Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties
Income from oil and gas production doesn’t always trickle down to landowners, as companies find ways to minimize the share they pay in royalties.
A drilling rig in Springville, Pa. Income from oil and gas production doesn’t always trickle down to landowners, as companies find ways to minimize the share they pay in royalties. (Alex Brandon/AP Photo)
Don Feusner ran dairy cattle on his 370-acre slice of northern Pennsylvania until he could no longer turn a profit by farming. Then, at age 60, he sold all but a few Angus and aimed for a comfortable retirement on money from drilling his land for natural gas instead.
It seemed promising. Two wells drilled on his lease hit as sweet a spot as the Marcellus shale could offer – tens of millions of cubic feet of natural gas gushed forth. Last December, he received a check for $8,506 for a month’s share of the gas.
Then one day in April, Feusner ripped open his royalty envelope to find that while his wells were still producing the same amount of gas, the gusher of cash had slowed. His eyes cascaded down the page to his monthly balance at the bottom: $1,690.
Chesapeake Energy, the company that drilled his wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.
“They said you’re going to be a millionaire in a couple of years, but none of that has happened,” Feusner said. “I guess we’re expected to just take whatever they want to give us.”
Like every landowner who signs a lease agreement to allow a drilling company to take resources off his land, Feusner is owed a cut of what is produced, called a royalty.
In 1982, in a landmark effort to keep people from being fleeced by the oil industry, the federal government passed a law establishing that royalty payments to landowners would be no less than 12.5 percent of the oil and gas sales from their leases.
From Pennsylvania to North Dakota, a powerful argument for allowing extensive new drilling has been that royalty payments would enrich local landowners, lifting the economies of heartland and rural America. The boom was also supposed to fill the government’s coffers, since roughly 30 percent of the nation’s drilling takes place on federal land.
Over the last decade, an untold number of leases were signed, and hundreds of thousands of wells have been sunk into new energy deposits across the country.
But manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found.
An analysis of lease agreements, government documents and thousands of pages of court records shows that such underpayments are widespread. Thousands of landowners like Feusner are receiving far less than they expected based on the sales value of gas or oil produced on their property. In some cases, they are being paid virtually nothing at all.
In many cases, lawyers and auditors who specialize in production accounting tell ProPublica energy companies are using complex accounting and business arrangements to skim profits off the sale of resources and increase the expenses charged to landowners.
Deducting expenses is itself controversial and debated as unfair among landowners, but it is allowable under many leases, some of which were signed without landowners fully understanding their implications.
But some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions. In other cases, according to court files and documents obtained by ProPublica, they withhold money without explanation for other, unauthorized expenses, and without telling landowners that the money is being withheld.
Significant amounts of fuel are never sold at all – companies use it themselves to power equipment that processes gas, sometimes at facilities far away from the land on which it was drilled. In Oklahoma, Chesapeake deducted marketing fees from payments to a landowner – a joint owner in the well – even though the fees went to its own subsidiary, a pipeline company called Chesapeake Energy Marketing. The landowner alleged the fees had been disguised in the form of lower sales prices. A court ruled that the company was entitled to charge the fees.
Costs such as these are normally only documented in private transactions between energy companies, and are almost never detailed to landowners.
“To find out how the calculation is done, you may well have to file a lawsuit and get it through discovery,” said Owen Anderson, the Eugene Kuntz Chair in Oil, Gas & Natural Resources at the University of Oklahoma College of Law, and an expert on royalty disputes. “I’m not aware of any state that requires that level of disclosure.”
To keep royalties low, companies sometimes set up subsidiaries or limited partnerships to which they sell oil and gas at reduced prices, only to recoup the full value of the resources when their subsidiaries resell it. Royalty payments are usually based on the initial transaction.
In other cases, companies have bartered for services off the books, hiding the full value of resources from landowners. In a 2003 case in Louisiana, for example, Kerr McGee, now owned by Anadarko Petroleum, sold its oil for a fraction of its value – and paid royalties to the government on the discounted amount – in a trade arrangement for marketing services that were never accounted for on its cash flow statements. The federal government sued, and won.
The government has an arsenal of tools to combat royalty underpayment. The Department of Interior has rules governing what deductions are allowable. It also employs an auditing agency that, while far from perfect, has uncovered more than a dozen instances in which drillers were “willful” in deceiving the government on royalty payments just since 2011. A spokesman for the Department of Interior’s Office of Natural Resources Revenue says that over the last three decades, the government has recouped more than $4 billion in unpaid fees from such cases.
There are few such protective mechanisms for private landowners, though, who enter into agreements without regulatory oversight and must pay to audit or challenge energy companies out of their own pockets.
ProPublica made several attempts to contact Chesapeake Energy for this article. The company declined, via email, to answer any questions regarding royalties, and then did not respond to detailed sets of questions submitted afterward. The leading industry trade group, the American Petroleum Institute, also declined to comment on landowners’ allegations of underpayments, saying that individual companies would need to respond to specific claims.
Anderson acknowledged that many landowners enter into contracts without understanding their implications and said it was up to them to do due diligence before signing agreements with oil and gas companies.
“The duty of the corporation is to make money for shareholders,” Anderson said. “Every penny that a corporation can save on royalties is a penny of profit for shareholders, so why shouldn’t they try to save every penny that they can on payments to royalty owners?”
* * *
Gas flows up through a well head on Feusner’s property, makes a couple of turns and passes a meter that measures its volume. Then it flows into larger pipes fed by multiple pipelines in a process the industry calls “gathering.” Together, the mixed gases might get compressed or processed to improve the gas quality for final sale, before feeding into a larger network of pipelines that extends for hundreds of miles to an end point, where the gas is sold and ultimately distributed to consumers.
Each section of pipeline is owned and managed by a different company. These companies buy the gas from Chesapeake, but have no accountability to Feusner. They operate under minimal regulatory oversight, and have sales contracts with the well operator, in this case Chesapeake, with terms that are private. Until Chesapeake sold its pipeline company last winter, the pipelines were owned by its own subsidiaries.
As in many royalty disputes, it is not clear exactly which point of sale is the one on which Feusner’s payments should be based – the last sale onto the open market or earlier changes in custody. It’s equally unclear whether the expenses being charged to Feusner are incurred before or after that point of sale, or what processes, exactly, fall under the term “gathering.” Definitions of that term vary, depending on who is asked. In an email, a spokesperson for Chesapeake declined to say how the company defines gathering.
Making matters more complicated, the rights to the gas itself are often split into shares, sometimes among as many as a half-dozen companies, and are frequently traded. Feusner originally signed a lease with a small drilling company, which sold the rights to the lease to Chesapeake. Chesapeake sold a share of its rights in the lease to a Norwegian company, Statoil, which now owns about a one-third interest in the gas produced from Feusner’s property.
Chesapeake and Statoil pay him royalties and account for expenses separately. Statoil does not deduct any expenses in calculating Feusner’s royalty payments, possibly because it has a different interpretation of what’s allowed.
“Statoil’s policy is to carefully look at each individual lease, and to take post-production deductions only where the lease and the law allow for it,” a company spokesman wrote in an email. “We take our production in kind from Chesapeake and we have no input into how they interpret the leases.”
Once the gas is produced, a host of opaque transactions influence how sales are accounted for and proceeds are allocated to everyone entitled to a slice. The chain of custody and division of shares is so complex that even the country’s best forensic accountants struggle to make sense of energy companies’ books.
Feusner’s lease does not give him the right to review Chesapeake’s contracts with its partners, or to verify the sales figures that the company reports to him. Pennsylvania – though it recently passed a law requiring that the total amount of deductions be listed on royalty statements – has no laws dictating at what point a sale price needs to be set, and what expenses are legitimate.
Concerns about royalties have begun to attract the attention of state legislators, who held a hearing on the issue in June. Some have acknowledged a need to clarify minimum royalty guarantees in the state, but so far, that hasn’t happened.
“If you have a system that is not transparent from wellhead to burner tip and you hide behind confidentiality, then you have something to hide,” Jerry Simmons, executive director of the National Association of Royalty Owners (NARO), the premier organization representing private landowners in the U.S., told ProPublica in a 2009 interview. Simmons said recently that his views had not changed, but declined to be interviewed again. “The idea that regulatory agencies don’t know the volume of gas being produced in this country is absurd.”
Because so many disputes come down to interpretations of contract language, companies often look to courts for clarification. Not many royalty cases have been argued in Pennsylvania so far, but in 2010, a landmark decision, Kilmer v. Elexco Land Services, set out that the state’s minimum royalty guarantee applied to revenues before expenses were calculated, and that, when allowed by leases, energy companies were free to charge back deductions against those royalties.
Since then, Pennsylvania landowners say, Chesapeake has been making larger deductions from their checks. (The company did not respond to questions about this.) In April, Feusner’s effective royalty rate on the gas sold by Chesapeake was less than 1 percent.
Paul Sidorek is an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling. He’s also a landowner himself – in 2009, he leased 145 acres, and that lease was eventually sold to Chesapeake. Well aware of the troubles encountered by others, Sidorek negotiated a 20 percent royalty and made sure his lease said explicitly that no expenses could be deducted from the sale of the gas produced on his property.
Yet now, Sidorek says, Chesapeake is deducting as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year.
“Now that the royalties are flowing, some people just count it as a blessing and say we don’t care what Chesapeake does, it’s money we wouldn’t have had before,” Sidorek said. But he’s filed a lawsuit. “I figure I could give my grandson a first-class education for what Chesapeake is deducting that they are not entitled to, so I’m taking it on.”
Landowners, lawyers, legislators and even some energy industry groups say Chesapeake stands out for its confusing accounting and tendency to deduct the most expenses from landowners’ royalty checks in Pennsylvania.
“They’ve had a culture of doing cutthroat business,” said Jackie Root, president of Pennsylvania’s chapter of the National Association of Royalty Owners.
Chesapeake did not respond to questions on whether its approach differs from that of other companies.
Root and others report good working relationships with other companies operating wells in Pennsylvania, and say that deductions – if they occur at all – are modest. Statoil, which has an interest in a number of Chesapeake wells, does not deduct any expenses on its share of many of the same leases. In an email from a spokesperson, the company said “We always seek to deal with our lease holders in a fair manner.”
Several landowners said that not only do deductions vary between companies using the same gas “gathering” network – sales prices do as well.
On Sidorek’s royalty statements, for example, Chesapeake and Statoil disclose substantially different sales prices for the same gas moved through the same system.
“If Statoil can consistently sell the gas for $.25 more, and Chesapeake claims it’s the premier producer in the country, then why the hell can’t they get the same price Statoil does for the same gas on the same day?” Sidorek wondered.
He thinks Chesapeake was giving a discount to a pipeline company it used to own. Chesapeake did not respond to questions about the price discrepancy.
Chesapeake may be the focus of landowner ire in Pennsylvania, but across the country thousands of landowners have filed similar complaints against many oil and gas producers.
In dozens of class actions reviewed by ProPublica, landowners have alleged they cannot make sense of the expenses deducted from their payments or that companies are hiding charges
Publicly traded oil and gas companies also have disclosed settlements and judgments related to royalty disputes that, collectively, add up to billions of dollars.
In 2003, a jury found that Exxon had defrauded the state of Alabama out of royalty payments and ordered the company to pay nearly $103 million in back royalties and interest, plus $11.8 billion in punitive damages. (The punitive damages were reduced to $3.5 billion on appeal, and then eliminated by the state supreme court in 2007.)
In 2007, a jury ordered a Chesapeake subsidiary to pay $404 million, including $270 million in punitive damages, for cheating a class of leaseholders in West Virginia. In 2010, Shell was hit with a $66 million judgment, including $52 million in punitive fines, after a jury decided the company had hidden a prolific well and then intentionally misled landowners when they sought royalties. The judgment was upheld on appeal.
Since the language of individual lease agreements vary widely, and some date back nearly 100 years, many of the disagreements about deductions boil down to differing interpretations of the language in the contract.
In Pennsylvania, however, courts have set few precedents for how leases should be read and substantial hurdles stand in the way of landowners interested in bringing cases.
Pennsylvania attorneys say many of their clients’ leases do not allow landowners to audit gas companies to verify their accounting. Even landowners allowed to conduct such audits could have to shell out tens of thousands of dollars to do so.
When audits turn up discrepancies, attorneys say, many Pennsylvania leases require landowners to submit to arbitration – another exhaustive process that can cost tens of thousands of dollars. Arbitration clauses can also make it more difficult for landowners to join class action suits in which individuals can pool their resources and gain enough leverage to take on the industry.
“They basically are daring you to sue them,” said Aaron Hovan, an attorney in Tunkhannock, Pa., representing landowners who have royalty concerns. “And you need to have a really good case to go through all of that, and then you could definitely lose.”
All of these hurdles have to be cleared within Pennsylvania’s four-year statute of limitations. Landowners who realize too late that they have been underpaid for years – or who inherit a lease from an ailing parent who never bothered to check their statements – are simply out of luck.
Even if a gas company were found liable for underpaying royalties in Pennsylvania, it would have little to fear. It would owe only the amount it should have paid in the first place; unlike Oklahoma and other states, Pennsylvania law does not allow for any additional interest on unpaid royalties and sets a very high bar for winning punitive penalties.
“They just wait to see who challenges them, they keep what they keep, they give up what they lose,” said Root, the NARO chapter president. “It may just be part of their business decision to do it this way.”
Fracking: Gas Drilling's Environmental Threat
The promise of abundant natural gas is colliding with fears about water contamination.
The Story So Far
The country’s push to find clean domestic energy has zeroed in on natural gas, but cases of water contamination have raised serious questions about the primary drilling method being used. Vast deposits of natural gas, large enough to supply the country for decades, have brought a drilling boom stretching across 31 states. The drilling technique being used, called hydraulic fracturing, shoots water, sand and toxic chemicals into the ground to break up rock and release the gas.
33 comments
Mike
Aug. 13, 2013, 1:35 p.m.
To boil it down, as long as one happens to be the Department of the Interior or State of Alabama, you can sue and might win. Everyone else, good luck (aka your screwed). What impact is a fine (which appears is rarely collected) when you have billions in resources - NOTHING?
WHEN they have the ability to export NG (not if), we can kiss the cheap gas goodbye. Our 100 years of natural gas energy resources will fuel a manufacturing revolution is some other county. The honeymoon will end, as many coal plants have been converted to NG, which currently allows for lower electrical costs. When NG is on the international market, we can kiss the cheap electricity goodbye. Even though it’s literally OUR gas; state and federal land leases, DOE technology development, and we will be screwed with our own NG.
As HVHF will be consuming ever increase amount of our fresh water resources, the impact to local communities will increase accordingly. Economics drive the recycling not reason. Which will be cheaper in Michigan the home of 20% of the WORLDS fresh water? If you need 2-5 million gallons for a single frack on a single lateral; what is the demand if you have a dozen laterals at double the previous length? New York States Environmental Impact review just looked at the single lateral for a single well. Now factor in fracking the same well cluster say a dozen times - lots of water, billions at a state level and trillions nationally. Keep in mind what goes does come back up, as flowback. Consider 13-50% depending on formation, all hauled by truck through your sleepy little town with limited HAZMAT resources).
Review Encana’s Investor relations documents. The individual pads are now able to have an apparently ever-increasing number of laterals, lateral lengths are increasing, thereby requiring more water demands. The nature of HVHF appears to have a significant increase in gas production but declines rapidly, requiring refracking or additional laterals to maintain production levels.
The moral of this long diatribe - we are screwed seven ways to Sunday!
Jane Cyphers
Aug. 13, 2013, 3:01 p.m.
GASLAND 2 on HBO on JULY 8th- Watch Daily Show interview here.
http://www.thedailyshow.com/watch/wed-june-26-2013/exclusive—-josh-fox-extended-interview-pt—1
http://www.gaslandthemovie.com/screenings
Hydraulic Fracturing (Fracking) has very little in common with your grandmother’s gas well. Contaminating water sources and nondisclosure agreements should be serious crimes. They are not. Invest ethically. Watch Gasland 1 and Gasland 2 for info that the gas industry is not disclosing.
My husband and I recently installed a high efficiency Okefen pellet boiler in Milanville Pa. The oil burner is out.
Pellet heat as an alternative to fossil fuels and a source of carbon-neutral local heat.
http://www.DamascusCitizens.org
TomO
Aug. 13, 2013, 3:05 p.m.
Should anyone be surprised that gas companies are committing shenanigans to keep as much money as they can? Seems they are preying on those who do not understand the complexity of a multi-page contract. The gas companies have high priced lawyers, both in house and outside to write contracts to benefit themselves and fool the others. It may be ok by the law, but how do these lawyers sleep at nigh knowing they just screwed someone?
Michael Fulks
Aug. 13, 2013, 3:47 p.m.
This is the industry that repeatedly says we should trust it to make the best decisions for safety (now and for future generations) without any government oversight.
Pete Webb
Aug. 13, 2013, 4:39 p.m.
‘The duty of the corporation is to make money for shareholders,” Anderson said. “Every penny that a corporation can save on royalties is a penny of profit for shareholders, so why shouldn’t they try to save every penny that they can on payments to royalty owners?”’
This is the same excuse we always hear. Nobody talks about the duty of corporations to be honest and forthright in their dealings. Surely they have some obligation to act in good faith and treat people fairly.
Byard Pidgeon
Aug. 13, 2013, 5:27 p.m.
No, Pete, corporations have no duty to be honest or forthright, only to operate within the law, which they have great influence over right from the start.
There really should be no surprise here, as corporations of all sorts have used legal and accounting maneuvers to cheat lease holders since the practice began.
Entertainment corporations use similar tactics to cheat the people who produce the products (the “talent”) out of residuals and even out of their contractual share of profits.
It’s easy to show little or no profit when the company controls production and distribution…and it appears to be the same in every industry.
Bobby Dias
Aug. 13, 2013, 5:40 p.m.
Lustgarten is another selfish writer that believes that if HIS people do not receive money everybody is a thief.
James Barth
Aug. 13, 2013, 7:31 p.m.
I have no sympathy for most of the lessors (people who leased the precious land to HVSWMSHF, and drilling, for shale gas or oil, that they happened to own). Many of them call themselves “stewards” of the land, but, they really are people who have a “tea party” interpretation of land ownership.
They thought they had a right to do anything to the land that was “currently legal”, and, screw their neighbors, it’s their land! Well, Mr. and Mrs. lessor, meet the oil and gas industry, meet Chesapeake in particular.
Did they really think that only the land would be “fracked”? When you deal with the devil, chances are at least 16% you will end up in “hell”, and that does not even include the tears shed, and anger expressed, by the lessors, over their decreasing royalty payments.
Is it not interesting, that the royalty payment issue gets their blood boiling, instead of how the industry drills and fracs, and how the State and Federal governments allow the industry to drill and frac, and how it affects their neighbors?
frank
Aug. 13, 2013, 8:05 p.m.
this is what’s “great” about “our” gov’t—feds & state. here is our corrupt state of PA, the pols don’t protect it’s people. they sell them out. they incarcerate them in many FOR PROFIT PRISONS! the prisons are even guaranteed over a set minimum # of prisoners. (we recently had a judge who got caught jailing people who didn’t have to be becos he was getting kickback$ from the prisons for getting them more prisoners!)
in our lovely State full of freedoms, our pols saw fit to add Several, SEVERAL items to “banned substances”. Other states are starting to decriminalize substances. PA IS ADDING to the list!
the gas/oil co. SHOULD remember that rural PA is well ARMED. they keep screwing around with people’s land and $, we all know where the well pads are, the lines, compressors, and the pipelines.
IF it comes down to gas/oil co. paying 1% royalties, instead of the minimum 12.5%—most leases are for 15-18%—you will see landowners taking matters into their own hands.
Shahislam
Aug. 13, 2013, 8:34 p.m.
Never mind until free competition makes fuel oil & gas price cheaper than vegetable oil & oxygen.
Byard Pidgeon
Aug. 13, 2013, 9:38 p.m.
@James Barth…your lack of “sympathy” is compounded by your condemnation of those who have leased rights to their land, and your assumption that you are privy to their thoughts, needs, emotions.
You’d do better, if you’re actually sincere and active in your opposition to fracking, by finding some common ground with these people who are being cheated, maybe even some empathy, and enlisting them in your supposed cause.
They’ve also been wronged.
Byard Pidgeon
Aug. 13, 2013, 9:44 p.m.
@frank…Law is solidly on the side of the gas companies, so if you, or “we” start shooting, bombing, sabotaging or whatever, those will most likely be considered acts of terrorism, and you’ll wind up either dead or in one of those prisons you’re talking about.
You may make a lot of noise and cause some destruction, but that won’t accomplish much.
gudrun Scott
Aug. 13, 2013, 9:50 p.m.
I viewed the trailer of the awardwinning documentary in 2012 with the title “Chasing Ice” http://ecowatch.com/2013/arctic-rapid-melt-death-spiral/. We are losing ice now in winter and in summer and will be out of ice at the pole in 2015. The methane will bubble out of the permafrost and this is described as the tipping point of climate change were we cannot avoid climate catastrophe.
We need to function not “business as usual”. We need to find persons who will pasture that land without the pesticides that are killing the bees and build topsoil and live a much less complex life.
This is a serious crisis looming soon and very soon it will not matter what royalty anybody got or did not get.
Farmers should find somebody to function on that land and retire with genuine dignity and do a reverse mortgage if they need funds
The rest of us should elect a Congress that understands the crisis and cares about nature and work as hard as we can to avoid this crisis.
eric taylor
Aug. 13, 2013, 10:53 p.m.
A good reason for everyone to invest in Chesapeake stock, if they can get away with destroying the environment, but don’t have to pay the fools the agreed amount of Royalties promised to get rich rich quick scheme, because of accounting sleight of hand——giving you the business, financial advisers, with little to no education in the Hard or Soft Science’s of so many applied Philosophies, are recommending just such stock to make you rich quick, right now!
James Barth
Aug. 14, 2013, 8:04 a.m.
Byard Pidgeon: The vast majority of landowners who have been wronged by the industry are either those in a split estate situation, near BLM lands leased, or, willing lessors themselves. The first two categories are victims (along with any non lessor neighbors who have been negatively impacted), and my heart goes out to them on a daily basis for the past 5.5 years that I have been deeply involved in this issue. The willing lessors fall into their own category.
All the impacted people in the Dimock, PA situation, were lessors. When they got “screwed” by having their water, air, and health impacted, and they fought back through litigation, they had/have my support.
The lessors to whom I refer, and this article portrays, are more the people in Bradford, Susquehanna, or Washington Counties, who continue to support shale gas and oil extraction, as it was practiced 5 years ago, and as it is now practiced; as it was regulated 5 years ago, and how it is currently regulated; how regulations were enforced 5 years ago, and how they are now. All to what I just referred is wildly inadequate, and these lessors still scream loudly in support of their “FracNation” view, and ideology.
The only way they are currently being “wronged”, and the only way it seems to matter to these lessors, is related to their pocketbooks, and the reneging on the agreement, by the industry, that they thought they had.
My cause is not “supposed”, it is very real. It is those lessors to whom this article refers that should acknowledge the harm many of them have done to their neighbors, by leasing their lands for this extraction. They are the ones who need to acknowledge the negative realities, and to agitate for reform.
When they start showing support for the innocent victims of this extraction, and for changes in the regulations and enforcement related to this extraction, instead of attack blogging in support of this industry, then, we can find common ground.
If the fact that they are being screwed out of their royalty payments brings them to such an awareness, then there will be common ground.
I would welcome them, at that point.
Kim Feil
Aug. 14, 2013, 10:02 a.m.
Before fixn’ the shorted royalties their priority should be to spend money on protecting the public. They need to…
1) use diesel-less engines on rigs/compressors/trucks for preproduction phases
2) ensure no silicia dust can fly off the padsite and ban the use of uranium to perf detonations
3) flowback right away- don’t let the well sour and use pressurized tanks (ventless) for flowback
4) use vapor recovery systems on storage tanks
5) not allow indirect venting on compressor blowdowns - they must direct whats stuck in the lines to the storage tanks that are equipped with vapor recovery systems.
6) use the BTEX Eliminator equipment on thier dehydrators
7) invent erosion proof cement and rust proof steel for their casings
frank
Aug. 14, 2013, 11:53 a.m.
@Byard… yes, ur right re: my comment. i was trying to make a point tho on the fringe of sanity. BUT, things like this, esp. in the environment of the protruded slow “recovery” WILL make someone (or more) “insane”.
some people have nothing left, nothing to lose. so if they “die trying”…
my other point is our State gov’t is quick to curtail our rights, instead of protecting what really matters like gas co. ripping off people of the state. we all know why that is. the gas co. pay off the pols, they lobby, etc.
Steve Gates
Aug. 14, 2013, 1:59 p.m.
First thing. No land owner should “sign” or “agree” to anything they receive from the oil/gas companies until it is reviewed by a very competent oil/gas royalty lawyer. Gas and oil company lawyers would tell you this directly if you ask them…or at least the honest ones should.
People have told me they took the contract/agreement they got from the oil/gas company, had their lawyer create an exact duplicate look of the document, except taken some things out, added other things in, signed it and returned it. In these instances the oil/gas companies sign it and return without reading it themselves.
Obviously a person nees to check all the language from unspecified expenses and any other language where they can withold money from you. Some people have told me that they have written in to the agreements/contracts that the oil/gas company has full legal liability for any spills, cleanups, problems, equipment malfunctions, environmental restoration, equipment accidents, vehicle accidents health issues from exposure to vaports/chemicals/whatever etc.
The other thing to look out for is the language of where and how disputes related to that contract are settled. Are they settled by Arbritration in Houston Texas, or where ever the corporate headquarters is or is it local? Same thing if it is legal proceedings. At company headquarters or locally. If it is at the company headquarters, it is very likely an individual will have to pay the additional expenses of a lawyer in that location and not be able to use their personal lawyer.
Third the oil/gas companies are like any other company, group or organization in America. This includes your favorite grocery stores all the way down to the locally owned hobby show. They are are in business to make money. If they don’t make money, they go out of business. As part of that business model they have anywhere from one lawyer and one accountant to fleet of corporate lawyers and accountants who use every legal angle, loop hole and language to get legally get more money into company pocket’s and or the owner or share holders pockets.
Generally speaking if companies are not “legally required” or forced by the government, shamed into doing something by bad publicity, or the accident or problem is so big it can’t be covered up, they probably won’t do anything helpful.
Every for profit and not for profit company in America does this to some degree or another. Wait you say, not the “not for profit companies to!!” Yes, they do. They just have to show that the money they are getting is going out to expenses, salaries, or ear marked for some major projects.
For example in 2011 the Sierra Club made about 98 million dollars. Their top people make in reportable compensation anywhere from $177,000.00 per year to over $200,000.00 with the additional compensation. See pages 13 and 14 of their tax return at: http://990s.foundationcenter.org/990_pdf_archive/941/941153307/941153307_201112_990O.pdf
No matter the what kind of business a company is in, how much money they made, or didn’t make, how much the CEO and staff get paid or how little they get paid, it is always up to the individual/customer or individual land owners to make sure that they have taken care of themselves and their interest’s first and foremost.
I would hope after reading this article that when oil/gas companies send papers to people they instantly go to an oil/gas lawyer and read every letter/word/phrase to their satisfaction and or retype the document if need be to make sure they are covered first and foremost.
W.G. Miller
Aug. 14, 2013, 2:19 p.m.
The company mentioned in this article came our way all smiley and making promises. .Personally I told them to hit the road. .They tried to get me to sign things but hey. . There were a lot of promises made, and a lot of angry disappointed people. .
My Grandpa said if it sounds too good to be true, you can bet it is. . There were a lot of broken promises in our area, missing royalties, and much, much more. . There’s also a promise of “employment opportunity”, however that never comes either. .They bring their own people in from out of state. .I will vote against any state, or federal politician who favors the oil and gas companies over their constituents. . Which means all of them in my districts. . Too bad “tar and feathering” are out of vogue. .
John
Aug. 14, 2013, 2:59 p.m.
You know, it fascinates me that companies keep trying to find ways to scam their suppliers, employees, and customers, and then can’t figure out why sales are dropping and everybody says they can’t be trusted.
Nobody has money to spend and they don’t earn any trust? Nah, that’s silly! Spend more money on PR! Lay off more employees!
See, this is where the shareholders should revolt. If the quarterly earnings are up but the company is digging its own grave for the longer term, then the corporation’s leadership has failed in its duty to the shareholders.
Dave Mowers
Aug. 14, 2013, 3:53 p.m.
When will somebody go to jail?
Gudrun Scott
Aug. 14, 2013, 6:23 p.m.
The problem is ethical .
no cement lasts forever, 5% leaks immediately and the other 95% leaks eventually.
The amount of flow back water is HUGE. For a single frack that uses 5 million gallons, about 20% flows back contaminated with radiation , heavy metals, pyrites, and the chemicals that were used in the frack and there is more later called “produced water” just like this former product is called “residual waste”.
The amount from a single well from a single frack is about 1 million gallons for the flow back ( 20% of 5 million) never mind the produced water.
Considering that a milktruck hauls about 6,000 gallons of liquid, this million gallon amounts to 160 milk trucks full of liquids from a single frack.
Pa has fracked over 3,000 wells and wants to frack 60,000 all more than once.
Pa and NY do not have deep injection wells because their geology is not well understood.
There is no accounting were this waste is going.
Maybe it is going into household landfills which is illegal because the waste is not NORM or natural occuring radioactive material but it is TENORM, technically enhanced by man to bring this toxin from a mile away into the vicinity of humans and processed by chopping up the Marcellus rock into gravel and increasing the total surface area which was a single bolder and now is much more surface area which can liberate the radon gas , the radium which dissolves in water and produces the radon and liberates into the atmosphere the methane that this rock was of interest for in the first place. The drill cuttings that are piled up next to the well before hauling them to a dump have liberated their methane into the atmosphere where it becomes a green house heating gas 25 times more potent than CO2. It also brings with it heavy metals, pyrites and the chemicals that the industry puts into the frack.
Would I sign a contract for an activity that has not figured out what to do with the huge amount of toxic wastes no matter if they gave it a harmless name?
No-
Dru Christen
Aug. 15, 2013, 4:15 a.m.
This article is much needed communication. It reflects the state of our entire economy and the unethical behavior that we all seem to accept on not only a business level, but also with our government. What happened to us?
I am in a family (estates) that have many dealings with multiple OG Companies, including the ones mentioned in this article. Actually, Chesepeake has been sold more than a year ago to a new company and the band plays on. We have one oil well generating over 750 barrels a day for the last several months, and have yet to see any money and may not.
With Enron, they would send statements like a check was attached with no check. They went bankrupt.
So, you say find a good OG Attorney? Where? Tell me where? The big companies have them retained and to go after them, lawfirms have to have plenty of money because they keep them in court forever, etc etc.. we know. Been down that road.
This is all because our government, our businesses, education, etc. etc are so corrupt. But we accept it and voting doesn’t help. They are all of the same lot… reprobate minds.
This was predicted in one book though.. the Holy Bible. The deception is great, our country is in love with money….. “the love of money is the root of all evil” and it is. So our country has become so corrupt and evil, our government is useless, but rest assured, there will be retribution, even for those who just participate for a paycheck.
clarence swinney
Aug. 17, 2013, 4:01 p.m.
NEWT SENSE
Newt Gingrich said: “The GOP has been caught up in a cycle that is negative and vicious”.
Does he recall Repeal of Glass Steagall—Modernization of Commodity markets—Open Market with Cuba and Nafta? Or, does he forget the Impeachment?
Yet! He is intelligent on Government and noted no increase in Minimum Wage—Dream Act—Immigration—America Jobs Act—Bush Tax Cuts for Rich—Payroll Tax Cut—Social Security CPI—Voting acts—Shutdown of Government—Debt Extension, etc.
I will take him over Boehner. He is smarter and tougher.
clarence swinney
Aug. 19, 2013, 4:02 p.m.
In this Congress 22 bills have been signed into law
88 in 1994 lowest since Great Depression
David Koch zillions hired Tea Party to cut government and he is succeeding
at the expense of millions without jobs and more millions with low pay.
In OECD nations we now rank #1 as largest number working for low wages.
44 million for minimum wages.
Newt Gingrich was accurate to say the GOP is on a cycle that is negative and vicious.
We closed 58,000 plants in the first decade of this century and it has not been stopped.
Smart Socks recently moved our 45 jobs to Mexico.
President Obama was correct to say we have had a decline in good jobs.
He explained that the income of the top 1% nearly quadrupled from 1979 to 2007, while the typical family’s barely budget. As the recovery continues the earnings of the average worker are down. Newly hired auto workers make a fraction of what the industry historically paidThere does not seem to be any good answer to better paying jobs.
paul randall
Aug. 19, 2013, 6:06 p.m.
Drillers must be using the same accountants that Art Buchwald sued in Buchwald v. Paramount. There is a term in Hollywood for net points of movie profit called Monkey Points because only monkeys think they are worth anything. Once the accountants are done none of these wells will make any money at all.
clarence swinney
Aug. 20, 2013, 11:08 a.m.
60th-80th Percentile=$100,700
40th-60th Percentile=$12,200
Bottom 40%=$14,800
What scares me is control of voting via computer programs.
In last election I voted a straight D but, on review, all came up R
Robert Reich of University of California put it simple and truthful in a brief outline:
“Suppose a small group of extremely wealth people sought to systematically destroy the U.S. Government by finding and bankrolling new candidates pledged to shrinking and dismembering it—-
intimidating or bribing many current senators and representatives—-to block all proposed legislation, prevent the appointment of presidential nominees, eliminate funds to implement and enforce laws
and—-threaten to default on the nation’s debt—-taking over state governments in order to redistrict, gerrymander, require voter IDs, purge voter rolls and otherwise suppress the votes of the majority in federal elections—-running a vast PR campaign designed to convince the American public of certain big lies, such as climate change is a hoax And—-buying up the media so the public cannot know the truth—-would you call this Treason or what?”
Who controls our voting machines and vote counters? Vote counter Diebold was sold to a Republican.
What a wonderful simple analysis on American politics today.
Orland
Aug. 22, 2013, 9:55 p.m.
The very same thing is going on in Northern Calif,
The gas company pais sweet and the prices dropped 80 % (ABA Energy)(Vintage Petroleum)
What can a guy do now ?
rob whitten
Aug. 23, 2013, 1:30 p.m.
If I could set this thing up ait would go like this… Install a meter on the well head to keep track of volume of material coming from well which would send a daily report to the property owner and any body else who needed the info. Price would be affixed to daily market prices AND taken off the top, preventing the oil company’s from ripping these folks off. If price goes up you make more and if they go down, not so much. Checks to be cut monthly with a daily accounting summery included. Bottom line if it comes out of the ground your paid… period. As far as the government royalists ...Their real good at covering their own asses.
BAS
Aug. 23, 2013, 11:08 p.m.
I often wondered how they know how much gas they are really taking from landowners? Is there a meter somewhere? Do they just pull a number out of their complicated process?
We’ve been telling people for years. Make sure seek legal council before signing your property away to the gas industry.
Ashton
Aug. 28, 2013, 6:46 a.m.
Truly strong /well run companies do not prioritize paying shareholders. If the rest of the company is run well, then the shares take care of themselves! Didn’t anyone else take high school consumer economics??
Stockholders are gamblers and are not supposed to have a guarantee of income.
Low level employees usually bear the brunt of companies that foolishly subscribe to the myth that shareholders are “owed” anything special unless the company is genuinely doing really well.
Anyone wonder why the middle class no longer exists?
This “shareholder” myth is the biggest contributing factor in the decline of morale in US corporate culture. The result is that the rich get richer right up until the whole thing falls apart.
There are a few oil and gas companies (http://thegascompany.blogspot.com/2013/07/liquefied-natural-gas-company.html) who understand and do not follow the suicidal business model, but most are riding that bandwagon right into oblivion and taking the peons with them.
Dru Christen
Aug. 31, 2013, 9:44 a.m.
@ Rob Whitten: I would help you! I am actually a web developer and thinking about setting up a website for information/ complaints etc. Just really busy (have a cattle ranch) and didn’t want to go it alone. Let me know and I would be happy to send my contact info.
@ Ashton: Stockholders? Well, we are THE landowners of said property and we also own the mineral rights. They have put major pipelines through our land (we own about 3000 acres) and multiple og wells. We feel totally ripped off by most of them down there. No one lives there actually to keep an eye on things. Now the attorneys are giving the excuse that there is something wrong with the deeds… go figure. Lands been in my family a long long time.
Eva Hall
Sep. 4, 2013, 7:58 p.m.
I see. So it is not a good idea to lease lots for drilling in Pennsylvania after all because of their law. It would probably be wiser to continue farming because that way, owners can gain more revenues.
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