A royalty is a cost-free share of oil and gas production. This video looks at the typical language for the oil royalty and the gas royalty in a lease. It also considers how oil and gas companies should pay royalties when natural gas prices turn negative as they have sometimes done in recent years and likely will more in the future. It examines what royalty oil and gas companies pay when they sell oil and gas under a long-term contract that may differ from the current market price. And it looks at how to treat separate payments to natural gas companies that may or may not be related to the sale of gas.
Class 16; Video 1
Citations:
John S. Lowe, Owen L. Anderson, Christopher S. Kulander, Monika U. Ehrman, Burke W. Griggs, James W. Coleman, Cases & Materials on Oil & Gas Law, https://faculty.westacademic.com/Book/Detail/338274
pp. 303-323
Background Reading:
James W. Coleman, The Third Age of Oil and Gas Law, 95 Ind. L.J. 389 (2020), https://scholar.smu.edu/cgi/viewcontent.cgi?article=1705&context=law_faculty