How to get a royalty audit in Texas?

I have royalty interests and override interests in La Salle county, Texas with Verdun Oil Co (EP Energy), Ridgemar (now Crescent) and Texas American Resources. I am highly skeptical that I’m being paid and taxed for the correct decimal and for all the wells to which I’m entitled. What can I do to find out if I’m paid and taxed correctly?

There are a few issues with different solutions here. A good way to see if you are being paid on all wells you own in is to go to https://gis.rrc.texas.gov/gisviewer/, look for your lands, and look for all producing wells within your interests. How to know if you are being paid at the correct NRI is to know what your % interest is in the tract, how many acres in the unit/well, your royalty rate (less possible burdens), and calculate it from there. To know if you are being taxed on the right NRI, just to compare royalty statements to the tax roll. If you are asking about ad valorem value, then you can roughly compare annual revenue and expect that the ad valorem value will be ROUGHLY 3-5x that. You can also compare old division orders or possibly Stipulations of Interest to you current royalty statements for more data points. For a one-stop solution, hire a landman and let them do it for you. :slight_smile: Happy hunting!

Thanks so much for your answer! One of the problems is that I don’t own any of the surface. I bought producing interests and I have reason to believe I’m not paid properly.

For a proper audit to proceed, you must start at your base title. From that point you include any OGL obligations. You will have to pull permits and unit agreements before you start to advance to Division Orders. Ad valorem taxes are based on Division Orders. A landman can perform any part of this work that you do not feel comfortable completing.

I wouldn’t give any different advice knowing that you don’t own surface, if that helps. Do you mean that you own mineral interests that are producing, or do you own and override or NPRI? I might be able to give better guidance depending on the type of asset.

Thanks! How do I find a good landman that can do that? Can you recommend some?

I have used Kelly Morton for some work in Burleson. She did a great job on that project.

First step is careful review of the documentation from the seller, including copies of his royalty checks and his DOI, division orders, deeds, etc. Second is the assignment language, such as limitations to wellbore only or depths, and whether he assigned 100% or a fraction of his interest. If the seller assigned his interests in specific leases, then the landman can help you trace the status of those leases (such as expired or released depths) and which wells were drilled under those leases. Hopefully you have or can obtain copies of the original leases. Whether or not the seller was the original lessor, the landman will need to track the assignments into the seller (and out of the seller) to determine what he owned at the time of your purchase. For example, was an assignment of an override into the seller limited to specific depths or formations. You may also be able to pull the seller’s tax listings from the county CAD to see what wells and DOI he was paying taxes on.