Transportation Charges On Oil

[Bruce Oksol]

A reader asked elsewhere: do operators in North Dakota deduct transportation charges for oil? Elsewhere in that note, the reader was discussing Triangle USA Petroleum so it is possible there was specific interest in Triangle USA.

I would be curious about operators in general, as well as specific operators.

I don't own mineral acres so I don't have first hand information.

[brsa...@gmail.com]

The short answer it has everything to do with the language of the lease. It is a legal issue. As usual, the casual reader, non-legal reader, generally hears or understands the language to mean--no I will not be charged for that-- however, once precedents are searched and language defined "legally" then 9 times out of ten you get the shorter stick. This is why it is essential to use a lawyer who is on your side to improve all of the terms.

If you want a comparison example look up north dakota state leases and see how vastly different a lease written for the state is compared to the first "producer-88" standard lease most people see.

Also, and I don't mean to drive away traffic bruce, the other Bakken google group if searched has gone off on this topic in many ways and is worth using the search function if you really want to begin to understand the topic. Research is learning, welcome to school.

[Bruce Oksol]

Thank you, I appreciate that. I knew transportation charges were fairly common for natural gas, but did not know about oil.

I agree with need for professional advice. I posted that again yesterday in a long post.

Don't worry about driving away traffic by referencing other websites. I have no hidden agenda with regard to the blog. I started the blog to learn about the Bakken; if others stumble upon the blog, they are welcome to read it. Most readers won't know about "the other Bakken google group" or how to access it. If anyone has that link or additional links, that would be helpful.

[davidjo...@aol.com]

I would really like to know the web site for "the other Bakken google group" as I would like a lot more information on oil transportation charges. In negotiating my lease I asked for the meaning of the statement ...."royalty, free of cost but not applicable taxes, into the tanks or in the pipeline on the leased premises..." I was advised by a company rep as follows; "in regards to the royalty paragraph of the lease, your royalty payment will only be subject to a deduction of taxes and not a deduction of costs for transportation. The "into the tanks or into the pipeline on the leased premises" indicates that transportation costs will not be deducted because the royalty is being valued basically at the wellhead."

After a number of months, my royalty check started showing deductions for transportation charges. When I questioned this I was advised that "you will no longer be charged the "TRAN" fee on your checks going forward."

However, the latest check deducted $1,503 for transportation.

Any help or information on other peoples experience would be appreciated.

[Jane Smith]

Our lease says we are to be paid at the well head with no deductions for transportation. And for a year that was the case. But when oil prices dropped the oil company started deductions about 20%. I am interested if others are having this happen and if there are any class actions. We have talked to an attorney, but hasn't been very effective.

[Bruce Oksol]

I'll post this at the blog (and here, of course) but it's my experience not many will respond. Name of operator? General location? Specific language in the lease? Have you faxed the operator directly (it's my understanding that letters generally don't work)?