I think Aethon might be shorting us on our royalty payments. We have a gas well that started producing last may and we have been recieving monthly checks from Aethon since last August. I am questioning the owner interest they are using to pay us.
Pool = 1104 acres,
our deed = 149.2 acres,
minerals we own = 50%,
lease is for 20% or 1/5th
So wouldn’t the owner interest calculation be 149.2/1104*.5*.2 = 0.013514493?
What is on our checks is owner interest of 0.01304196 which is what I show would be paying us on around 144.1 acres, not 149.2 (74.6 acres of minerals).
I called Aethon early this morning and the girl that answered said they should be getting back to me immediately but so far no response. Shouldn’t the owner interest be the simple calculation I am making or is there more to it?
Did you sign a division order based on that ownership decimal?
Is the well part of a pooled unit or an allocation unit.
If you haven’t seen the plat and other information Aethon filed with RRC when they permitted it, post the well name and legal description and someone can help you locate that information.
My deceased father-in-law signed the lease, but I have read it and do not see where it lists anything other than the 149.2 acres. It is Robertson County well, Koda #1H.
This is the plat, it is tract #7:
The P-12 Certificate of pooling authority also shows 149.2 acres, same as our deed:
Also, Aethon is also not posting all the correct production numbers with the RRC. As of right now it only shows 4 months of production on the RRC site, Sept-Dec. But we have recieved checks based on 9 months of production since last May. Thanks to Alan on these forums, he showed me how to go to the CONG site to get what production they report for taxes.
The payment decimal on a royalty check may differ from the decimal interest on your division order statement. My understanding on how they arrive at each individual owner’s payment decimal is by adding all the owner’s decimal interest in the unit and then taking that total decimal interest and dividing it by the division order decimal interest. The “payment” decimal represents your proportionate share of the revenue received from the gas purchaser.
Aethon’s decimal interest suggests they don’t believe you own 74.6 net mineral acres. Have you run the chain of title to confirm that you actually own 74.6 mineral acres? Remember that deed only conveys what it says, IF the grantor had it to convey.
This is not correct. As a general rule, the DOI on the division order is the DOI on the check. There are only a few circumstances where there is a variance, generally where one working interest is taking in kind. Make sure that you understand the math in calculating your royalty DOI on the division order and the math in any difference on your check detail. Do not just accept a verbal answer from the division order analyst or oil company.
Thanks for your post. That is very interesting. I never even heard the term “division order” before. We never had one presented to us, but maybe my Father-in-law did and we we just did not find a copy of it. He passed away after the well was producing but just a couple of weeks before the first checks arrived.
I assume I need to ask Aethon for a copy of it. Google says they are not public record. I found an interseting read about division orders in Texas here:
I worked for 2 major oil and gas companies for a total of 15 years. I handled 1000’s of inquiries from owners demanding an explanation why the payment decimal differed from their decimal interest from their division order statement. The information I provided is what is what I was told by the Sr Revenue Accountant on how they arrived at the payment decimal on the checks.
If you are quoting the revenue agent verbatim, then that is an inaccurate and inadequate explanation. I would never accept a reduced DOI without the numerical calculations to back it up. If you were not a division order analyst calculating the DOI, then you may not have understood what the revenue accountant was trying to explain. I have some wells where the payment decimal differs. In almost every instance it is because one of the working interest owners is taking in kind. However, if the payment decimal is 10% less, then the reported volumes and sales are 10% higher. If the decimal is 10% higher, then the volumes and sales will be 10% lower. At all times, the end result needs to match the base DOI times the true volumes and sales. A couple wells are paid on the higher tract decimal, rather than the lower unit decimal. Again, the volumes and sales are proportionately reduced so that the royalties end up the same. This may be the explanation that the revenue was trying to describe to you and the mineral owner, but it needed a lot more detail.
Todd, it is possible you may be correct. There is a railroad easment on one side of the property. I estimate it occupys 5 acres of land. Pretty much the number I estimate we are coming up short. I just always assumed that an easment would not take your minerals and if it did it should be reflected in the deed. And I was surprised to see that the railroad has 31 acres listed in the plat.
I’m not too familiar with the railroad easement deeds in Texas. In Oklahoma the Supreme Court rulings have been the Easement deeds conveyed minerals. You should inquire of the operator as to the mineral interest you are being credited with.
You need to get a copy of the original easement or deed to the railroad to determine whether the railroad acquired minerals. Or even to see if there is any kind of documentation. Texas is unique in the RR easements, particularly in West Texas where RR lines were installed without recorded land grants or easements, in which case they did not acquire minerals. This differs from other states where US owned the land and were under federal law granting title in exchange for installing the lines. Texas was an independent country and when it joined the union, Texas retained state title to all open land. At one point I had to explain this to a landman who had taken a lease from RR and paid a bonus and then had to take new leases on the same minerals.
I know this is all speculation on my part until I get a copy of the division order to see the actual calculations and that this is not legit legal advise but the google AI god says:
The Supreme Court ruled in 1957 that railroad right-of-ways do not grant mineral rights in United States v. Union Pacific Railroad Co… The court argued the case on January 23, 1957, and decided it on April 8, 1957.
Interesting Tennis. The plat lists the volume and page number of all the deeds in the pool. I can access them online on my counties web site. It shows volume Y, page 366 for the railroad. That pulls up not a deed, but a “Right of Way” document from 1875. Normally I can read deeds I pull up online but the right of way document is highly cursive and not at all easy to read online. I may need to go to the courthouse and have them copy the original for me. It doesn’t seem like a right of way would or should come with minerals, but then why list it in the plat at all.
TennisDaze, forgive me if what you are saying is totally going over my head, but I can tell you they are definitely not increasing the volume. Aethon has not been forth coming about reporting volumes to the RRC but I check it every month on the CONG site and every month the volume listed on my check is a little short of what they report production was on the CONG site. The 4 months they have reported to the RRC match CONG but not my checks. I don’t think it is a large percentage less but it is less than what they report.
AI is not a reliable source for many things and especially legal matters. There are numerous examples where AI has made up cases if if cannot find what is ordered. One judge fined the attorney who did not want to pull his filing after it was proven that some cases were made up. Furthermore, no case citation is valid unless you read the full decision in light of relevant state law and the fine details of your deed or contract, etc. Here you have no idea what kind of ROW, when they were granted, what specific language, and what other limitations. If the case is related to federal (U.S.) grants, then it would not pertain to Texas because the U.S. did not make RR grants in Texas.
The CONG volume may be the volume that went into the pipeline for transport to the processing plant and your volume may be the volume at the plant. Is the total Gross Sales on your check (gas and products combined) equal to the total Gross Sales reported to the CONG? If not, is the difference equal to the Marketing Costs listed on the CONG? Some companies deduct the costs out of the gross sales to hide the fact that they are charging expenses.