Sometimes the wrong lessor can be signed to an oil & gas lease. This stems often from a break in the chain of title, or a cloud on the title, which puts the ownership of the minerals in question. Land professionals are often tasked with due diligence work to determine the correct owner of the mineral interests in multiple tracts of land. If it is found the wrong lessor has been taken under a lease, the oil and gas company will want to protect its assets (i.e. oil and gas leases), and extend a new lease to the rightful owner.
What Happens to the Mineral Owner When the Oil & Gas Company Realizes its Mistake
If a mineral owner has been receiving royalty payments, then those checks would be proportionately reduced, based on the determined interest. In the vast majority of oil and gas leases, there is a clause called the proportionate reduction clause that addresses this possibility.
If it is found that the lessor in-fact owns no minerals, or only a portion of the minerals, then the oil & gas company may ask for any bonus, rentals, or royalty monies to be returned. Provided that the lessor has certain language written into the lease, despite requests from the oil & gas company for re-payment, the lessor is not always contractually obligated to re-pay monies to the company. However, every lease is different, and depending on the scenario, it may be a good idea to seek advice from legal counsel, or simply re-pay the money, particularly if the oil company has moved to file civil proceedings.