0 – 15 Minutes
In this version of All Things Marcellus, Doug explains The Clark Law Firm’s review and consultation legal services related to any contracts or agreements related Marcellus Shale, Utica Shale, or other oil and natural gas development in Pennsylvania. Doug stresses the importance of getting oil and gas representation and information before signing any documents presented by the company. Doug dives into how gas companies send Pennsylvania royalty owners documents and contracts in the mail and ask the landowner to sign the documents and return them in the self-addressed stamp envelope provided. Doug tells an old war story of a royalty owner who probably missed out of a per acre bonus payment in excess of $5 million Dollars because he simply signed and returned legal documents he received in the mail from the gas company. Royalty owners are cautioned to not repeat the mistakes that royalty owners have made in the past and do not simply rely on the gas or pipeline company landman to educate and inform you. Remember, the landman does not work for the landowner.
15 – 30 Minutes
Doug cautions Pennsylvania landowners to beware of pipeline company landman bearing exhibit maps when they visit your home. Doug explains how previously executed pipeline right-of-way agreements can be rendered completely useless when the pipeline company needs to change the location or route of the pipeline easement on the landowner’s parcel. New exhibit maps which changing of pipeline easement route can present outstanding opportunities for the landowner which must be maximized. An easement route and map change can often open the door wide-open for entirely new negotiations for additional money and compensation as well as additional addendum language to be added to the pipeline right-of-way agreement. Do not simply sign a new pipeline exhibit map if it is presented by the landman, but understand your rights and negotiation leverage and maximize this unique opportunity. Doug illustrates his point by providing examples where landowners simply signed the new exhibit map and failed to take advantage of this rare opportunity to take a second bite of an apple. Do not repeat this mistake and always negotiate to maximize opportunities.
30 – 45 Minutes
Doug walks through royalty owner’s royalty statements and explains post-production cost deductions. Doug walks through real royalty checks and goes through in detail the gross total of royalties in a given month and explains the compression, transportation, and gathering deductions, and also highlights the total royalties paid before and after and post-production cost deductions. Doug provides a sample set of royalty statements and goes through itemized list of the royalty deductions and explains the impact that deductions have on landowner’s monthly royalty payments. Doug also explains how some royalty owners in Bradford County are not receiving royalty payments because the post-production costs exceed the revenue obtained from the company’s sale of their gas. Post-production costs and royalty deductions or a major issue facing royalty owners in Pennsylvania, and everyone must understand royalty payments and the impact of transportation, gathering, and compression fees and other costs have on their royalty payments.
45 – 60 Minutes
Doug encourages all Pennsylvania landowners and royalty owners to seek experienced oil and gas legal representation before agreeing to any terms or signing any oil and natural gas related contract. Doug further discusses the negative impact that affiliated sales and post-production costs can have on natural gas royalty payments. Royalty owners must weigh the upfront per acre signing bonus against the terms and language of the oil and gas lease, including the natural gas royalty calculation method and whether deductions will be taken from the royalty payments. Of course, landowners must be very careful to understand the differences between royalty deductions and enhancements of marketable natural gas. Doug goes through another sample royalty statement and illustrates how approximately 67% of the royalties to date in the year 2016 have been deducted as post-production costs from the royalty payments. Affiliated sales and royalty deductions can destroy the value of natural gas royalties and royalty owners should negotiate to eliminate deductions from the royalty payments, and to eliminate unfair affiliated sales provisions that use index pricing to set the value of their natural gas royalty payments. These are complicated royalty issues that require professional legal assistance to protect the Pennsylvania royalty owner. Oil and gas lease reviews and consultations are an excellent legal service to educate and inform the royalty owner of company friendly terms of the agreement, and to inform the landowner their rights and ability to negotiate documents and offers presented by the company.