Chesapeake Energy has decided to deduct post-production costs from royalty checks in the Barnett Shale Play in Texas. About 20,000 royalty owners will likely see their royalty checks slashed by roughly 25 percent after the company deducts expenses associated with post-production, such as gas gathering, compression, and transportation, according to the Star-Telegram. The changes took effect with the July royalty checks, based on May production. Only those leaseholders who have specific clauses precluding assessments for post-production costs will be exempt from this new policy. Would you like to read the letter they sent to landowners who have signed leases with them? Here it is: http://www.askchesapeake.com/Barnett-Shale/Royalty-Owners/Pages/Gathering-Deductions.aspx
Chesapeake Energy can do this with leases that do not specifically prohibit the assessment. That's how it works. Pennsylvania, watch out.
A related article from the Fort Worth Star-Telegram
Read Sue Heavenrich's blogpost on The Marcellus Effect.
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