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Oil companies finding ways to slash royalties for landowners

On Behalf of | Aug 22, 2013 | Contract Disputes |

In Ohio and every other oil-producing state, oil companies have promised private and public landowners millions in royalties for the right to drill, frack or otherwise remove petroleum from their property. However, a study from ProPublica claims that many of the companies reneged on their promises once an agreement was signed. Considering that the promised royalties were one of the main reasons landowners allowed the oil extraction in the first place, the group found this systematic underpayment especially difficult for landowners to bear, particularly considering that many states’ laws work in the energy giants’ favor.

In 1982, a federal law was passed that guaranteed landowners at least 12.5 percent of oil and gas sales made from their leases. Individuals weren’t the only ones who have been denied a windfall; 30 percent of oil exploration is done on federally owned land, and royalties from oil and gas found there are, in theory, supposed to go into government coffers.

Despite those rules, ProPublica reported, lawyers and financial professionals who focus on the oil industry said that shady sleight-of-hand accounting is allowing energy companies to skim much more of the profits from resources than agreed upon in the contracts. In some cases, oil and gas concerns deducted money from royalties specifically for items prohibited from being deducted by the contract.

When it comes to any kind of contract dispute in Ohio, everyone involved needs to make sure that his or her own interests are being served as the agreement stipulates. An attorney experienced in business contracts and real estate contracts litigation may be able to help companies or individuals engaged in contract disputes involving a material breach or other breach of contract. The attorney may review contracts, making sure paperwork is filed in a correct and timely manner, as well as ensure that all terms in a contract are fair and not subject to being maneuvered around.

Source: Huffington Post, “Oil Drilling Royalties Often Avoided By Energy Giants“, August 13, 2013


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