“Lessee shall have free use of oil, gas, …from said land, …, for all operations hereunder, and the royalty on oil, gas and coal shall be computed after deducting any so used.” Precedent set by the Texas Supreme Court decisions in BlueStone Natural Resources II, LLC v. Randle (NADOA 2021 Q2 Newsmagazine) and Burlington Res. Oil & Gas Co. LP v. Texas Crude Energy, LLC (NADOA 202 Q1 Newsmagazine) controlled the reasoning in both Fitzgerald and Carl regarding the deduction of post-production costs (PPCs) from lessor gas royalties.
The plaintiffs’ cases in both Fitzgerald and Carl were dismissed, with the courts’ rationale being that PPCs add value to the gas, thus subtracting necessary and reasonable costs between the well and the point of sale approximates the market value at the well. Apache was allowed to subtract the value of the downstream use of this gas as PPCs paid as in-kind payment or used in post-production services before the gas was sold. The court in Hilcorp found the market value at the well clause allowed Hilcorp to deduct reasonable and necessary PPCs from royalty calculations, and that doing so would not conflict with a free-use clause that applies to produced gas used on the leased premises.
Unclaimed
Property The following information is not intended to be“written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. This article represents the views of the author(s) only, and does not necessarily represent the views or professional advice of KPMG LLP. Unclaimed Property: Updates for the Oil and Gas Industry
90 days from the date of the invitation to enroll the in the VDA program or they will be referred to the Delaware Department of Finance for a potential unclaimed property audit. 2 The invitations to Delaware’s VDA program are generally addressed to the holder’s Chief Financial Officer and as such, are sometimes are overlooked. Enrollment in the DE SOS VDA program offers holders of unclaimed property a variety of benefits compared to an audit. Namely, holders participating in the VDA program can employ a 90-day aging criteria for reviewing voided disbursement checks, whereas an unclaimed property audit uses a 30-day __________________ 1 Delaware Secretary of State voluntary disclosure program website at: VDA Invitation Dates - VDA Program - State of Delaware, as seen on 8-5-2022. 2 Del. Code Ann. tit. 12, § 1173 (b)
In this quarter’s magazine, we want to make readers aware of three significant developments impacting the oil and gas industry: — The issuance by the Delaware Secretary of State’s Office of additional invitations to companies to join its voluntary disclosure agreement program (the“DE SOS VDA”); — Impacts of recent Delaware law changes on the state’s“Compliance Review” process; and — Changes to the West Virginia dormancy periods including for mineral interest property. Delaware Voluntary Disclosure Agreement (“VDA”) Program On July 22 nd , the Delaware Secretary of State’s Office mailed letters to certain businesses inviting them to join the DE SOS VDA program. 1 Holders that receive an invitation from the Secretary of State’s Office have
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G rowth T hrough E ducat i on - J uly / A ugus t / S ept ember 2022
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