Overpayment of Royalties After Sale

Law & Legal
1

Approximately a year ago, I sold some of my mineral rights. After the sale was complete, I notified the current operator, XTO, via email about the sale of certain properties with copies of the notarized legal sale documents. In my email, I addressed my concerns about the sale of the properties and XTO overpaying me on royalty interests that I sold. In their response, they indicated that the sale/transfer could take up to 90 business days and seemed indifferent and had no concerns about overpayments.

As I suspected, they overpaid me for royalties, which I had already sold, despite my notification of sale as well as my concerns of overpayment.

My last check from XTO was on 07/30/2020. Since it had been 3 months since I received royalty payments from XTO, I gave them a call today and asked them why I had not received any royalty payments from them since the end of July. Since there are multiple properties involved, in which XTO is the operator, I was concerned that the properties that I did not sell were also not producing any royalty payments.

I talked to an XTO revenue department representative that told me my payments had been suspended until they recouped the overpayment amount. Apparently, operators/producers are not required to notify interest owners of overpayments and suspense of future payments. The properties of concern are both in Midland and Glasscock County, Texas. I only sold my interests in Glasscock County.

Should I contact a mineral attorney to dispute the overpayments based on the fact that I notified them immediately upon the sale of the properties yet they chose to ignore my concerns and written requests? Instead, they just overpaid me on the sold properties and then suspended ALL revenue payments from all of my currently owned properties.

I have direct deposit so XTO deposits the checks directly into my bank account. Therefore, I cannot return the checks but would have to draft a new check for the overpayment. How is the owner supposed to know if the operator has overpaid them if the operator does not inform the owner that they have overpaid them?

I feel I did everything within my powers to notify and address the sale and my concerns for overpayment. I have copies of all the correspondence and documents regarding the sale and communication between the buyers, myself, and XTO. I diligently notified all parties concerned and I have all of the correspondence between those parties.

I appreciate any suggestions from forum members and legal experts on what my options are in this case.

Warmest Regards,

Mitch Wayman

2

If it were me, I would do nothing. You were overpaid and XTO will begin paying you when the overage is made up. The old pay me now or pay me later. You were paid ‘now’.

3

From my experience, that is pretty much how many companies do it.

4

Dear Mitch: your lease and any division order you may have signed may specifically allow recoupment. Many, if not most, do. If the overpayment amount is correct, there may be nothing you can do.

5

Thank you all for your responses.

I checked my Division Orders on this subject and below is what XTO put on those Division Orders.

“Payor shall be notified, in writing, of any change in ownership, decimal interest, or payment address. All such changes shall be effective the first day of the month following receipt of such notice.”

I sent notification of the sale a full 1 1/2 months prior to the date listed on the Division Order. The Division Order was dated 03/07/2020. I sent notification to XTO of the sale on 01/14/2020. Additionally, in their response to that notification XTO acknowledged that they received the recorded deed of sale on 11/13/2019. What happened to their responsibility to make the effective changes the first day of the following month?

Is there no responsibility on the operator’s part to abide by their own rules and statements? They were well aware of the sale 4 months prior to the overpayments by their own admission.

6

You can calculate the overpayment by adding the royalties paid for each sold well for production months after the effective date of the sale. You can check the production volumes for wells which you still own on the RRC website to confirm that they are still producing. You can check the gross sales (in dollars) on the Texas Comptroller CONG site for each RRC lease. Then you can estimate the time it will take for XTO to recoup the overpayment. Most owners prefer not to send any money to an oil company. To sue, you would have to demonstrate economic harm. It is hard to imagine how being overpaid would qualify.

7

I think the bottom line here is that while it looks like the operator may have made a mistake in notifying you, I suspect that Texas law would not allow their error to serve as a justification for paying you more in royalties than they are contractually obligated to pay you. You would need to have an attorney look at the entire division order and your lease with them to determine whether or not this is the case.

8

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