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A Division Order or a division of interest means a payday is coming - mailbox money, cha-ching, cha-ching. Receiving one in the mail is good news. The lease you may have signed several years ago is now transitioning into royalty payments. Division Orders are issued when a well is producing and the operator is preparing to make royalty payments. If you receive a Division Order pay attention, because if you ignore it or toss in the trash, your royalties will likely remain in suspense until you take action otherwise.
A Division Order verifies a mineral owner's interest in a well and directs the operator to pay the Owner or Lessor. The document will typically include your name, a legal description of the property, the well, and most importantly a decimal number stating your interest in the well (watch for next months’ blog for information on how to calculate). The Division Order is also likely to include a request for certain information about the Owner such as address, phone number, and tax identification number.
Colorado does not per se require the return of a Division Order to be paid royalties. However, an operator can request that you verify your interest. To the extent that the document includes more than a verification of your interest in the Well such as indemnification clause to the favor of the operator regarding payments, then consider deleting or striking through such clauses. While a division of interest is not required, a verification of your interest can be requested.
A Division Order is likely to be accompanied by an IRS Form W-9. Failure to complete the W-9 is likely to result in at least 30% of your share of the revenue being withheld. If you have questions about whether you should complete the W-9, be sure to discuss your personal tax situation with your accountant, but in most instances it is likely that completing a W-9 will make sense.
Jenna H. Keller, Esq.
Attorney at Otis, Coan & Peters, LLC. (www.nocolegal.com)
Jenna H. Keller defends property rights and provides legal services to farmers, ranchers, rural property owners, and severed mineral interest owners in the areas of estate planning, natural resources (oil, gas, wind), real estate, and water.
The information in this article is for general information purposes only. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided in this article
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