Dueling Platforms - National Association of Royalty Owners

AUGUST 2016
Royalty Owners Action Report
The Voice of the National Association of Royalty Owners
Dueling Platforms
Jerry Simmons, NARO Executive Director
H
ope everyone’s summer is going well. It’s been hot and humid in Tulsa.
I have a couple of items for you this month. First, we
want to thank everyone who took the time and trouble to vote
for this year’s slate of NARO National Board of Director positions. This year the votes were very close (one vote separated
three candidates). I believe this is a testament to the
outstanding quality of the candidates you had to
choose from. So, elected to serve a three-year
term beginning January 2017 are: James
Elder; Gary Preszler; Jim Souto; Sally
Fleming; and Patti West.
Now, for what could be a very big
issue for each of you. NARO is and
does all we can to be a non-partisan
association as we have Democrats,
Republicans, Independents and
whatever else may be out there
politically. We would never suggest
you all vote for a particular party
or candidate, but that being said,
this year energy issues have taken
front seat positions in the presidential
election and have been featured in both
party platforms. As I said, when I read the
positions and sent the platforms to our board of
directors–I believe it is a very sad day in this country
when the energy we all rely on for heating, cooling, transportation, health care, agriculture, basically every function of our
current way of life, has become a partisan political issue. I don’t
know about you, but it really troubles me that party political
leaders would make these decisions and use energy issues to
further divide this great country.
Without further ado, here are the energy sections of each
party’s platform along with a link for each if you would like to
read the entire platform:
REPUBLICAN PLATFORM
Energy Highlights (pp. 17-22)
• “Only a few years ago, a bipartisan consensus
in government valued the role of extractive
Jerry Simmons
industries and rewarded their enterprise by
minimizing its interference with their
work. We look in vain within the Democratic
Party for leaders who will speak for the
people of agriculture, energy and mineral
production.”
• “[The energy sector’s] work can
guarantee the nation’s energy security for centuries to come if, instead
of erecting roadblocks,
government facilitates the creation
of an all-of-the-above energy
strategy.”
• “We support the opening of
public lands and the outer
continental shelf to exploration and
responsible production, even if these
resources will not be immediately developed. Because we believe states can best
promote economic growth while protecting the
environment, Congress should give authority to state
regulators to manage energy resources on federally
controlled public lands within their respective borders.”
• Do away with the Clean Power Plan
• Expedite the permitting process on public lands
• Finish the Keystone Pipeline
• “Climate change is far from this nation’s most pressing national security issue. This is the triumph of extremism over commons sense, and Congress must stop it.”
• “We support the development of all forms of energy that are marketable in a free economy without subsidies, including coal, oil, natural gas, nuclear power and hydropower.”
• “We respect the states’ proven ability to regulate the use of hydraulic fracturing, methane emissions, and horizontal drilling…”
• “We oppose any carbon tax.”
• “We support the enactment of policies to increase domestic energy production, including
production on public lands, to counter market manipulation by OPEC and other nationally-owned oil companies.”
• End “sue and settle” taxpayer funding of environmental NGOs
• Reform the Endangered Species Act
• Convey certain federal lands to the states
https://prod-static-ngop-pbl.s3.amazonaws.com/media/documents/DRAFT_12_FINAL[1]-
ben_1468872234.pdf
NARO Board Members
and Officers
Candice Brewer, CMM
President
James Elder
Vice-President
Ryan Rupert, CMM
DEMOCRAT PLATFORM
Treasurer
Energy Highlights (pp. 27-30)
• “Climate change is an urgent threat and a defining challenge of our time.”
• Reduce greenhouse gas emissions more than 80 percent below 2005 levels by 2050
• “We believe America must be running entirely on clean energy by mid-century.”
• Get 50 percent of our electricity from clean energy sources within a decade
• “We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency of cars, boilers, ships, and trucks.”
• “Democrats believe the tax code must reflect our commitment to a clean energy future by
eliminating special tax breaks and subsidies for fossil fuel companies as well as defending and
extending tax incentives for energy efficiency and clean energy.”
• “Democrats believe that carbon dioxide, methane, and other greenhouse gases should be priced to reflect their negative externalities.”
• Support the Clean Power Plan
• “Democrats are committed to closing the Halliburton loophole that stripped the Environmental Protection Agency of its ability to regulate hydraulic fracturing and ensuring tough safeguards are in place, including Safe Drinking Water Act provisions, to protect local water supplies.”
• “We believe hydraulic fracturing should not take place where states and local communities oppose it.”
• “We will reduce methane emissions from all oil and gas production and transportation by at least 40 to 45 percent below 2005 levels by 2025 through common-sense standards for both new and existing sources and by repairing and replacing thousands of miles of leaky pipes.”
• Reject the Keystone XL pipeline
• “All corporations owe it to their shareholders to fully analyze and disclose the risks they face,
including climate risk. Those who fail to do so should be held accountable. Democrats also
respectfully request the Department of Justice to investigate allegations of corporate fraud on the part of fossil fuel companies accused of misleading shareholders and the public on the scientific
reality of climate change.”
• Oppose drilling in the Artic and off the Atlantic coast
• Reform fossil fuel leasing on public lands
• “We will phase down extraction of fossil fuels from our public lands, starting with the most pollut ing sources, while making our public lands and waters engines of the clean energy economy ...”
https://www.demconvention.com/wp-content/uploads/2016/07/Democratic-Party-Platform-
7.21.16-no-lines.pdf
So there you go ... use this information to make yourself aware of each party’s position. Also know that
even with a party platform spelled out like this, it does not bind the candidates to that position ... once
elected they can do as they like on platform issues.
Janice Bennett Good, CMM
Corp. Secretary
David Sikes, CMM
Imm. Past President
Bob Hart
NARO-Appalachia Pres.
Terrel Shields
NARO-Arkansas Pres.
Ed Hazard, CMM
NARO-California Pres.
Michelle Smith
NARO-Colorado Pres.
Malissa Blackburn
NARO-Louisiana Pres.
Jim Leonard, CMM
NARO-New York Pres.
Tony Watterud, CMM
NARO-North Dakota Pres.
Dick McCalla
NARO-Oklahoma Pres.
Jackie Root, CMM
NARO-Pennsylvania Pres.
Craig Peterson
NARO-Rockies Pres.
Jack Fleet, CMM
NARO-Texas Pres.
At-Large
Kellee Jernigan, CMM
Jerry Moyer, CMM
Gary Preszler, CMM
Jim Souto, CMM
Paul Vallhonrat, CMM
Linn Willers, CMM
To Contact NARO:
Jerry R. Simmons
Executive Director
The National Association of Royalty Owners (NARO) does not explicitly or implicitly endorse third parties in exchange for
advertising. Advertising in our monthly newsletter (ROAR) does not influence editorial content, products or services in any way.
2 I Royalty Owners Action Report
August 2016
(918) 794-1660 or (800) 558-0557
(918) 794-1662 (Fax)
naro@naro-us.org
15 W. 6th Street, Suite 2626
Tulsa, OK 74119
Energy Going Live On Air
OK NARO is excited to announce a new partnership with
Exploring Energy, a KECO FM radio show. This show is totally
dedicated to the energy industry. Through news and interviews, Shawn Wilson and Nathan Brewer talk about all aspects
of energy, from oil and gas, to wind, solar, coal, nuclear and
geothermal. The show airs weekdays from 8:05 a.m. to 9:00
a.m. on 96.5 KECO in Elk City, Okla., and 102.3 KWDQ in
Woodward, Okla.
Some of their guests have included: outspoken oilman T.
Boone Pickens; the grandfather of deep gas drilling, Robert
Hefner III; Oklahoma Corporation Commissioner Patrice
Douglass; Oklahoma Attorney General Scott Pruitt; U.S. Sen.
James Lankford; and former State Treasurer Scott Meacham.
NARO guests will be on every third Thursday in the 8 a.m.
hour until March discussing important topics to mineral
owners. In March and April a NARO guest will be interviewed
every Thursday in the 8 a.m. hour. These guests will be
convention presenters offering a taste of their session this year!
OK NARO is proud to have Exploring Energy as the 2017
convention media sponsor.
Their bread-and-butter guests are the men and women who
work in the energy industry in the show’s listening area of Oklahoma, Southwestern Kansas, and the Eastern Texas Panhandle.
They also publish and distribute 20,000 copies of Exploring
Energy News each month. This 8-page paper is an extension of
the radio show, covering as many aspects of energy exploration
as possible.
Listen to Exploring Energy as it airs, and access online
copies of Exploring Energy News at: www.exploringenergy.net.
One can also get show information and interact with the hosts
through the Exploring Energy Facebook page.
S A V E T H E D AT E
Dick McCalla
President
2017
OK NARO CONVENTION:
Charting the Course;
Understanding the Present,
Navigating the Future
• Wed., April 19-Fri., April 21
• Embassy Suites Norman, Okla.
• Group room rate $131.
• Event registration is open
• Limited Registration and Rooms!
Book early!
ROAR FUN FACTS
• Liquid nitroglycerin was poured into a metal canister – or “torpedo” – and lowered into the well on April
15, 1897, as a crowd of about 50 curious onlookers gathered. A “go devil” (a detonating device) would then
be dropped down the well borne to set off the waiting nitroglycerin. In 1897 this method caused the Nellie
Johnston No. 1 to blow in as a gusher, producing from 50 to 75 barrels of oil a day.
• Dakota Gasification Company, located in Beulah, is the sole producer of synthetic natural gas.
• If all the natural gas pipelines in the U.S. were connected to each other they would stretch to and from the moon
almost three times.
• Rembrandt Peale, a famous portrait painter, founded the first natural gas utility in Baltimore in 1816 after using natural
gas as an energy source to light an exhibit at his museum and gallery.
August 2016
Royalty Owners Action Report I 3
2016 National Convention • Dallas, Texas • October 6-8
2016 EVENT
Registration
Name, as you would like on your badge: __________________________________________
Company: __________________________________________________________________
Address: ___________________________________________________________________
City: _________________________________________ State: _________ Zip: __________
Email: __________________________
Other Attendees on this registration: Phone: (______) ________________________
________________________________________________
________________________________________________
________________________________________________
Materials Pref. o Flash Drive o Printed book
RSVP Saturday Brunch: o Yes o No
I plan to attend the ______________________________________ chapter caucus(es).
Number of People Registering
Number of People Registering
On/Before September 1, 2016
On/After September 2, 2016
____@ $370 Early Bird Member
____@ $425 Member
____@ $520 Early Bird Non Member*
____@ $575 Non Member*
____@ $275 Friday Only Registration**
____@ $275 Friday Only Registration**
Amount due: ______________________
Amount due: ______________________
Non-Member Registration includes a one-year basic membership!
Refunds for registration will be subject to a $75 processing fee.
No registration refunds after September 1, 2016.
Event registrations include all meals, meetings, seminars and printed materials.
*Includes a one year basic NARO membership. **Does Not include a one-year membership.
Refunds for registration will be subject to a $75 processing fee. No registration refunds after
Sepember 1, 2016
Method of Payment: o Check Enclosed o Visa/MasterCard o American Express o Discover
Credit Card # ______________________________________ Expiration: ________________
Signature: ________________________________________Date: _____________________
Referred by: ________________________________________________________________
For questions about the event or your registration please call the NARO National Headquarters:
Dee Copeland at 1(800)558-0557 or DCopeland@naro-us.org
Font: Clear-Gothic Mediam
Red: CMYK: 0,99,100,0
Blue CMYK: 89,84,0,0
4 Ways to Register!
1) By Phone with a credit card
(800) 558-0557
2) Online www.naro-us.org/events
3) By Fax send the completed
registration form and credit card
information to our secure fax,
(918) 794-1662
4) By U.S. Mail send the completed registration form and a check,
payable to NARO:
NARO/Convention
15 W. 6th Street, #2626
Tulsa OK 74119
HOTEL RESERVATIONS
should be made with the
Hilton DFW Lakes Conference
Center
1800 State Hwy 26E
Grapevine, Texas
Reserve your room today!
(817) 481-8444
The group room rate is $160.00
Group rate code “4NR”
A link to online group room
reservations is available on the NARO
event registration website:
http://www.naro-us.org/
event-2182460
Free shuttle from the DFW airport
For more information about the hotel
visit www.hiltondfwlakesecc.com
I NARO
CMM
C e r t i f i e d M i n e ra l M a n a g e r
What is the CMM Program?
The CMM Program is an
educational, self-study course
exclusively through NARO designed
to increase your knowledge of
minerals management. The CMM
Review Course is an 8 hour, in
depth, educational course that will
be offered at this year’s Convention.
ALL NARO Members are welcome
and encouraged to audit this
EXCLUSIVE class, regardless of
intent to become certified.*
To complete the program, you must
accumulate a certain amount of
education credits and pass the
three exams affiliated with your
selected level of the program. The
CMM Program has two levels:
Associate and Professional.
The expert in anything was once a
beginner!
For more information contact:
Rhiannon Harris
CMM Registrar
(918) 794-1660 or
naro-us.org/CMM-Program
*Limited seating available.
Requires pre-enrollment and fee that
is separate from your Convention
registration.
The American Association of
Professional Landmen (AAPL) has
granted this convention 8 hours of
continuing education credit. Those
who attend the CMM Review can
acquire an additional 8 hours of
AAPL and CMM Credit.
Photo Release & Disclaimer
NARO event photos will be used
for association promotional
purposes. If you do no wish to be
included in any photos, please
send us your request in writing
to: 15 W. 6th Street #2626, Tulsa,
OK 74119,
Attn.: Cynthia Simonds.
We must receive your request
two weeks prior to the start of
the event. Thank you.
2016 National Convention • Dallas, Texas • October 6-8
Schedule of Events
Wednesday, October 5, 2016
8:00-5:00 pm
CMM Review Course
Thursday, October 6, 2016
8:00-9:30 am
10:00-11:30 am 8:00-5:00 pm
CMM Breakfast and Meeting (Must be certified to attend)
CMM Exams (Prior Arrangement Required)
Registration and Exhibits
1:00 pm 1:15 pm
2:00 pm
Welcoming Remarks Candice Brewer, CMM, NARO National Board President
U.S. LNG Exports Jason French, Cheniere Energy
From Tank to Bank; Following the Production Trail
David Melton, Petroleum Landman School, LLC
3:00 pm
BREAK
3:30 pm
4:15 pm
From Tank to Bank - Part 2
National Perspective Jerry Simmons, NARO Executive Director
Friday, October 7, 2016
7:30-9:00 am 8:00-5:00 pm
8:00-9:00 am CMM Exams (Prior Arrangement Required)
Registration and Exhibits
Continental Breakfast
Choose Your Session
• Oil Capital; Lessons Learned and Relearned
9:00 am Buddy Clark, Haynes & Boone LLP
• Geology of the Shale Plays John Browning, University of Texas
• What You Need to Know About Ad Valorem Taxes
10:00 am Lisa Waller and Salim Nice, CTMI
Choose Your Session
• Estate Planning for Mineral Owners Lisa Hutter, Wells Fargo
• Ballot Initiatives, Colorado, Ohio and Beyond Speaker TBA
• Mineral Management 101, Part 1
David Sikes, CMM and Candice Brewer, CMM
11:00 am Choose Your Session
• Oil and Gas Royalty Issues Robert “Eli” Kiefaber, Kiefaber and Oliva, LLP
• Appraisal/Evaluation
Jarrett Kitch, Senior Appraiser, Tarrant Appraisal District Ft. Worth Texas
• Operator Bankruptcy
C. Mark Stratton, Attorney and Shannon, Gracey, Ratliff & Miller, LLP
12:00 pm
LUNCH
1:45 pm 2:45 pm Choose Your Session
• Induced Seismicity Dr. Jeremy Boak, Oklahoma Geological Survey
• Evolution of the Anti-Fracking Movement; What You Need to Know
Steve Everley, FTI Consulting
• Money in Suspense? Rick Howell, CMM
Choose Your Session
• A Landman’s Perspective Jared Boehs, CMM, Cutter Energy, LLC
• Mineral Management 101 Part 2
David Sikes, CMM and Candice Brewer, CMM
• Mergers & Acquisitions Jason Schumacher, Locke Lord, LLP
3:35 pm
BREAK
4:00 pm
6:00-9:00 pm Deduction Panel; Getting a Chain on the Beast
Group Dinner, Music, Dancing in the Round Up Room
Saturday, October 8, 2016
State Caucus
8:00-9:00 am 9:00-10:00 am 10:00 am–Noon Oklahoma, Rockies, New York, North Dakota and California
Texas, Appalachia, Colorado, Pennsylvania, Louisiana, and Arkansas
Brunch and Prize Giveaway–Must be present to win. Only ALL Events
Registrations are eligible to win.
On Aug. 1, 2016, the New York State
Public Service Commission (PSC)
adopted the Clean Energy Standard, a
plan to obtain “50 by 30”, or 50 percent
of our electricity by the year 2030 and also
a 40 percent reduction in greenhouse-gas
emissions. As stated in a 158 page order,
Jim Leonard
President
“the Commission adopts a Clean Energy
Standard consisting of a Renewable
Energy Standard and a Zero-Emissions Credit Requirement
program.” The Commission also decided to make renewables
the core source of our electricity generation, rather than
ancillary.
The state has now adopted a program turning what had been
lofty goals into legal mandates. Wind and solar companies
will create Renewable Energy Credits (RECs) based upon the
amount of megawatt hours generated. Utilities will be required
to purchase these credits as evidence they are in compliance
with the new mandates. Prices will be determined by supply
and demand. If the utilities fail meet the REC purchase
requirements, they will be obligated to purchase Alternative
Credit Payments (ACPs) which includes a 10 percent penalty
over and above the average price of the RECs.
The owners of three aging nuclear plants in the state have
threatened to close the plants since they can’t compete with
low-cost natural gas. In terms of the 40 percent reduction in
greenhouse-gas emissions, the last thing the state wanted is
for that to happen. The reduction goal would be even more
unobtainable. The PSC has instituted Zero Emissions Credits
(ZECs) as part of the order. This is similar to a “cost plus”
arrangement whereby the owners of the plants will get paid
whatever it costs to keep these aging plants open, plus some
profit of course.
So, as taxpayers we get to subsidize the renewable energy
program and as ratepayers we get to pay for the RECs and
ZECs as the utilities will simply pass those costs on. How much
will that cost? No one knows, but when New Jersey first
adopted their REC program, the RECs were going for up to
$680 per megawatt hour. That’s 68 cents per kilowatt hour!
And that’s on top of the actual cost of the electricity, currently
around 6 cents per kilowatt hour locally.
Whatever quantity of natural gas that won’t get used in New
York will surely find its way to a market somewhere else. Basic
economic laws of supply and demand will ensure that. As to
saving the world, this plan won’t make one darn bit of
difference.
Remember the rants and raves by the antis regarding
“radioactive” drill cuttings? So far, not one word about the
highly radioactive spent nuclear fuel rods which, to this day,
have no permanent storage solution. Not a peep.
Earl Pregler & Associates
Box 1722, Tulsa, OK 74101-1722
Phone: (918) 583-2117 Fax: (918) 583-1344
We purchase producing mineral interests
and estates nationwide
6 I Royalty Owners Action Report
August 2016
CALIFORNIA
Attention!
Kern County Royalty
Owner Alert
Situated at the southern end of
California’s great San Joaquin Valley,
Kern County is the largest oil producing
county in the United States based on
annual barrels produced. Historically,
the county has been very open and receptive to the petroleum
industry. Many oil companies, large to small, are headquartered
there.
During the recently ended oil boom, Kern County was
being overwhelmed with applications for drilling permits
and projects. With California’s strict and often burdensome
environmental regulations, it is often a rather involved and
costly process to obtain the necessary permits. Due mainly
to the California Environmental Quality Act (CEQA), many
projects require a detailed environmental impact report (EIR).
The industry and the county wanted to be able to expedite the
permitting process while remaining compliant with
requirements of CEQA. Their solution was to complete a
countywide EIR and to amend the zoning/permitting process.
After several years of hard work and millions of dollars spent,
the EIR and zoning ordinance were adopted in November of
2015. The permitting process has been restructured such that,
in most instances, it is a much quicker process. We applaud and
appreciate the efforts of both Kern County and the producers.
See NARO CA on page 11
However, there is one exception.
Ed Hazard
President
Colorado’s Initiative Issues
Michelle Smith
President
The deadline to submit signatures
for ballot initiatives was 3:00 p.m.
on Aug. 8, 2016. Proponents were
busy gathering last minute signatures for initiative #75 and #78 and
interesting enough, at least 55 boxes
delivered were empty! So what does
that mean? Possibly nothing more
than a sloppy packing job, but it
may mean that the signature
gatherers were hoping to dramatize
and gain press from the “drop off”
event by showing a large number
of boxes delivered. It remains to be
seen as the secretary of state has
until Sept. 7 to validate the
signatures and you need 98,492
valid signatures to qualify for the
ballot. Both of these initiatives have
devastating impacts for mineral
owners and the state’s economy.
Initiative #75 grants local
government the authority to
regulate oil and gas which would
create a patchwork of regulations, driving up costs and
causing many oil companies to leave the state. Initiative #78
would mandate a 2,500-foot distance between drilling activity
and homes, schools, hospitals, playgrounds, any water source,
basically anything, and has proven to eliminate over 90 percent
of drillable locations in the state. We remain optimistic that
there will not be enough valid signatures to get these initiatives
on the ballot. Actually, please keep all fingers and toes crossed.
Premium Offers on Royalties &
Producing Minerals
918-392-4151
www.hissopenergy.com
Our thorough, technical evaluation considers future
drilling potential to ensure that we place the
highest value on your interest!
Our annual meeting is just around the corner. It is critical you
come this year with the issues happening in our state. ROAR
just doesn’t give us enough room to keep you updated
sufficiently on current events so please come to the annual
meeting as follows:
NARO Colorado Annual Meeting
Sept. 17, 2016
Pinehurst Country Club
6255 W. Quincy Ave. Denver, CO 80235
Lunch 12:00 p.m. – 1:00 p.m. Meeting 1:15 p.m. - 4:00 p.m.
Lunch RSVP to Debra Anderson at:
debraa@outlook.com or (719) 661-7614.
We would like to congratulate NARO member Kent Jolley,
west slope Colorado, who was recently appointed by Gov. John
Hickenlooper to the Colorado Oil and Gas Conservation
Commission. He will serve as a member actively engaged in
agricultural production, as a royalty owner and a republican.
What an honor Kent!
See you at the meeting on Sept. 17, because we will need all
hands on deck to defeat these initiatives if they make the
ballot.
August 2016 Royalty Owners Action Report I 7
8 I Royalty Owners Action Report
August 2016
August 2016
Royalty Owners Action Report I 9
Ruston is the place to be on Sept.
27, 2016, as NARO Louisiana hosts
a “Fuel Yourself With Knowledge”
luncheon at the Lincoln Parish
Library. Steve Venturatos, Director
of Land for Memorial Resource
Development Corp., will be the
Malissa Blackburn
guest speaker. Lunch is on us; space
President
is limited; but you must be
registered. R.S.V.P. online at: www.
naro-us.org/events or call Dee Copeland at (800) 558-0557.
We’ve been spreading the word about NARO locally too.
Last month I spoke to the Red River Desk & Derrick Club
about “Doing It All.” My focus was that it is possible to work,
raise a family and volunteer. NARO is a good place to give your
time. We are currently looking for members interested in
serving on our Louisiana board. No experience required; just
come ready to give some time and we will guide you through the
rest. This month Lynn Higginbotham and I will be speaking to
the Council of Petroleum Accountants Societies or “COPAS”
about the royalty owner point of view.
On the state legislative side, SB24 was referred to the
Committee on Revenue and Fiscal Affairs but did not proceed
from there. This would have reduced income taxes on bonus
and royalty payments to zero. And SB165, which requires
landowner notification when an operator transfers an oil or gas
well and provides for similar notification once a well is
orphaned, went into effect on Aug. 1, 2016.
Nationally, HR 3342, introduced by U.S. Rep. John C.
Fleming, seeks to address title issues caused by a Bureau of
Land Management Resurvey performed in the late 1960s
within certain lands along Lake Bistineau in northwest Louisiana. The important takeaway for royalty owners is that the
BLM has effectively made a claim to mineral rights which have
been in private ownership and commerce for many years prior
to their resurvey. HR 3342 appears to be headed to a floor vote
in the house early this fall.
WE PURCHASE OKLAHOMA
MINERAL INTERESTS AND ESTATES,
PRODUCING AND NON-PRODUCING
Call or write: W. H. Stromberg, Jr., 10 W. Main., Ste.506,
Ardmore, OK 73401 • (580) 223-0353 or (800) 687-5882
VALMAR L.L.C.
5665 Chestnut Hill • Bartlesville, OK 74006
• Title Transfer Consultant
• Deed Preparation Services
• Offer(s) to buy RI/ORI
Over 30 years of Experience in the Oil & Gas Business
NADOA & NARO Member
Contact: Meredith (Mimi) Nett
(918) 766-5759 jsnett@sbcglobal.net
10 I Royalty Owners Action Report
August 2016
Depletion allowance is a tax deduction that
accrues the royalty owner. It is virtually the
only deduction that the mineral owner has.
It is mischaracterized as a “tax loophole” for
oil companies.
What is depletion allowance? In one word
it
is
depreciation. It is no different that the
Terrel Shields
depreciation that would accrue to a
President
business machine or a farmer’s tractor. As
you wear it out, the value goes to zero. You may use the tractor
long after you have deducted the entire 100 percent of cost. As
your oil is depleted from the reservoir, you lose that resource
forever. And, it applies not only to oil and gas, but it is applied
to timber, gravel, quarry rock, mining materials, and even
oyster shells. Minerals are a “wasting” asset. Once removed, it
is gone forever.
The IRS recognizes
two methods of depletion allowance. Cost
depletion allows you
to amortize the capital
investment. This is the
method large companies
must use. You cannot
deduct more than invested. Your investment may be zero if
you inherited the mineral or it is part of your fee simple title to
land. For a small interest, it could cost more to have an engineer
estimate the reserves than you get from the well.
Percentage depletion is currently 15 percent. The IRS allows
you to deduct 15 percent of the annual income for depletion. It
is a proxy for depreciation. Depletion allowance only applies to
small producers and royalty owners. In any case, consult your
tax advisor for information. And write your congressman and
senators to tell them how important this tax deduction is to you
personally.
As your oil is depleted
from the reservoir, you
lose that resource
forever.
NARO CA from Page 6
Certain split estate mineral/royalty owners (those owning only
the subsurface mineral rights and not the surface rights) must
now obtain the written permission of the surface owner in order
to participate in the fast track process. This is causing some
great concern among producers and mineral/royalty owners.
One producer has filed a lawsuit attacking those provisions of
the ordinance that unfairly impact certain split estate mineral/
royalty owners.
This is a huge issue for Kern County split estate mineral/
royalty owners, and there are thousands of them. Certain
provisions of the new ordinance could have a serious negative
impact on the value of the assets of these mineral/royalty
owners. In order to assist these parties, NARO-California
will be holding a free “Fuel Yourself With Knowledge” event
on Sept. 21, 2016, at the Petroleum Club in Bakersfield from
5:30 p.m. to 7:00 p.m. Some of the speakers and topics will be:
“Impacts of Legislation, Regulation and Taxation on Royalty
Owners” Ed Hazard, President, NARO-CA; “State Regulation
of Oil and Gas Operations” Bill Bartling, Deputy, Inland
District, California Division if Oil, Gas and Geothermal
Resources (DOGGR); and “Kern County Oil and Gas
Ordinance” and “Mineral/Royalty Owner Issues” Mike Finch,
Principal, Energy Project Solutions LLC.
This Fuel Yourself event will be very informative. We urge
Kern County (and other) mineral/royalty owners to attend.
Seating is limited to 100. Please RSVP as soon as possible to
reserve your seat. Complimentary appetizers and beverages will
be served. Please visit the NARO website to register:
www.naro-us.org/events. Or you may call: (800) 558-0557, or
email: DCopeland@naro-us.org.
Petroleum Engineering Services
Francis W. (Frank) King, Licensed Professional Engineer
*Regulatory and Court Testimony *Appraisal of Oil & Gas Interests
*Bank Loan Reports
Tel: (405) 348-2562, Fax: 866-818-4362
Email: fwking@hotmail.com
Are you ready for a celebration?
Well, I am after four years of
fighting for HB 1391! So get your
running shoes on and help with our
push for passage this fall! NARO
Jackie Root
President
PA has an aggressive agenda in
place to rally the legislative support
we need to get the bill on the floor ASAP this fall. You will be
receiving a short ‘to do’ list very soon. Be sure to complete your
tasks and report back. Call me if you have questions. Make
every effort to participate in our Harrisburg events. Attend one
or all three of our town hall events in western Pennsylvania if
applicable. Spread the word, share the action plan and meeting
notices with relatives, friends, neighbors and even people you
don’t like (if they own minerals!) Now is the time for action!
Watch your email and mail for important information.
UPCOMINGEVENTS
CONVENTIONS
Rockies
• Aug. 31-Sept. 1, Vernal, Utah
National
• Oct. 6-8, Dallas, Texas
FUEL YOURSELF WITH KNOWLEDGE
free but r.s.v.p. required
Texas • Watch for Updates to the Calendar
California
• Sept. 21, - 5:30 p.m., Bakersfield
“Impacts of Legislation, Regulation and Taxation on Royalty Owners”
“State Regulation of Oil and Gas Operations”
“Kern County Oil and Gas Ordinance” and
“Mineral/Royalty Owner Issues”
Colorado • Sept. 17, 1:15 p.m., Denver
“Current Legislation and Ballot Initiative Update”
TOWN HALLS
free but r.s.v.p. required
Pennsylvania • Sept. 13 - 6:30 p.m., Washington • Sept. 14 - 10:00 a.m., Ellwood City
• Sept. 14 - 6:30 p.m., Indiana
“Legislation Deductions, and Reading Check Stubs”
WEBINAR
free, link will be emailed after registration
Arkansas Meeting • Aug. 20 - 9:00 a.m. CST
“Percentage Depletion and Ballot Initiatives”
For all the events, information, registration and flyers:
www.naro-us.org/events or (800) 588-0557.
August 2016
Royalty Owners Action Report I 11
2016 National Convention
Dallas, Texas • October 6-8
Font: Clear-Gothic Mediam
Red: CMYK: 0,99,100,0
Blue CMYK: 89,84,0,0
No mineral owner should miss Thursday’s session
Tank To Bank; Following the Production Trail
David Melton will offer a forensic look at oil and gas accounting by following the production
trail–not verification of percentages. This is a whole new way to consider it!
Our Friday will wrap up with a panel discussion on
Deductions; Getting a Chain on the Beast
Moderated by Texas CMM/Attorney George Wilson, the panel will include Louisana Attorney
Mike Stag, Texas Attorney David Wallace, and Pennsylvania CMM and Banking SR VP Jim
Souto. Bring your questions and find out what the experts think it will take to chain the
deductions beast once and for all.
National Association of Royalty Owners
15 W. 6th Street • Suite 2626
Tulsa, OK 74119
Oklahoma City, OK
Permit #1541
PAID
Presorted First Class
Mail
U.S. Postage
Stay informed through our social media.
Get educated with our videos!
www.naro-us.org