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Confounding

September 29, 2013

Senator Gene Yaw’s opposition to legislation clarifying the definition of royalty as referenced in the Guaranteed Minimum Royalty Act is confounding....

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ToTEXASfromPA

Sep-29-13 8:13 AM

"I do not recall an amendment in the Constitution enshrining the right of gas companies to deduct excessive post production costs; perhaps I'm "ignorant.""

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The minerals (gas/oil) lease is a separate legal contract between the owner of the mineral rights and the company wanting to lease them. Who pays for the production fees or how they are split between the lessee and lessor is a negotiation that is captured in the legal contract.

For instance, natural gas pricing may be referenced to the Henry Hub pricing but since transportation of the gas needs to take place through multiple pipelines and compressors, fees for transporting it would be deducted from the Henry Hub reference price. Third party pipelines recoup their CAPEX/OPEX expenditures for spending money to put in the equipment.

Similarly a farmer that sells corn to a mill has to transport his product to the mill to get the agreed upon price. He will pay for bins, trucks, gasoline, etc.

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FortySixand2

Sep-29-13 8:51 AM

That's sort of sidestepping the issue at hand. Why have a minimum royalty(12.5%) written into law when greedy gas companies take advantage of the naivete and inexperienced attorneys in the region by using lease language which allows them to steal these resources for next to nothing? Is there a 12.5% minimum royalty or not? Well, not according to Sen. Gene Yaw. A Republican siding with industry over individuals. Shocking, isn't it? Oh, and Benghazi!

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DavidBross

Sep-29-13 9:26 AM

An interesting and well written letter. I look forward to more letters from Mr. Brooks.

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BornHere

Sep-29-13 11:06 AM

Yes, best letter of the day. Thank you Mr. Brooks please keep writing more letters.

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FortySixand2

Sep-29-13 3:04 PM

"Yaw"

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