A little background, Grandparents sold some property but retained half the mineral rights on 156 acres. Had our attorney take care of getting everything transfered into each of our names ( 3 family members) The rights go back to the 50's but I can only find info on the last two, one is involved in a law suit and the product purchasing company has been bankrupt for years. The current company working on the property has been there since 5/1/2010 and has been selling to Phillips 66. There are funds in suspense and we have been sent Division orders to sign to release them and start the royalty payments. The property is Sec 1 Twp 20N R3E in Payne County, Ok. P66 has the RI at .02083333 Where do we go from here, this is not the field my attorney works in. Do we contact the Operator about a new lease? What should we expect to be offered? I keep seeing 3/16 plus a per acre lease, Just not sure what our order of steps should be. Thanks for any help you can offer!
If there was a lease legally in effect at the time you inherited the minerals, there is really nothing much you can do to change or void the lease (unless you discover through research that the lease, by its own terms, should be or should have been terminated but was not). Get a copy of the lease. About the only thing to do, beyond research, is to sign the division orders, collect your money and began the collection of royalties. Once a lease is signed and put into effect, there is virtually nothing that can be done to alter it unless Lessee and Lessor both agree to do so. Most older leases are very favorable to the Lessee so it is unlikely they'd want to make any changes. 3/16 is the royalty to be paid to Lessor(s) which is 18.75% (could be much worse!)
I would be happy with old lease at 3/16… I have 1 that’s paying at 1/16 from the 50’s that I have tried everything possible besides court to do something with… I have chased old lease agreements for a year now trying to find something to break or at least renegotiate lease over… Even had a resource manager tell me that lease actually needs to be updated to current standards from lease holder now…
I have the lease company's contact info so I'll get ahold of them for a copy. We are only getting 1/16 and that is divided 3 ways, I was told they should be paying us a per acre amount as well, is the per acre lease a separate thing or is it included in the RI? If it is a separate lease what is a fair amount we should be asking for on 156 acres? Would the property owner have signed a lease with them even though we have 50% of the mineral rights and do they now have to start a lease with us as well? Thanks for the info!
It sounds like you may have different interests confused. If you are being paid 1/16 royalty, then it's not being split 3 ways - you are each still getting 1/16th royalty. What was split 3 ways after the inheritance was the net mineral acres. If your grandparents owned 100% of the minerals and retained half when they sold the surface, they then owned 78 net mineral acres. Split 3 ways, that means each of the 3 of you own 26 net mineral acres (nma). Your interest in the 156 acres has probably been pooled into a larger gas unit - mostly likely 640 acres or so. If the entire 156 acres were included in the Unit then your grandparents would have had 156/640 or about 4% of the unit and each of the 3 of you would have inherited 1/3 of that 4% or about .0135 in the Unit. Since the division order says you each own 2%, then the gas unit is much smaller than 640 acres - in other words, the denominator is smaller than 640. It would be very unusual for an oil and gas lease - even back in the 1950s to pay only a 1/16th royalty as 1/8th was typical as far back as the 1930s. It is possible your grandparents sold someone half of their royalty interest (not mineral interest) to someone as a non-participating royalty interest (NPRI). In that case - you would still own the same net mineral acres, but the royalty (the income stream ONLY) was sold. That sounds like what happened in your situation, which would explain why you would be getting paid 1/16th. If you have been shown an actual lease for 1/16th royalty then that's what you have, but it would be unusual. You need to understand the difference between mineral ownership and royalty ownership and that they are two entirely different kinds of animals. And as others have already said - it is almost impossible to break any of those old leases as long as they are held by production. You don't care what the property owner (or whoever owns the other 50%) does with their net mineral acres. It is not relevant to your ownership. Each person owns their own net mineral acres and each person can negotiate their own terms, sell it, or do whatever they want to do with it. But since your interest was already leased when you inherited it, you inherited the terms of that lease and not the right to negotiate a new lease. If the Unit is ever dissolved or all the wells in the Unit are shut in per the terms of the Lease, it may terminate and then - at that time, you could negotiate new terms if someone is interested in leasing it again.
Let me clarify what I wrote above. Here's how to figure it - take your 26 nma divided by the 156 acres in the tract, and you get .16666666. Now take that number (.010416667) and multiply it by 1/16th royalty (.0625) and you get the .020833333 that they are telling you you own. Hope that makes better sense. Sorry if I confused everything by discussing pooling. Your approximate 2% share of the royalty income from that 156 acre tract works out to $208 for each $10,000 of production sold. Hope that makes better sense.
I know of a set of heirs who are getting very impatient for waiting to receive ALOT of royalties placed in suspense by a company in bankruptcy. The party responsible for paying them keeps dragging their feet, and wants to change the NRIs in the lawyer's TItle Opinion because they think the lawyer is wrong (he's not). But they have sent out division orders in the mean time with "their" decimal interests specified, not those in the Title Opinion.
Can somebody answer this for me: if a royalty owner signs a Division Order with a decimal interest that turns out be incorrect, is it too late to "amend" the Division Order, is the royalty owner essentially saying, "Regardless of what the lease specified, I am accepting THIS decimal interest?"