Friday, August 28, 2009

Honesty isn't in Gas and Oil Industry's Vocabulary!

Many have signed leases right here in North Texas and all through the United States. Believing that if it is put in writing, the gas and oil companies will stick to the agreement. Recently DFW accused Chesapeake of not reporting some production amounts.
The airport notified Chesapeake Energy that Chesapeake is in "monetary default."
"I think we should all be concerned," said Burnam.

The airport's received $37 million in royalty payments to date but contends in these letters it's not being paid correctly, citing concerns with both the way Chesapeake is calculating royalties and the amount of gas the company reports it's producing and selling.

Burnam's district includes Fort Worth, a part owner of D/FW airport.
"Any public official is going to be, should be concerned... Certainly D/FW is big enough to stand up for its own interest but that fact that they're having these legal letters back and forth over so many issues really disturbs me," he said.

Royalties, however, aren't the only controversy involved in D/FW gas drilling.

Big problem, who is watching them to make sure they do what the lease states? If you believe the Texas Railroad Commission here is Texas is regulating and protecting us, think again.
Landowners in Texas who lease their lands for drilling have very few options when they are denied the royalty payments that are rightfully theirs. That is because, in Texas there is no single authority in in charge of ensuring that landowners receive their dues. Due to the lack of such authority, owners are often at the mercy of oil and gas companies who may delay and deny royalty payments. In such cases, owners may have no other option but to consult with an oil and gas attorney to receive the royalties due to them.

Even if the TRC was in charge of monitoring the reporting of production for royalties to make sure landowners are paid correctly, it is physically and mathematically impossible for them to do so. Like previously posted, a total of over 377,000 oil and gas wells, over 76,000 of them being gas wells and only 80 something inspectors!

'Honor System' Doesn't Work for Oil and Gas Companies, Louisiana Says
NEW ORLEANS (CN) - Louisiana has filed 30 federal lawsuits seeking millions of dollars from oil and gas companies it accuses of grossly under reporting oil and gas production. It claims the oil industry has cheated the state by lying in a tax reporting system that relies upon an honor code.

About 1,546 oil and gas wells and other production facilities operate in Terrebonne Parish, on the Gulf of Mexico. Below the surface of the Gulf and in the coastal lowlands lie some of the major oil and gas fields in the United States. The inshore and offshore fields have been extensively developed and minerals have been extracted from them for decades.

Oil and gas production companies must pay severance taxes to the state on all minerals and gas extracted and removed from Louisiana. Taxes are based on the volume of minerals and gas that pass through valves that measure and control the flow. Oil and gas companies periodically report the volume to the Louisiana Department of Natural Resources.

The state's lawsuits say that before 2008, gas and mineral reporting was done on a well-by-well basis. Since then, to make things less complicated, the reporting is done by land - operators file a single report for all wells operating on a parcel of land.

Under the new system, the state has no way of determining whether production from a particular field is comprised of production from all, some, or only one well within that field and - the state says - visible inspection by assessors is generally not feasible, as assessors have "neither the manpower nor the resources to conduct visual inspections of the thousands of wells and other facilities located in the fields." For that reason, the Louisiana Tax Commission developed "a system of self-reporting" where "the assessed value of oil and gas property is determined solely on the basis of reports filed under oath."

The state says the many defendants substantially under reported the fair market value of the oil and gas extracted from 1998 to 2008. Often, the state says, the defendants did not report production from some wells at all. Sometimes they reported they their wells were "shut in" and not producing, and yet they reported to other sources that those very wells were "producing" during the same times.

The state demands back taxes and damages for RICO violations and mail fraud.