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Author Topic: QUESTION ABOUT ROYALTY ALLOCATION  (Read 18133 times)

ladybugfarm

  • Guest
QUESTION ABOUT ROYALTY ALLOCATION
« on: December 10, 2009, 11:03:40 AM »
Can anyone help me understand this? Sorry if it has covered elsewhere on the forum. Will I get anything if I my 40 acres is part of  a 300 hundred acre unit but the horizontal will not go under any of my acres? How should it be stated in a lease, if it is all possible, that your entire acreage be used for getting royalties. Or if there is only a small fraction of the horizontal going under is there a way to include the whole acreage? What would that wording be in an addendum? I do not  understand the royalty part of a lease. Is it based solely on what fractional part of gas is extracted from your acreage? Thanks, I need to know what I am doing, I may be signing a lease soon..

gassyguy

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #1 on: December 10, 2009, 12:20:18 PM »
if all 40 acres are part of the unit it doesn't matter where the horizontal is

The problem arises when they only include 1 acre of your 40 acres in a unit, then you have big problems, look up Pugh clause, this added to your lease will enable you to lease your remaining 39 acres to someone else

http://www.mitchell-texaslaw.com/subpage.html

THE PUGH CLAUSE

The Pugh Clause is the language used in an oil & gas lease to spell out what happens to the portion of the acreage you leased that does not either contain a well or is not included within a producing petroleum pool or unit. The typical Pugh Clause reads as follows:

"If at the end of the primary term, a part but not all of the land covered by this lease, on a surface acreage basis, is not included within a unit or units in accordance with the other provisions hereof, this lease shall terminate as to such part, or parts, of the land lying outside such unit or units, unless this lease is perpetuated as to such land outside such unit or units by operations conducted thereon or by the production of oil, gas or other minerals, or by such operations and such production in accordance with the provisions hereof."

cara

  • Posts: 819
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #2 on: December 11, 2009, 06:49:07 AM »
The are two types of pugh clauses.  The horizontal as stated in the previous post and a vertical.  Vertically the clause should state something along the following guidelines.  At the end of the primary lease term all depths below the base of the deepest producing formation will be released and a copy of the recorded release will be provided to the Lessor.

I realize a vertical pugh clause can also terminate all formations above the top of the deepest producing formation but my view is, if a company has spent millions to target the best producing formation they should also have the right to produce lesser formations up hole.

ladybugfarm

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #3 on: December 11, 2009, 12:01:32 PM »

Thanks for your reply, then even if there is no horiaontal under my  acreage, I will still get royalties if my acreage is part of the unit? Is that correct? Well that sounds good to me.

 
if all 40 acres are part of the unit it doesn't matter where the horizontal is


JEB

  • Posts: 1397
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #4 on: January 24, 2010, 04:49:58 PM »
Here in the Troy area a Chesapeake unit size is 800 acres. 400 acres on the North side of the well head and 400 acres on the South side of the well head. A unit size is 2,800 feet wide and 12,450 feet long.  If part of your 40 acres fall in that unit then that is what you are payed on.  When the next units are drilled on each side of the first unit the rest of your 40 acres will be included in one of those units. 
That is if you are leased Chesapeake!  If you are leased with Fortuna then you are not included in any of the production units and according to the Chesapeake field man you never will be.  He told me once a unit is formed that is it and it will not be changed.  If the land you have leased with others ends up in a Chesapeake unit you get nothing for it from them.  I have some small acreage leased with Fortuna that is surrounded by land that I have leased with Chesapeake and that is what the field man told me this last Thursday.

Good luck to you!   

JETHRO

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #5 on: January 24, 2010, 05:09:40 PM »
 STILL  BELIEVING EVERYTHING THEY TELL YA HUH JEB...WERENT YOU SUPPOSED TO BE SEEING ROYALTYS BY NOW IF YOU AND ALL YOUR NEIGHBORS THAT YOU GOT TO SIGN FOR ...HOW MUCH WAS IT BACK THEN? BOY I BET YOU LOST A COUPLE FRIENDS WHEN THE PRICE DOUBLED ...LIKE I SAID IT WOULD{AND AM BETTING IT WILL AGAIN IF NG PRICES GO UP}....GOD FORGIVE ME I CANT HELP TO GLOAT!! ;D

Berak

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #6 on: January 24, 2010, 05:36:51 PM »
...
If the land you have leased with others ends up in a Chesapeake unit you get nothing for it from them.
...

I sure hope this is true, I can't imagine anything more profitable to the landowner than taking the big gas company to the cleaners for unlawful trespass and theft.  I sure wish the landmen had it right once in a while ....  ;D   ::)

JEB

  • Posts: 1397
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #7 on: January 25, 2010, 04:38:26 AM »
STILL  BELIEVING EVERYTHING THEY TELL YA HUH JEB...WERENT YOU SUPPOSED TO BE SEEING ROYALTYS BY NOW IF YOU AND ALL YOUR NEIGHBORS THAT YOU GOT TO SIGN FOR ...HOW MUCH WAS IT BACK THEN? BOY I BET YOU LOST A COUPLE FRIENDS WHEN THE PRICE DOUBLED ...LIKE I SAID IT WOULD{AND AM BETTING IT WILL AGAIN IF NG PRICES GO UP}....GOD FORGIVE ME I CANT HELP TO GLOAT!! ;D

How do you know that I am not getting royalties?  You didn't have anything to do with anyone getting a higher price for a lease or a higher royalty percentage. 
It was all because of the large group of landowners in Susquehanna county that made that happen.  It then filtered back to you!  I didn't lose any friends at all!
If you are so sure that the price of natural gas will double then why did you sign a lease with Chesapeake?   Why did you sign with Chesapeake if you think they are liars and crooks?  I can tell you why!  You were afraid you would lose out!  You are just as greedy as the rest of us! 

Good luck to you!

JEB

  • Posts: 1397
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #8 on: January 25, 2010, 05:08:15 AM »
...
If the land you have leased with others ends up in a Chesapeake unit you get nothing for it from them.
...

I sure hope this is true, I can't imagine anything more profitable to the landowner than taking the big gas company to the cleaners for unlawful trespass and theft.  I sure wish the landmen had it right once in a while ....  ;D   ::)
You don't have to take my word for it!  Call Chesapeake and ask them what there policy is on production units!  The reason I ask was because I had land leased to Fortuna in there production unit!

JEB

  • Posts: 1397
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #9 on: January 26, 2010, 04:05:20 AM »
I called Fortuna and of course got the answer machine.  I left a message about the land I and others have leased to them that is going to be in Chesapeake production units.  That was two business days ago!  As soon as I can get an answer as to who will pay us the royalties for those Fortuna leases if anyone, I will post the findings.

beazer

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #10 on: January 26, 2010, 06:05:06 AM »
I called Fortuna and of course got the answer machine.  I left a message about the land I and others have leased to them that is going to be in Chesapeake production units.  That was two business days ago!  As soon as I can get an answer as to who will pay us the royalties for those Fortuna leases if anyone, I will post the findings.

I heard from a good source that a chk landman had told them the same thing about having to be with chk or you would be out of luck. They said it felt like a pressure tactic.
After they pressured him back (they had a source high up in the gas world with different info..) he admitted that no company will let a lease stand in the way and that they will trade, flip, whatever.. in this market. My thought is why would fg RECENTLY buy a lease in a chk area if they did not know it would be worthwhile to them ???

Berak

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #11 on: January 26, 2010, 07:04:54 AM »
Being "in a unit" effectively means there is a drill plan that includes your proprty and it is being drained of gas. You cannot be "in a unit" and not be under a lease in PA.  If you are under a lease, the terms of the lease MUST be honored.  Stop spreading CHK landmen lies and FUD, you are just doing their dirty work.

JEB

  • Posts: 1397
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #12 on: January 26, 2010, 10:44:46 AM »
Being "in a unit" effectively means there is a drill plan that includes your proprty and it is being drained of gas. You cannot be "in a unit" and not be under a lease in PA.  If you are under a lease, the terms of the lease MUST be honored.  Stop spreading CHK landmen lies and FUD, you are just doing their dirty work.

What to hell do you think we are trying to get Fortuna to do?

Give me one good reason at a CHK production unit meeting that the CHK representative would sit there and lie?   I have tried to get an answer from Fortuna if they had worked a deal with CHK.  But as of yet I can't get an answer from them.  Why do you label everyone you don't agree with a liar.    
« Last Edit: January 26, 2010, 11:41:22 AM by JEB »

duffy

  • Posts: 2813
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #13 on: January 26, 2010, 11:45:27 AM »
Ok JEB if you have been through all this give those of us the break down of how your unitization meeting went so we might know what to expect and questions to ask. In dealing with chk employees directly i haven't encountered anybody who has lied,IMO, some contractors REPRESENTING the company are a different story. Keep us informed on the other co leases in a Chk unit and how they fare when royalties come. What unit are you getting royalties from in the Burlington area, i'm confused on which one or ones have been officialy declared in that area, and which chk wells are online.Thanks

Berak

  • Guest
Re: QUESTION ABOUT ROYALTY ALLOCATION
« Reply #14 on: January 26, 2010, 12:07:36 PM »
Jeb,

I wasnt at the meeting so I dont know what was said.  It isnt really relevant because of what I already said.  It isnt a matter of opinion and getting a landman's take on it, it's the law. If you think they can drain your gas without paying you anything because you have someone else's lease then you are completely ignorant of the law and I would tell you to seek competent legal help in any dealings from here on out.

Why would they lie?  Are you that niave? They lie because that is what they do best.  They are professional story tellers.  You want a motive? How about so all the landowners like you spread the word that Fortuna leases are no good when dealing with CHK to stop people from signing up with Fortuna. Got it?

Do you think they are going to leave 80% profit in the ground because they dont like Fortuna?  Please.
« Last Edit: January 26, 2010, 12:19:47 PM by Berak »

 


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