So a couple of questions for - you and the forum.
We are part of a producing spacing unit with three producing (runs) wells. Well 1 began paying right after the 150 day hold period. Division order came with check. Well 2 began paying after 130 days. Division order came a week after the 1st check. Well 3 had runs per the NDIC site every month since April of 2012, and still no division order or payment. The oil company says they are behind and at least over the phone acknowledge the 18% interest on late royalties.
#1. When should we send the demand letter for payment and interest?
#2. Based on the NDIC web site and our current checks we have a very good idea what our royalty should be, but do not understand when or how the 18% annual interest is paid and calculated.
Thank you for any information and please forward this note to the forum if it does not go there directly.
You can tell them you want to be paid any time and they are supposed to pay interest whether you ask for it or not. You may have to remind them about the interest.
Calculating the interest, it's 1.5% a month. Example, the operator gets the first 150 days free, at 150 days plus one year you receive 18% interest on the first months production 16.5% on the second months production, 15% interest on the third months production. 18% sounds large but really isn't large enough to make the operator get in any hurry to pay up.
From what I hear, operators conveniently forget to pay the interest so a law had to be passed that they have to pay whether you request it or not.
Operators only have to pay interest if you have good title. I have seen threads here on this site where operators said someone did not have good title as an explanation for having not paid royalty and for not paying interest. The operator then paid royalty without the mineral owner ever having done anything to improve their title, meaning that the title was good all along.
RW,
Do I understand that the owner can demand payment all they want, but the operator can effectively wait until they're ready to pay?
My basic understanding is that as long as they pay the interest, there aren't any other penalties....
Mr. Dukes, I have never seen anything that would limit the amount of time the operator has to pay in ND. The operator may owe interest and interest may accrue but that is not the same as saying you have to pay. If you are not being paid royalty, you are not being paid interest either. Yes, the operator can pay whenever they think best.
It might be nice if states added to their rules that payment must be made no later than 1 year after first sales and if payment can not be made due to title problems, ALL of the proceeds attributed to acres where the title was not good enough to pay on should go into escrow, after all, if your title is no good, the operators title shouldn't be any good either because it's based on the lease you executed.
Reagan "R.T." Dukes said:
RW,
Do I understand that the owner can demand payment all they want, but the operator can effectively wait until they're ready to pay?
My basic understanding is that as long as they pay the interest, there aren't any other penalties....