The Oil and Gas Addendum
An Oil and Gas Blog for Landowners.
The law of oil and gas here in Pennsylvania and throughout the Marcellus Shale region is complex and continues to evolve and change. If you own oil and gas rights, keeping up to date on these changes and trends is critical. The Oil and Gas Addendum is your resource for timely and informational articles on the latest developments in oil and gas law. Our oil and gas practice here at Houston Harbaugh is dedicated to protecting the interests of landowners and royalty owners. From new lease negotiations, to title disputes, to royalty litigation, we can help. We know oil and gas.
Articles posted in Royalties and Post-Production Costs
Texas Supreme Court Rules That 1924 Deed Conveyed One Half Of The Oil and Gas Estate
The calculation of production royalties and the deduction of post-production costs remains a controversial topic here in Pennsylvania. As we have written before, there is another frustrating and...
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Texas Supreme Court Rules That Post-Sale Costs Must be Added Back to Gross Proceeds Calculation
Let’s assume you own 185 acres in Washington County. In 2020, you negotiate a new oil and gas lease with ABC Drilling. During the negotiations, you insist on...
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Pennsylvania Supreme Court Agrees to Hear Appeal In Royalty Dispute
On February 15, 2023, the Pennsylvania Supreme Court agreed to hear the appeal of PennEnergy Resources, LLC in the Dressler Family, LP v. PennEnergy Resources, LLC matter. The...
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Can "Free Gas" Clauses Refute the Artificial Wellhead Value Suggested by Drillers?
An oil and gas lease with a “free gas” clause may be a valuable tool for landowners to push back against drillers’ inaccurate attempts to value gas at...
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Market Enhancement Clauses in Pennsylvania After Dressler Family, LP v. PennEnergy Resources, LLC
Many Pennsylvania landowners have leases with “market enhancement” royalty clauses. These clauses typically prohibit the deduction of any post-production costs that are incurred transforming the gas into marketable form....
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Is the Value of Your Gas Really Being Enhanced?
Let’s assume you own 115 acres in Greene County, Pennsylvania. In 2017, you signed an oil and gas lease with ABC Exploration, Inc. During the negotiations, you agreed...
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Pennsylvania Superior Court Rules that Royalty Clause Referencing Both ‘Gross Proceeds’ and ‘At the Well’ Was Ambiguous
Let’s assume that you own 125 acres in Tioga County. In 2017, you negotiate a new oil and gas lease with XYZ Drilling. During the negotiations, you insist...
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Are Your Royalties Going Up In Flames?
Royalty provisions can differ and often contain different royalty valuation points. But all of those leases are subject to the Pennsylvania Guaranteed Minimum Royalty Act (the “GMRA”), which imposes a minimum royalty on all hydrocarbon production
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Texas Supreme Court Issues Troubling Decision in Royalty Dispute
The practice of deducting post-production costs from landowner royalties remains a controversial and contentious issue here in Pennsylvania. Many landowners sought to insulate their royalties from such deductions by negotiating royalty clauses which require the hydrocarbons to be sold “free of cost in the pipeline.”
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Texas Federal Court Rules No Royalty Due on Gas Used to Fuel Off-Lease Operations
No Royalty Due on Gas Used to Fuel Off-Lease Operations because the gas is never sold or marketed and is instead consumed as fuel during the processing operation
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Claim Based On Implied Covenant To Market Gas To Move Forward In Federal Royalty Litigations
For many landowners in Pennsylvania, the receipt of the monthly royalty statement is an ongoing source of frustration and anger. In addition to excessive and unreasonable deductions for...
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Federal Court in Kentucky Allows Novel Royalty Claim to Move Forward
Federal Court in Kentucky Allows Novel Royalty Claim to Move Forward
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Failure to Tender Production Royalty Did Not Trigger Forfeiture Clause
Failure to Tender Production Royalty Did Not Trigger Forfeiture Clause In a typical oil and gas lease, there are three primary sources of compensation to the landowner: the...
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Court Rules Severance Tax Does Not Increase Value of Shale Gas, Therefore Not a Deductible Post-Production Cost
A landmark decision on the practice of deducting post-production costs was recently issued by the Supreme Court of Kentucky. Specifically, the court held that a lessee could not...
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Superior Court Breathes New Life Into Guaranteed Minimum Royalty Act
Superior Court Breathes New Life Into Guaranteed Minimum Royalty Act As the debate in Harrisburg heats up this winter regarding the practice of deducting post-production costs from oil...
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Landowners May Face Difficult Burden Regarding Intermingled Gas
Landowners May Face Difficult Burden Regarding Intermingled Gas A recent opinion issued by the Pennsylvania Superior Court may place a difficult burden on landowners confronted with a subsurface...
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Federal District Court In Pennsylvania Allows Royalty Claim To Move Forward
Pennsylvania Allows Royalty Claim To Move Forward
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Federal District Court In Ohio Rules That Chesapeake Did Not Breach Lease When It Deducted Costs From Royalty
In the ongoing royalty dispute in Lutz v. Chesapeake Appalachia, LLC, the federal district court sitting in Akron, Ohio recently ruled that Chesapeake did not breach the parties’...
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Sixth Circuit Rules That Driller Must Pay Royalties On Natural Gas Liquids
Sixth Circuit Rules That Driller Must Pay Royalties On Natural Gas Liquids
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Federal District Court in Ohio Rules That Driller Did Not Breach Lease by Deducting Post-Production Costs Incurred by Affiliate
Federal District Court in Ohio Rules That Driller Did Not Breach Lease by Deducting Post-Production Costs Incurred by Affiliate
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Federal Court in Pittsburgh Questions Applicability of Kilmer Decision
In a recent decision, the federal court in Pittsburgh held that the definition of “royalty” adopted by the Pennsylvania Supreme Court in Kilmer v. Elexco Land Services, Inc. was not...
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West Virginia Supreme Court to Reconsider Landmark Decision in Leggett v. EQT Production Company
In a rather surprising move, the West Virginia Supreme Court has decided to revisit the November 17, 2016 opinion it issued in the Leggett v. EQT Production Company...
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West Virginia Federal Court Rules That Lease Did Not Authorize the Deduction of Post-Production Costs
Your family owns a 300 acre farm in Ritchie County, West Virginia. There is a lease from 1978 on the property that has now been incorporated into a...
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Tenth Circuit Rules That Obligation To Pay Royalty On Fuel Gas Depends On Lease Language
royalty may be due depending on the precise language in the parties’ oil and gas lease.
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West Virginia Moves To Prohibit Drillers From Taking Deductions Which Reduce Net Royalty Below 12.5%
West Virginia Moves To Prohibit Drillers From Taking Deductions Which Reduce Net Royalty Below 12.5%
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Driller Has No Obligation to Pay Royalty on Lost Gas
Imagine you own an apple orchard. You sign a contract with XYZ Produce which grants them the exclusive right to harvest your apples. At the end of the...
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Legislation Revived to Protect Royalty Owners in Pennsylvania
On June 23, 2015, Representatives Garth Everett (R-Lycoming), Sandra Major (R-Susquehanna/Wayne), Matt Baker (R-Bradford/Potter/Tioga), Tina Pickett (R-Bradford/Sullivan/Susquehanna) and Karen Boback (R-Lackawanna/ Luzerne/Wyoming) re-introduced legislation which seeks to clarify...
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Is Pa. Becoming a First-Marketable-Product Jurisdiction?
Many landowners across Pennsylvania are experiencing sticker shock upon opening their first royalty statement. They have waited months, often years, to receive their first royalty. As they open...
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The Difference Between a “Royalty” and a “Royalty Interest” Can Be Confusing and Costly For Landowners
The calculation of production royalties and the deduction of post-production costs is a hot topic for landowners across Pennsylvania. But there is another frustrating and often confusing royalty-related...
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Ohio Supreme Court Declines to Adopt Blanket “At the Well” Rule
The question of whether Ohio follows the “at the well” rule or the “marketable product” rule will have to wait for another day. And that might not be...
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New Royalty Bill Hb 1708 Will Not Help Pennsylvania Landowners
Throughout Pennsylvania, landowners are continuing to experience frustration and anger when they open their royalty statements. The practice of deducting postproduction costs from the gas royalty has become...
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Federal District Court in Pittsburgh Rules That 1897 Deed Did Not Grant a Non-Participating Royalty Interest
When a landowner executes an oil and gas lease, the developmental rights are transferred to the lessee. The lessor’s interest in the transferred developmental rights is known as a “possibility of reverter”. If the oil and gas lease expires, the developmental rights automatically revert back to the lessor-landowner.
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The Net-Back Method Does Not Result In Better Pricing to Justify Deductions Under Market Enhancement Clauses
Landowners with market enhancement clauses should carefully review their royalty statements and pay particular attention to the commodity prices reported in their statements. If these prices remain below nearby index prices but the gathering and transportation costs remain the same, it is difficult to justify how these movement costs resulted in better pricing.
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The New Royalty Bill is Good for Pennsylvania Landowners
On August 5, 2021, Rep. Eric Davanzo (R-Westmorland County) introduced HB 1763. The bill seeks to clarify Pennsylvania oil and gas law by defining the term “royalty”. It...
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Is Your Driller Really Enhancing the Value of Your Gas?
The driller cannot deduct the cost of dehydrating the raw gas and then moving the gas 165 miles away to a distant buyer unless the final net sales price at that location is better than the price the driller would have received selling the gas locally.
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Federal District Court Injects Confusion into Definition of Gross Royalty Under Pennsylvania Law
Drillers are becoming more creative and aggressive in their effort to avoid lease language that was intended to prohibit or restrict the deduction of post-production costs.
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Are February 2021 Production Royalty Payments Leaving you Out in the Cold?
Pennsylvania Attorney General announced a settlement that Chesapeake must stop offering leases that contain “market enhancement” clauses or “ready for sale or use” clauses to Pennsylvania landowners.
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Is Your Driller Trying to Re-Write History?
The driller cannot unilaterally amend or modify the underlying lease by changing the effective date of the pooling instrument. This, in turn, means that the driller cannot go back in time and make retroactive changes to the previously recorded unit declaration. The driller can change or modify the size, shape, and boundary of the unit but those changes can only affect your royalty prospectively.
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Texas Supreme Court Rules That Gross Royalty Clause Prohibits Driller From Deducting Post-Production Costs
Texas Supreme Court Rules That Gross Royalty Clause Prohibits Driller From Deducting Post-Production Costs
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Historic Cold May Provide Window Into “Market Enhancement” Under Gas Leases
These clauses typically contain language that prohibits a driller from deducting post-production costs unless the driller can demonstrate that the purported costs “enhanced the value” of the gas and enabled the driller to receive a better price for the gas.
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Kansas Court Rules that Gas is not Marketable Until it Reaches Interstate Pipeline
Under most “market enhancement” clauses, the costs associated with moving, processing and transporting the gas should not be deductible. If you have a “market enhancement” clause, you should carefully review and monitor your royalty statements for improper or excessive deductions.
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Why Is The Driller Deducting Post-Production Costs My Lease Doesn’t Allow? Kilmer V. Elexco Land Services: A Decade Later
Kilmer granted them an automatic and universal right to deduct post-production costs – even when the underlying lease says nothing about deductions.
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Oklahoma Federal Court Rules That Driller Must Pay Royalty On Fuel Gas
Driller Must Pay Royalty On Fuel Gas
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West Virginia Jury Finds That EQT Improperly Calculated Landowners’ Royalty on Shale Gas
EQT Improperly Calculated Landowners’ Royalty on Shale Gas royalty was artificially reduced by EQT’s practice of “netting out” post-production costs incurred between the wellhead and the downstream point-of-sale
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Why the New Minimum Royalty Bill is Constitutional and Good for Pennsylvania
On February 17, 2017, Rep. Garth Everett (R-Lycoming County) introduced HB 557. The bill seeks to put teeth back into Pennsylvania’s Guaranteed Minimum Royalty Act (“GMRA”) by prohibiting...
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About Us
Oil and gas development can present unique and complex issues that can be intimidating and challenging. At Houston Harbaugh, P.C., our oil and gas practice is dedicated to protecting the interests of landowners and royalty owners. From new lease negotiations to title disputes to royalty litigation, we can help. Whether you have two acres in Washington County or 5,000 acres in Lycoming County, our dedication and commitment remains the same.
We Represent Landowners in All Aspects of Oil and Gas Law
The oil and gas attorneys at Houston Harbaugh have broad experience in a wide array of oil and gas matters, and they have made it their mission to protect and preserve the landowner’s interests in matters that include:
- New lease negotiations
- Pipeline right-of-way negotiations
- Surface access agreements
- Royalty audits
- Tax and estate planning
- Lease expiration claims
- Curative title litigation
- Water contamination claims
Robert Burnett - Practice Chair
Robert’s practice is exclusively devoted to the representation of landowners and royalty owners in oil and gas matters. Robert is the Chair of the Houston Harbaugh’s Oil & Gas Practice Group and represents landowners and royalty owners in a wide array of oil and gas matters throughout the Commonwealth of Pennsylvania. Robert assists landowners and royalty owners in the negotiation of new oil and gas leases as well as modifications to existing leases. Robert also negotiates surface use agreements and pipeline right-of-way agreements on behalf of landowners. Robert also advises and counsels clients on complex lease development and expiration issues, including the impact and effect of delay rental and shut-in clauses, as well as the implied covenants to develop and market oil and gas. Robert also represents landowners and royalty owners in disputes arising out of the calculation of production royalties and the deduction of post-production costs. Robert also assists landowners with oil and gas title issues and develops strategies to resolve and cure such title deficiencies. Robert also advises clients on the interplay between oil and gas leases and solar leases and assists clients throughout Pennsylvania in negotiating solar leases.
Brendan A. O'Donnell
Brendan O’Donnell is a highly qualified and experienced attorney in the Oil and Gas Law practice. He also practices in our Environmental and Energy Practice. Brendan represents landowners and royalty owners in a wide variety of matters, including litigation and trial work, and in the preparation and negotiation of:
- Leases
- Pipeline right of way agreements
- Surface use agreements
- Oil, gas and mineral conveyances
