GAS LEASE TRICKS - CAN I GET OUT OF A BAD LEASE - NORMALLY NO - IT IS IMPORTANT TO NOT SIGN A BAD LEASE TO START WITH

  THE TRUTH ABOUT GROSS VERSUS NET ROYALTY PAYMENTS.

  IT IS VERY IMPORTANT THAT YOU NEGOTIATE A FULL GROSS ROYALTY FOR YOUR GAS LEASE. MANY OIL AND GAS COMPANIES DEDUCT THEIR DRILLING, SEPARATION, PROCESSING, TRANSMISSION AND MARKETING COST FROM YOUR ROYALTY. THIS IS A BAD THING. THE OIL COMPANY MAKES MORE MONEY THAN YOU OFF YOUR GAS. THEY SHOULD PAY THE COST OUT OF THEIR PORTION.

  THERE IS A LOT OF MONEY IN YOUR ROYALTY PAYMENTS. THE ROYALTY PAYMENT WILL BE A LOT MORE THAN YOUR SIGNING BONUS. THE OIL COMPANIES KNOW THIS. THAT IS WHY THEY OFFER YOU A FAVORABLE SIGNING BONUS. THE MORE OF A SIGNING BONUS THEY OFFER, THE MORE TRICKS THEY PUT IN YOUR LEASE.

  BE AWARE OF THE FOLLOWING TERMS IN YOUR LEASE.  IF YOU SEE THE FOLLOWING TERMS;  THEN YOU ARE PROBABLY NOT GETTING A GROSS ROYALTY PAYMENT. 

  • REVEVUE RENDERED
  • REVENUE REALIZED
  • NET ROYALTY
  • REVENUE AT THE WELLHEAD MINUS COST TO BRING GAS TO MARKET
  • ANY TERMS CONTAINING THE WORDS POST PRODUCTION COST
  • ANY TERMS CONTAINING THE WORDS BRINGING GAS TO MARKET.
  • NET ROYALTY PAYMENT.
  • MODIFIED GROSS.

  IF YOU SEE ANY OF THESE TERMS, YOU ARE PROBABLY GETTING A NET ROYALTY PAYMENT. THIS CAN COST YOU THOUSANDS IN THE END. IT DOES NOT MATTER HOW MUCH THEY PAY YOU FOR THE SIGNING BONUS IF YOU ARE LOOSING MONEY IN THE END. IF YOU HAVE A NET ROYALTY PAYMENT, YOU MAY LOOSE THOUSANDS OF DOLLAR IN ROYALTY PAYMENTS.

  BEWARE OF COMPANIES OFFERING A HIGHER SIGNING BONUS THAN EVERYONE ELSE. GENERAL, THIS MEANS YOU HAVE FINE PRINT AND A NET ROYALTY PAYMENT. THIS IS BAD.  IF YOU GAIN $200 AN ACRE NOW IN SIGNING BONUS AND LOOSE $1000 IN ROYALTY PAYMENTS DOWN THE ROAD, THEN YOU ARE LOOSING $800 AN ACRE. 

  WE WORK FOR THE HOME OWNER. NOT THE OIL AND GAS INDUSTRY. WE MAKE SURE THAT YOU RECEIVE A FULL GROSS ROYALTY PAYMENT WITHOUT ANY TRICKS OR  FINE PRINT.

  CLICK HERE TO CONTACT US ABOUT A FAIR LEASE WITH A 100% FULL GROSS ROYALTY AND INCREDIBLE LAND AND WATER PROTECTION. REMEMBER, WE WORK FOR YOU!  

 

How to Get Out of a Bad Gas Lease

How to Get Out of a Bad Gas Leasethumbnail
Underground gas can make farmland very valuable.

 

Gas leases are a mixed blessing for many landowners. For a struggling farmer, an offer from a gas company to lease a few acres of land for a drilling rig can mean the difference between survival and bankruptcy. On the other hand, some gas companies are less than up front about the consequences of their drilling. Many farmers have complained of being pressured to sign leases by aggressive salesmen. Although there is a "lemon law" that facilitates exits from used car leases, there is no equivalent regulation for gas leases. Landowners do, however, have a few options.

Difficulty:   Challenging

Instructions

  • 1

    Talk to your neighbors regularly as soon as the first salesman arrives. This lets you compare the terms being offered for your leases and makes you aware of any terms offered that are unfair or misleading.

  • 2

    Keep careful records of every conversation you have with representatives of the gas company. Since there are no specific legal protections for owners who sign gas leases, breaking the lease requires legal action. Keeping records helps you prove that you have been misled or subjected to high-pressure salesmanship.

  • 3

    Search for other landholders (neighbors or otherwise) who have been the victim of similarly bad leases signed with the same gas company. If you do have grounds to take legal action, do so as a group. This is called a "class action" lawsuit.

  • 4

    Contact your state's attorney general's office and complain to them. They may be willing to open an investigation into suspicious practices, as the attorney general of New York State did in 2008. Having the power and public visibility of the attorney general behind you can be a powerful incentive to the gas company to offer you a better lease



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IF YOUR PROPERTY IS NOT IN THE OFFER AREA, WE WILL BE HAPPY TO REPRESENT YOU. CONTACT US BELOW FOR MORE INFO. 

Contact Us

A BAD LEASE ALLOWS THE OIL COMPANY TO BACK OUT FOR NO REASON AT ALL. A LEASE SHOULD BE A BINDING CONTRACT. SOME OIL COMPANIES LOOK AT A LEASE AS AN OPTION.   NOT A CONTRACT. 

WE REMOVE THE FINE PRINT FOR YOU

 

ROYALTIES

Pa Supreme Court says it is ok for post-production cost to reduce your royalty payment below the 12.5% minimum. CONTACT US TO GET A FULL GROSS ROYALTY PAYMENT WITHOUT FINE PRINT TRICKS.  WE DON'T WORK FOR THE OIL COMPANIES.   WE WORK FOR YOU ! 

 

Pa Supreme Court OK's Post Production Cost Deducts and Approves Net-Back Pricing

Today the Pennsylvania Supreme Court ruled that natural gas royalties can properly be calculated at the well head net of post production costs under the net-back (or work-back) method. The net-back method referenced in a footnote to the decision is defined in 30 C.F.R. 206.151 as follows:

Under this method, costs of transportation, processing, or manufacturing are deducted from the proceeds received for the gas, residue gas or gas plant products, and any extracted, processed, or manufactured products, at the first point at which reasonable values for such products may be determined by a sale pursuant to an arm's-length contract or comparison to other sales of such products, to ascertain value at the lease.

In Kilmer v. Elexco Land Services, et al (No 63 MAP 2009) the court ruled ". . . we hold that the GMRA [minimum royalty act] should be read to permit the calculation of royalties at the wellhead, as provided by the netback method in the Lease, and thus, affirm the trial court's grant of summary judgment to the Gas Companies."

Kilmer is an exceptional case in many respects. It is one of the few cases in the history of the Commonwealth in which the Supreme Court agreed to by-pass Pennsylvania's intermediate appellate court (the Superior Court) and take a trial court decision for direct review. The Supreme Court was persuaded to take this extraordinary step because of the number of cases pending in state and federal courts in which landowners were seeking to avoid their obligations under oil and gas leases that provided for the landowners to bear their pro rata share of post production costs. The Court appeared to be persuaded by the standard definition of a royalty in the industry as a landowner's share of production. The Court was also expressly appreciative of an amicus brief filed by former Texas Tech Professor Bruce Kramer that detailed the history of natural gas price regulation and its impact upon the placement of the price setting point in the gas fields (In addition, Professor Kramer rejected the interpretation of his published work asserted by the Landowners in favor of their position).

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DISCLAIMER

This website does not offer any legal advice or real-estate advice. We offer public information and articles on topics related to the oil and gas industry. We encourage our visitors to consult your trusted attorney to revue legal documents before signing. Any opinions expressed by this website are just opinions and should not be considered legal advise. This website offers information which helps landowners make their own intelligent decisions.

 

 

 

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