Binghamton Natural Gas Summit: National Association of Royalty Owners Executive Director Jerry Simmons
Jerry Simons was the final presenter at the March 18 Binghamton Natural Gas Development Summit. He is the executive director of the National Association of Royalty Owners (NARO). According to Mr. Simmons, NARO is the only organization to represent landowners that is completely independent and not attached to energy companies in any way.
NARO was founded in 1980 after the “windfall profits tax” was passed by the 96th Congress, a 35 percent tax on oil royalties. NARO fought against the tax, and it was eventually repealed in 1988.
NARO is an educational and advocacy group, chartered as a 501(c)3 and 501(c)6 non-profit organization. There are state chapters of NARO. New York and Pennsylvania fall under the Appalachia Chapter which covers the Mid-Atlantic and Northeast areas of the country.
As an example of what NARO does for royalty owners: Mr. Simmons said the Depletion Tax Allowance, part of federal law since the 1920s, is under assault by the Obama Administration. They tried to take the allowance away last year but were unsuccessful. They are trying again this year, as part of the 2011 budget. NARO is fighting against it. [MDN Comment: The Depletion Tax Allowance treats royalty owners as part owners of an asset, allowing them to “write down” the value of the asset as it is used up, in this case mineral deposits being the asset. Bottom line—if this allowance is taken away, taxes to the federal government go way up for royalty owners.]
NARO sponsors a yearly conference for royalty owners, those who are interested and those who will soon become royalty owners. This year’s conference is in Pittsburgh, Oct. 7-9.
Mr. Simmons quickly reviewed what he calls his “Mineral Management 101” talk.
There are four major events for mineral owners:
- Divison Orders
- The Royalty Check
And there are ten duties of mineral owners:
- KNOW what you own
- KNOW what information you need and where to get it
- KNOW what is going on in your area of interest
- KNOW what the future impact the small print in the oil and gas lease/division order will have on your royalty payment
- KNOW who has it (your lease, your well, your production)
- KNOW what questions to ask and to whom to ask them
- KNOW your limits
- KEEP copies/originals of everything and organize it
- KNOW that you must remain vigilant and DO something
He briefly explained each point. He next spoke about types of ownership and leasing (see the slide presentation below).
Simmons closed with the Royalty Owners Bill of Rights:
- Royalty owners have the right to be paid according to all terms contained in their lease contract and by law.
- 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.
- Royalty owners have the right to seek redress if good faith negotiations to correct violations of lease terms fail.
- 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
Because the Summit was already short on time, Mr. Simmons had to quickly touch on some of the points in his presentation. MDN followed up with Mr. Simmons after the Summit and asked for a copy of the slide presentation, which he graciously sent. We have linked to it at the bottom of this post.
Mr. Simmons was up front about why he was at the Summit. To educate? Yes, for sure. But also to advertise for members. NARO membership is only $105 per year. MDN believes it’s an excellent value for landowners who have already signed a lease, and just as importantly (perhaps more importantly), for those who have yet to sign a lease. Take advantage of this excellent organization and the resources and advice they offer.