cost-free royalty

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Co-author Ethan Wood

In Johnson et al vs. Chesapeake et al, unit operator Chesapeake deducted post-production costs (gathering, compression, treatment, processing, transportation and dehydration) from non-operating, unleased mineral  owners’ share of production proceeds. The UMO’s (so-called by the court) sued. The federal district court concluded that La. R.S. 30:10(A)(3) governs the dispute, and post-production costs could not be recovered from the UMO’s share of production proceeds.
Continue Reading Louisiana Operator Can’t Deduct Post-Production Costs from Unleased Mineral Owners

Co-author Chance Decker

 Burlington Resources Oil & Gas Company, LP. v. Texas Crude Energy, LLC et al is another chapter in the back-and-forth over deduction of post-production costs from royalty payments. In “clarifying” (royalty owners might say “retreating from”) Chesapeake Exploration & Production, LLC v. Hyder, the Texas Supreme Court held that a royalty delivered into the pipeline or tanks is akin to a royalty delivered “at the wellhead.” The lessee was entitled to deduct post-production costs from its royalty calculation, notwithstanding that the calculation was based on the “amount realized” from downstream sales.

Don’t read too much into it?
Continue Reading Texas Supreme Court Clarifies Hyder

Co-author Travis Booher

Chesapeake Exploration, L.L.C. v. Hyder is another hair-splitting Texas decision about “cost-free royalties”. 

The Facts

The Hyder family executed a lease covering 1,037 acres. Chesapeake drilled 22 wells on the leased premises. The Hyders believed their lease provided for a “cost free” royalty; that is, no post-production deductions. Chesapeake deducted post-production…