- March 20, 2017
- Posted by: Sandy Pollard
- Category: News & Events
We are still invested in providing information regarding natural gas contracts. We have a special ad hoc committee working on your behalf. Should you have questions we will direct you to the members of that committee.
An Open Letter to Texas Gas Well Operators
Dear Texas Gas Well Operator:
During the last year many operators have experienced significant financial loss due to gas purchasers terminating existing POP contracts and replacing them with fee-based contracts. These contracts substantially increase the cost of marketing their gas. Most all producer/operators have reported increased expenses of 25 to 400 percent, or more. They also report that the gas purchaser immediately begins to charge the operator the new and greatly increased fees while refusing to negotiate reasonable terms for a new contract.
Operators are at a loss as to what to do. Some have signed contracts with exorbitant fees, because they didn’t think they had any other option. The purchaser has offered a “take it or leave it” stance, with little or no negotiation, leaving independents feeling forced to execute poor contracts.
Because of this, we have formed the Mid-Continent Gas Contracts Group to share information and help one another work through these daunting problems. We invite you to join us, sharing your information, in an effort to move forward, better informed on our options and best practices in settling these contracts issues. The Group has an online forum that is available at [to be determined]. You can post your concerns or questions there and be answered by others that are facing the same or similar problems. The forum is set up so that you may remain anonymous, if you feel there is a potential for retaliation from your gas purchaser.
By advice, we have found filing an Informal Complaint with the RRC to be extremely helpful if you have not been successful in negotiating a new contract in good faith. After having filed the Informal Complaint, many operators have experienced better communication with their purchaser. The RRC does have statutory authority to set the rates charged by a gas purchaser; however, that will require a Formal Complaint hearing. This is a step that some operators are currently pursuing.
In 2007 the Texas Legislature passed legislation that expressly states ‘A confidentiality provision may not be required in a contract to which a producer is a party for the sale, transportation, or gathering of natural gas that is entered into on or after September 1, 2007’. Hence, you should request that the confidentiality language be dropped from the contracts that you negotiate. You can then keep it confidential if you wish, but you can also share the information with other operators, if that is what you want to do. Confidentiality only helps the purchaser divide and conquer the operators while telling each one that they got the best contract in the area, much like a used car salesman.
We feel as we work together and share information, we will all be better situated to make the best contracts we can and keep producing this important commodity for our State and Nation. Please join us and share your experiences so we can all learn and, hopefully, survive this low gas price/high-cost environment.
Mid-Continent Gas Contracts Group
This is a legislative year and we are currently reviewing and drafting legislation. We will be printing the most current legislation that is critical to our industry and has already been sponsored in the Pipeline. Please read and report if you have any issues with these bills.
As always – don’t hesitate to contact us! You are our main concern!