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Oil/Gas/Court order


Hi Marsha. I have a question concerning a court order made In  the court of Wise county Texas. The judgment states that in any lease made between the lease owners will provide for and I quote A)a royalty of not less than 1/8 of the oil to be delivered free of cost in the pipe line; (b)a royalty on natural gas of not less than 1/8 of the value of it when sold or used off the premises, OR NOT LESS THAN 1/8 OF THE NET PROCEEDS OF SUCH GAS, AND NOT LESS THAN 1/8 OF THE NET AMOUNT OF GASOLINE MANUFACTURED FROM NATURAL OR CASINGHEAD GAS,(C)AND NOT LESS THAN 1/8 OF THE VALUE AT THE MINE OR WELL ON ALL OTHER MINERALS. My QUESTION IS CAN YOU EXPLAIN THIS STATEMENT TO ME? Sorry about the upper case. I received the papers after my mother passed and now I am working with Devon Energy. Thank you for any help you can give me.

Based only on the language from the order that you provided here, as a division order analyst I would interpret this to mean that the court has ordered that any oil and gas lease signed after the date of the order must provide for a minimum of 1/8 royalty.  Since 1/8 has been the minimum for many decades, this is nothing new.  But what is important is that this language clearly requires all of the royalty owners entitled to a share of the 1/8 to have deducted from it all post-production costs incurred to get it sold or delivered to the buyer.  That's what " of cost in the pipe line" means.  It is to be free of all of the costs of exploring, drilling, equipping and producing the oil and gas to the mouth of the well, but after that whatever costs are incurred for transportation, marketing, dehydrating, or a host of other potential post-production costs must be borne proportionately by all owners of production including royalty owners. That is to say, unless the lease also contains a clause elsewhere in it that says straight-out that all royalties are to be free of all post-production costs.  In that case, the oil companies (operator and partners in the well) must pay the post-production costs on behalf of the royalty owners here.  If this does not answer your question, please send a follow-up.  Thank you for your patience--I was very busy this week.


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Marsha Breazeale, M.Ed., CDOA, CPLTA


All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.


Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

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