We’ve noticed a possible incorrect decimal interest on some older vertical wells we inherited in Martin County, TX. Payments appear to be based on a 1/8 royalty, and our lease is for 3/16. These are legacy wells, so we weren’t planning to push hard on correcting past payments.
However, we’re now seeing new horizontal wells being permitted in the same section and want to make sure the correct royalty rate is applied going forward.
My question is would it be better to:
-
Raise the issue with the operator now (and risk going into suspense while they review), or
-
Wait for the division orders on the new horizontals—assuming a fresh title opinion will be done—and address any discrepancy at that point if needed?
Curious if others have dealt with something similar. Thank you.
You should get this corrected if it is wrong. Did you sign a division order with that royalty decimal (DOI) and does that match the DOI on the check? Ask the operator for help in how the DOI was calculated. There are multiple factors, besides your royalty rate. You need to know what fractional interest you own in your tract to determine your net mineral acres within the well or unit acreage. Are there any burdens against your minerals, such as was an NPRI reserved in an earlier deed? If so, you will want to get a copy of that deed to see how this will affect your DOI. In some shallow units which were formed by combining multiple wells for waterflood or other secondary recovery, there was a weight factor based on geology and historic well production which went into the DOI calculation. This would be laid out in the unit agreement. Any such weighting factor will be limited to the shallow units wells and not carry over to new horizontal wells. Your interest should not be suspended since you think that you are being underpaid. Usually the suspense is limited to the disputed portion of a decimal and no one is claiming your royalties.