Columbia Natural Gas has a little bone to pick with Southwestern Energy. It’s one that you might find yourself picking with the company you sign a lease with, too.

Back in 2007 Columbia signed a sub-lease with Southwestern. That means that Columbia had bought a lease from someone and turned around and sold at least some of the rights to that lease to Southwestern.

In that sub-lease, Columbia made it clear that they expected to be paid a royalty on all of the gas produced, whether it was sold or not. You see, it’s expected that royalties get paid on gas that’s sold. But not all the gas gets sold, and when a company doesn’t sell gas it doesn’t want to pay royalties. In other words, if gas was lost through a break in a pipeline, or flared, or used to run machinery, Southwestern wouldn’t usually pay royalties on it.

In this lease, that was not the allowed. Southwestern had to pay royalties on everything that came out of the ground whether it was sold or not.

Columbia is suing for $17,000 in unpaid royalties, plus any amounts it’s not aware of already. I expect that they think there is a lot more to be paid or they probably wouldn’t be worrying about it.

Your lease probably includes language that says your company doesn’t have to pay you a royalty on gas unless it’s sold. That’s pretty standard. However, if you think that it could impact your royalty checks you should make sure to get a clause in your lease or addendum saying that you’ll be paid on all gas produced, whether it’s sold or not.