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Short Commercial about NARO

Short Commercial about NARO. What does this statement mean? Who are we?. NARO was founded in 1980 Due to Windfall Profits Tax We have grown into an educational/advocacy organization NARO has two “parts” The Association a 501 c (6) The NARO-Foundation a 501 c (3).

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Short Commercial about NARO

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  1. Short Commercial about NARO • What does this statement mean? • Who are we?

  2. NARO was founded in 1980 Due to Windfall Profits Tax • We have grown into an educational/advocacy organization • NARO has two “parts” The Association a 501 c (6) The NARO-Foundation a 501 c (3)

  3. NARO State Chapters Arkansas-NARO NARO-Appalachia KY, OH, WV NARO-New York NARO-Pennsylvania NARO-Louisiana NARO-Rockies CO, MT, ND, NM, UT, WY OK-NARO NARO-Texas

  4. Annual Convention Educational Opportunity for Mineral/Royalty Owners Two days of seminars 2011 Was in Long Beach, CA 2012 will be in Dallas, TX November 1-3

  5. MISSION The mission of NARO is to encourage and promote exploration and production of minerals in the United States while preserving, protecting, advancing and representing the interests and rights of mineral and royalty owners through education, advocacy and assistance to our members, to NARO chapter organizations, to government bodies and to the public.

  6. Royalty Owners Bill of Rights 1. Royalty owners have the right to be paid according to all terms contained in their lease contract and by law. 2. Royalty owners have the right to access information possessed by the operator or payor in order to verify correct payment according to their contract or by law. 3. Royalty owners have the right to seek redress if good faith negotiations to correct violations of lease terms fail. 4. Royalty owners have the right to be heard in matters regarding oil and gas energy policy, proposed legislation or regulatory issues which would positively or adversely affect their interests

  7. How Many Royalty Owners? • How many citizens are royalty owners, if you take our membership in each state as a percentage of a total and then multiply by the estimated 8.5 million royalty owners you get a rough idea of how many royalty owners live in each state. AK 13,600 AL 33,150 AR 255,000 AZ 144,500 CA 510,000 CO 654,500 CT 17,000 DC 17,000 DE 2,550 FL 161,500 GA 85,000 HI 8,330 IA 33,150 ID 35,700 IL 76,500 IN 27,200 KS147,900 KY 11,050 LA 125,800 MA 30,600 MD 35,700 ME 5,525 MI 44,200 MN 47,600 MO 110,500 MS 39,100 MT 47,600 NC 67,150 ND 24,650 NE 19,550 NH 13,600 NJ 47,600 NM 161,000 NV 44,200 NY 127,500 OH 30,600 OK 1,691,500 OR 51,000 PA 119,000 RI 5,525 SC 22,100 SD 5,525 TN 59,500 TX 2,975,000 UT 39,100 VA 85,000 VT 2,550 WA 39,100 WI 39,100 WV 19,550 WY 30,600 Total nationwide: 8,440,755.

  8. Mineral Management 101Program Outline • Ten Duties of Mineral Owners • Four Major Events for Mineral Owners • Ownership • Leasing • Division Orders • The Royalty Check

  9. 1- KNOW what you own 2-KNOW what information you need and where to get it 3- KNOW what is going on in your area of interest 10 Duties (Responsibilities) of Mineral Owners

  10. 10 Duties (Responsibilities) of Mineral Owners 4-KNOW what the future impact the small print in the oil and gas lease/division order will have on your royalty payment 5-KNOW who has it (your lease, your well, your production)

  11. 10 Duties (Responsibilities) of Mineral Owners 6-KNOW what questions to ask and to whom to ask them 7-KNOW your limits

  12. 10 Duties (Responsibilities) of Mineral Owners 8-KEEP copies/originals of everything and organize it 9-KNOW that you must remain vigilant and DO something 10-PLAN

  13. 4 Major Mineral Owner Events • OWNERSHIP • Leasing • Division Orders • The Check

  14. Types of Ownership • Non-Producing • Mineral Ownership • Producing • Overriding Royalty Ownership • Working Interest • Royalty Ownership

  15. Mineral Ownership • Rights of Mineral Ownership • Enter the land to explore, drill, produce and otherwise carry on mining activities. • Lease those ownership rights to another party. • Ownership exists in perpetuity. Unless “Dormant” • The minerals sit “in place” until developed; most mineral owners cannot afford to drill a well.

  16. Types of Ownership: Producing Working Interest (WI) Investors in the well who share the actual costs incurred in drilling, completing and producing Production income is distributed proportionately Overriding Royalty Interest (ORRI) Carved from the WI; non-cost bearing

  17. Types of Ownership: Producing • Royalty Ownership/Interest (RI) • Begins with Production • Ends with Production • Does not have to be owned by the “Mineral Owner” but it usually is • Is based on the fraction retained in the lease and your ownership • Gets you the checks in the mail

  18. Ownership • Legal Description (Gross acres) • Amount of Mineral Acres Owned (Net mineral acres) • Type of Ownership Components of Ownership

  19. Legal Descriptions

  20. Legal Descriptions • The publicly recognized unit of land measurement for your property • Mineral Ownership can be • A portion of that description • All of that description

  21. 4 Major Mineral Owner Events • Ownership • LEASING • Division Orders • The Check

  22. Leasing Many printed forms are available but THERE IS NO SUCH THING AS A “STANDARD LEASE” FORM

  23. Leasing • the basic instrument in oil and gas development • a legal instrument executed by a mineral owner granting the exclusive right to another to explore, drill and produce oil and gas from a particular piece of land The Oil and Gas Lease is

  24. Leasing VIRTUALLY ALL LEASE TERMS ARE NEGOTIABLE

  25. Negotiations • The Lease Bonus Paid by the Lessee at the time the lease is executed Usually is calculated on a per acre basis Usually is paid by separate draft or check Is not recited in the lease Example: Ownership = 10 NMA Lease Bonus = $50 per acre Total Bonus Paid = $500

  26. Negotiations • Retained Fraction (Royalty Rate) If production is established the Fraction agreed upon will be the royalty rate paid on production Example: Retained Fraction 1/8 = 12.50% 3/16 = 18.75% 1/5 = 20.00% 1/4 = 25.00%

  27. Lease Clauses that can Bite Your Pocketbook “To pay Lessor for gas (including casinghead gas) and all other substances covered hereby, a royalty of 3/16 of the proceeds realized by Lessee from the sale thereof, less a proportionate part of the compressing, dehydrating, transporting, and marketing or otherwise making such gas or other substances ready for sale or use, said payments to be made monthly.”

  28. Lea$e Clause$ to Protect “Commencement of a well according to the terms of this lease will require that a drilling rig capable of drilling to a total depth be on location and drilling on or before expiration of the primary term, and that the drilling of said well be continued with due diligence until completion. Construction of a well location without actual drilling as detailed above will not be deemed commencement of a well.”

  29. 4 Major Mineral Owner Events • Ownership • Leasing • DIVISION ORDERS • The Check

  30. Division Orders • Issued by the Company AFTER production is established • States the decimal interest on which you will be paid • Is the link to information on your check stub

  31. Division Orders NADOA Model Form Division Order

  32. Model Form Division Order

  33. Model Form Division Order

  34. Interest Verification:The Decimal Interest 80/640 x 3/16 = .0234375 RI

  35. Shift Gears Why do we need oil and gas? AND Why Now? Can’t we just put up windmills and solar panels?

  36. New York Electricity Consumption Energy Source 2008 Trillion Btu • Nuclear 454.8 • Natural Gas 375.1 • Hydroelectric 268.3 • Coal 131.8 • Petroleum 26.6 • Geothermal 0.0 • Solar/PV 0.0 • Wind 22.1 • Bio Mass 31.5 Source EIA 2009

  37. California Electricity Consumption Energy Source 2008 Trillion Btu • Natural Gas 830.8 • Nuclear 332.2 • Hydroelectric 272.2 • Coal 21.1 • Petroleum 18.5 • Geothermal 125.4 • Solar/PV 6.3 • Wind 57.0 • Bio Mass 77.5 Source EIA 2009

  38. Texas Electricity Consumption Energy Source 2008 Trillion Btu • Coal 1480.4 • Natural Gas 1415.1 • Nuclear 434.8 • Wind 195.3 • Petroleum 16.1 • Hydroelectric 10.3 • Bio Mass 4.4 • Geothermal 0.0 • Solar/PV 0.0 Source EIA 2009

  39. Let’s be Honest •  Anyone building any new nuclear plants? (Well…?) • How about new dams for hydro? • Coal- and oil-fired plants?  

  40. Fossil fuels provide 83% of U.S EnergyU.S. Energy Information Administration

  41. U.S Petroleum ConsumptionEIA Estimates 2010 TRANSPORTATION SECTOR 13 Million Barrels (42 gal/bbl) Per Day = 546,000,000 gallons/day

  42. “You gotta be careful if you don't know where you're going, otherwise you might not get there“ Yogi Berra

  43. www.naro-us.org Web site with current NARO information Also link to NARO Message Boards

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