shut in a well for two years minimum with the possibility of further extensions based on request.  Whether lease language addressing shut in payments and period would override the state regulations, I don't know.  Good question for a Texas licensed O&G attorney to answer.

In LA, outside of a shut in period made effective through payment under the lease language a mineral lessor could demand termination of lease rights following three consecutive months of non-production.  That's  a question for an experienced LA O&G attorney.

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Permalink Reply by JHH on September 9, 2015 at 12:00

Wow!  Thanks for the information. 

a lawyer could be our next step.

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2015 at 12:19

You're welcome, JHH.  If you want to explore a termination of a lease for non-production you should talk to an O&G attorney about case law concerning notice.  To have a good case they may recommend that you send, or they send on your behalf, a notice letter and provide an opportunity for your operator to do something about the cessation of production.  That removes one of the main defenses that companies attempt to use in litigation.

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