Eminent Domain Raises Its Ugly Head Tawney" Class Action by Small Mineral/Royalty Owners. Updated 3/18/2008 Mineral owners generally sign "leases" to operators/drillers. The leases almost always provide that the mineral owner gets paid a 1/8th "royalty", and the operator keeps 7/8ths of the value of the gas in order to, theoretically, reimburse the operator for the cost of drilling the well, getting the gas to market etc.-- plus a profit. Most leases provide that the value of the gas is determined "at the well head" etc. That was where the operator sold the gas to someone who owned the gathering lines, who sold it to someone that processed the gas, who sold it to interstate pipelines, who sold it to the utilities, who sold it to consumers and businesses.
The $100 drink of water Would you spend $100 for a glass of water? Some 49ers on the California Trail did. Because of poor planning, many western-bound 49ers were unprepared for the hot, dry deserts of Nevada. A few sharp businessmen in California knew this and took advantage of the situation. They traveled eastward with barrels of water. Extremely thirsty, many 49ers paid $1, $5, even $100 for a glass of precious water. But water was not the only expensive item on the Oregon-California Trail. For example, at the start of the journey, flour could be purchased for $4.00 a barrel, but further along the price rose to a sky-high $1.00 per pint. Other staples could also be quite expensive: ·Sugar $1.50 per pint ·Coffee $1.00 per pint ·Liquor $4.00 per pint Surprisingly, there were other staples that were amazingly cheap. For example, at Ft. Laramie, bacon could be had for a penny per pound. Those who had excess bacon often considered it worthless and dumped it by the side of the road. One emigrant reported seeing ten tons on one pile. Why the wide disparity in prices? The basic laws of supply and demand were at work. Most wagon trains took too much bacon and so it had little trading value. Water, on the other hand was in short supply and thus commanded a high price.
This edition of the Commentator is only 28 pages. We reduced size to meet our contributions. We also rushed into production because of the big oil and gas leasing move that is on in the county. We want the best information as soon as possible.
Lawyer Brought in by Charlie Wilfong to Explain Oil and Gas Leases Re: The Marcellus Formations of Oil Shale--The United States Geological Survey had estimated that the Marcellus contained only 1.9 trillion cubic feet (54 km³) of technically recoverable natural gas in a 2002 publication.[20] In 2008, Terry Englander, a Pennsylvania State University geosciences professor called his estimate of 168 trillion cubic feet (4,800 km³) conservative.[20] State University of New York at Fredonia geology professor Gary Lash has calculated that more than 500 trillion cubic feet (14,000 km³) of natural gas may be contained in the Marcellus black shale beds that lie between New York state and West Virginia.[21] At the present level of technology, he believes approximately 10 percent of this, or 50 trillion cubic feet (1.4 trillion m³), could be recovered.[21] This is enough to satisfy approximately two years' of total U.S. consumption,[20] or a total value of approximately one trillion United States dollars. To extract the shale gas, directional drilling is done to depths of 7,000 feet (2,000 m) to 10,000 feet (3,000 m) underground to reach the formation, then water is pumped into the rock under high pressure in a process known as hydraulic fracturing to release the gas from the low permeability shale,[22] which would not otherwise produce gas at commercially viable rates. This is a technique that was only perfected in the beginning of the 21st century outside Fort Worth, Texas to tap the reserves in the Barnett Formation shales of the Bend Arch-Fort Worth Basin, which are now the most prolific source of gas in the continental United States.[20]
In the years after the leases were signed, this organization of the industry changed. Now the gas is only "sold" in an arms length transaction after it has been gathered and processed. The gas is worth more there because it has been gathered and processed. Operators did not want to pay mineral owners 1/8th of that value, since it was higher than the well head value. So without re-negotiating the leases, often in violation of the lease language, and sometimes without even notifying the mineral owners, the operators subtracted expenses from the post-processing value before calculating the mineral owner's 1/8th royalty. Mr. Tawney went to a lawyer because his royalty check was smaller than his neighbor's. It turns out that not only were subtractions frequently in violation of the lease language, but the operators were fudging their expenses and subtracting all kinds of indefensible expenses, and using prices negotiated with wholly owned subsidiaries. Their legitimate 7/8's was not enough.
The natural gas drilling is really starting to ramp up, and I am glad to see so many candidates for county commission on top of this game. I think I speak for all the commission candidates when I say it is important that land owners know what they're signing. These are 40-80 year agreements. Long term, affecting your children and grandchildren. I hope everybody does their homework and gets a good deal.--David Fleming
Etater.com forum is being updated constantly with information about the oil and gas leasing.