Brutto nicht netto

“Gross not nett,” what rural U.S. landowners should try to take their ~12.5% royalty from if signing an agreement to let oil and gas companies frack their land. Previously, landowners had to worry about drillers’ resistance to the ethical challenges arising from the fact that it’s the driller who measures and reports the yields produced. Technology is also presenting drillers with ethical challenges: it’s now possible to drill sideways underground much farther than you’d think, for example.

Now ProPublica.org has reported drillers and/or pipeline owners have been using “creative accounting” in the office to reduce how much they say they owe farmers and other rural people whose land they are fracking, from Pennsylvania to North Dakota.

For example, “But some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions. In other cases, according to court files and documents obtained by ProPublica, they withhold money without explanation for other, unauthorized expenses, and without telling landowners that the money is being withheld. … In Oklahoma, Chesapeake deducted marketing fees from payments to a landowner – a joint owner in the well – even though the fees went to its own subsidiary[.]” The companies have also sold the product to subsidiaries at artificially low prices on which they paid farmers’ royalties, then resold at the higher market value.

Natural gas is apparently priced by volume, yet in pipelines it can be compressed and subjected to other processes the drillers and transporters call “proprietary” and won’t describe. Ownership of pipelines is not only becoming obscure, it’s a new field for innovative financial trading: Transport pipelines are being sold off to multiple third parties. Fracking rights purchased from farmers are being divided up and sold off to other companies in dribs, drabs and perhaps even tranches. One of the more “cutthroat” drillers has also been found to consistently report getting lower sale prices for its harvested gas on the market than e.g. the Norwegian partner firm Statoil selling similar products in the same markets at the same time.

A fierce debate is raging in Germany about whether to allow fracking to harvest its “Schiefergas,” shale gas or slate gas.

(BRUTE oh   nichh t   NET oh.)

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