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BIA O&G Lease for Osage Lands in OK. See what you can demand when you are BIG

  • 8 Replies
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donegal

  • 4991
Here's a recent Bureau of Indian Afffairs revised proposed Lease for Osage Lands in Oklahoma.  Interesting what terms you can demand  when you have big acreage:

http://www.bia.gov/cs/groups/xregeasternok/documents/text/idc-041212.pdf

Wonderin' how they determine the price that Royalty is paid on?
See page 11 paragraph (4) (b) and on into most of page 12.

Note how the Superintendant of the BIA makes some of the judgements on matters and NOT the Lessee, "...resolving all doubts about volume and qeuality  in favor of the Lessor."  Also how they want paid royalty on gas that is 'avoidably lost'.

Least I found you a method by which to determine your Royalty sale price that's not necessarily tied to the wellhead.

Donegal

« Last Edit: March 22, 2013, 09:06:51 AM by donegal »
We finally scuttled the Exxon Valdez (for the second time in her life), and turned in at the boatyard the ol'  gray Bismarck before she sank too..  Now I'm Captain of the most beautifulest boat ever, the "HMS HOOD", a 2012 stealth black AWD V-8 Chrysler 300.

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cara

  • 819
A week ago I did some research on the Osage Tribes minerals.  The Osage Tribe owns 100% of the minerals under 1.4 million acres which is probably all of Osage County.  When production occurs, from a well anywhere on the reservation, all registered tribal members are entitled to a portion of the proceeds.  Last year the average tribal member received royalties of about $36,000.  This reservation appears to be well run, as are the minerals, and this tribe is one of the more highly educated and wealthy.  One of the members recently commented, the US Government had no idea what they were giving us when the reservation was created.

Some of the recent leases have had royalties of 1/5 & 1/4.

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donegal

  • 4991
Thanks cara.  Always good to see you here on the Forum.

Donegal
We finally scuttled the Exxon Valdez (for the second time in her life), and turned in at the boatyard the ol'  gray Bismarck before she sank too..  Now I'm Captain of the most beautifulest boat ever, the "HMS HOOD", a 2012 stealth black AWD V-8 Chrysler 300.

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Steve-O

  • 2505
"the US Government had no idea what they were giving us when the reservation was created.

Nor did we realize what laid beneath our feet when we purchased our property.

Great post, cara.

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Skip OK

Donegal,

The draft you have is not the latest one.

See http://www.bia.gov/cs/groups/xregeasternok/documents/text/idc-041257.pdf

Since I work with the Osages (in my day job) I have been following this pretty closely. 

Most of the best portions of the Osage lease
and regulations, (which is what we are discussing) have been in place for years, including premium royalty (16.67% from 1916-1974; 18.75% 1975-2006; and 20% since 2007),  royalty based higher of actual price  or a standard price (since at least 1920).  Established the statutory requirement the the oil/gas lessee is responsible for surface damages (1921) including the method of arbitrated damages (since 1929).

Mostly,the most beneficial aspects of Osage leases were set by the Osage Tribal Council as early as 1916;leases are as nearly as possible always 160 acre governmental quarter-sections, each lease is considered to be a drilling/spacing/proration unit (no pooling needed).

More than 1 Billion barrels of oil have been produced and sold, and currently, after more than 110 years of production, the Tribal owners are getting more income now than at any time in history.  Those old Tribal leaders were very wise.
 
« Last Edit: March 23, 2013, 04:06:35 PM by Skip OK »

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donegal

  • 4991
Much THANKS Skip.  You are O.K. in my book.  ;)

Donegal
We finally scuttled the Exxon Valdez (for the second time in her life), and turned in at the boatyard the ol'  gray Bismarck before she sank too..  Now I'm Captain of the most beautifulest boat ever, the "HMS HOOD", a 2012 stealth black AWD V-8 Chrysler 300.

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donegal

  • 4991
Allow me to cut & paste the pertinent paragraphs.  I have deleted the lined-out words to make it easier reading: (color, bold, underline mine)

"...(b) Royalty on gas . All  gas removed from the lease from which it is produced shall be metered before removal unless otherwise approved by the Superintendent and be subject to a royalty of not less than 20 percent of the gross proceeds of the gas. Unless the Osage Minerals Council, with approval of the Secretary, shall elect to take the royalty in kind, gross proceeds shall be calculated pursuant to subparagraph 1; except that the Superintendent may direct (and the Osage Minerals Council may request that the Superintendent direct) any lessee, upon no less than 30 days notice, to calculate gross proceeds at the higher royalty value of subparagraph 1 or subparagraph 2.
(1) Under this paragraph 1, gross proceeds of the gas shall be determined by multiplying the entire volume of gas at the well times the heating value of the gas measured in MMBtu as determined by periodic gas analysis, times the Monthly Index Price in dollars per MMBtu for Oklahoma Zone 1 published by the Department of the Interiorís Office of Natural Resources Revenue. If that Monthly Index Price ceases to be published and is not otherwise available, the price shall be calculated in a comparable manner to be determined by the Superintendent. If any lessee supplies gas produced from one lease for operation and/or development of any other another lease held by the same lessee, royalty calculated under this section shall be paid on all gas so used.

(2) Under this subparagraph 2, gross proceeds of the gas shall be one hundred percent of the actual proceeds from sales of all residue gas produced from the lease and one hundred percent of the actual proceeds from sales of all natural gas liquids produced from the lease (including drip condensate) minus the actual, reasonable cost of processing not to exceed fifty percent of the actual sales value of the natural gas liquids (including drip condensate). If the actual reasonable cost of processing cannot be obtained, upon approval by the Superintendent, the lessee may determine such cost in accordance with the alternative methodology and procedures set forth in 30 C.F.R. 1206.173. There shall be no other deductions of any kind, whether monetary or volumetric or otherwise, for any purpose, including but not limited to compression, dehydration, gathering, treating, or transportation.
(c) Royalty on minerals wasted or avoidably lost. Royalty shall be due on all oil and gas wasted or avoidably lost, the volume and quality of which shall be determined by the Superintendent, resolving all doubts about volume and quality in favor of the lessor. ...

(e) Royalty on other marketable products. Royalty on other marketable products shall be paid at the rate of not less than 20% of the actual sales value of the other marketable products sold, irrespective of any other royalty due on oil or gas."


Like WHAT other marketable products?  Dunno',...don't forget about Helium, for instance. 

Again, thank you Skip for posting the latest AND for putting it into a modifiable format. Folks, there are PLENTY of other  Lessor-friendly terms in all those pages.  WORTH a read.

Donegal
p.s. Not sayin' that it's the do-all to end-all. I am postin' it to show folks that Royalty calculations can be, in fact  sometimes are based on published market rates.
We finally scuttled the Exxon Valdez (for the second time in her life), and turned in at the boatyard the ol'  gray Bismarck before she sank too..  Now I'm Captain of the most beautifulest boat ever, the "HMS HOOD", a 2012 stealth black AWD V-8 Chrysler 300.

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Skip OK

Helium is a very real possibility. Osage County is in a Helium province, and the He price is $75-$80 per MCF, versus $2-$4 per MCF for natuural gas.


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donegal

  • 4991
Yeah, especially down your way on the Helium,  Skip.  Nice to see a lease where the Lessor has thought beyond the obvious O&G. 

Donegal
We finally scuttled the Exxon Valdez (for the second time in her life), and turned in at the boatyard the ol'  gray Bismarck before she sank too..  Now I'm Captain of the most beautifulest boat ever, the "HMS HOOD", a 2012 stealth black AWD V-8 Chrysler 300.