I agreed to lease my mineral rights in Lea county, New Mexico (Section 24 Township 24S Range 37E), 80 total acres in the unit, 2.50 acres owned in the unit (see below for why it should be 5.0 acres) to Nevada Minerals & Mining Co who then paid me a lump sum & stated what my monthly % would be. I signed their paperwork & cashed their check. They then discovered that I might be entitled to more because my father had passed away a couple of years ago. I proved to them that I was his only heir & am entitled to his share. I have a 2nd lump sum check they sent me a couple of weeks ago but have not cashed it because, when I asked for new paperwork, they said they didn't need it.
I am feeling very uncomfortable because the copy of our agreement I have states my monthly % to be half of what I should be receiving monthly. When my mother passed away some years back, other companies provided a letter in lieu of transfer with a copy of the interest(s) they credited to my account. The current paperwork that I signed shows me agreeing to 1/2 of the monthly amount to which I am entitled. Am I not within my rights to receive paperwork that shows the correct monthly % I am to receive? Thank you in advance for any help you can be.
Is the legal description the same for the minerals you inherited from your father? Also, I assume the paperwork you are referring to is the oil and gas lease? If that is the case then you may be ok in terms of the lease since they typically only include the legal description for the gross acreage to cover any potential inaccuracies with respect to their calculation of your net acreage (Net Mineral Acres).
In terms of the monthly percentage you are referring to, do you mean the royalty rate outlined in the lease? If so, that will stay the same and won't go up or down from what was agreed to based on any adjustments to the Net Mineral Acres owned. When a well is drilled in a spacing unit covered by your tract, then you will receive what is called a Division Order which outlines your Net Revenue Interest (NRI) in that well. The operator will calculate the NRI based on several factors but at its simplest form by multiplying the Royalty % multiplied by the # of NMA and then dividing by the # of Acres in the Drilling Spacing Unit. If you don't have any producing or completed wells in the unit then you won't receive any additional paperwork from the operator outlining the amount owned.
Here's an example (assumes 100% of your tract is in the DSU, no NPRI, etc.):
Net Mineral Acres = 17.78 Acres
DSU Size = 1280 Acres
Royalty Rate = 15%
So, our NRI = 17.78 / 1280 * 0.15 = 0.0020835
You can use the NRI to estimate your royalty check amount. Multiply the NRI by the oil or gas production for the month and the respective price received to get an estimate of the royalty (before any deductions or tax) for that month. For more details on how to do this, you can look at this post.
Did the paperwork accompanying the lease (that outlined how much you own and the bonus payment per NMA) include the correct # of NMA (to your knowledge)? You could always contact their owner relations department and ask for their records on the number of NMA that you own in that Section. They may not send it (I don't believe they are required to by law but I may be wrong).
I'm not an attorney but hopefully this information is helpful. If you still have any doubts, I would consult with a qualified attorney who can review you paperwork and advise.
First of all, thank you so much for replying. I appreciate it, & already understand a bit more about mineral rights.
The legal description Nevada M&M Co has on the lease I signed does not match any of those we inherited from my mother. My father & I each inherited from my mother half of each mineral right, not him certain ones & me certain other ones, & the Nevada M&M Co description does not match any of them.
Yes, I was referring to the royalty rate outlined in the lease when I said monthly %. I understand you to say, when a person passes away, the royalty rate he received when alive isn't added to the person who inherits the oil royalties' rate, even though a lump sum offer is doubled. So that person's share just becomes non-existent . . . Is this correct? And wouldn't my net acres owned also double when inheriting his oil royalty share?
Because I don't have a description of this particular property, I don't know what the correct # of NMA I own is. My lease says it is "2.50 total net acres". The court document declaring my father & I having equal shares in my mother's mineral rights upon her passing doesn't show my mother owning any mineral rights in Section 24.
Thank you again for your assistance,
Inheriting mineral rights. Is there a way to find the value of royalty rights? I do not have any documents from the executors. What do the heirs need to request to decide if they should keep and split the property rights or sell them?
There are several ways to find the value of mineral rights and royalty interests. I cover how mineral rights and royalties are valued in my latest Podcast Episode. (Note this is a link to iTunes but it can also be found on Google Play and Stitcher - just search for the Mineral Rights Podcast).
Just to note, there is a difference between a mineral acre and royalty acre which has been answered in detail here on the forum. Here’s a link to one of the latest posts on the subject.
Please let me know if the Podcast episode helps answer your question and please let me know if you have any suggestions or feedback. Right now we are recording regular episodes and I plan on publishing them every other week or so.
Mineral Rights Podcast
It sounds like you may have inherited some minerals that were not covered by your mother’s will? In any case, if you inherit minerals subject to an existing lease it would typically continue under the same terms as agreed by the original lessor (there is usually language to cover this). So if she had agreed to a certain royalty rate, you would be subject to this as well, no matter what percentage of that person’s interest you inherit. For illustrative purposes, let’s say your mother owned 5 net mineral acres leased at 20% and you inherited 1/2 of her interest and your father inherited 1/2 of her interest. With that, you each would have 2.5 NMA (1/2 of 5 NMA) leased at 20%. The division order should show your mothers previous Net Revenue Interest (NRI) and you and your fathers NRI’s (which should add up to your mother’s NRI). If there is a discrepancy in what is shown on the Division Order vs. your mother’s estate documents, you can provide these to the operator along with an explanation as to why you think you should have a different NRI. If they didn’t have all of the information then it is possible that the division of interest is not correct. If in doubt, I would hire an attorney experienced in oil & gas law in that state to review the documentation and help you get things straightened out.
I am going to be featuring estate planning and common issues like this on an upcoming Episode of The Mineral Rights Podcast so please subscribe so you won’t miss it.
Mineral Rights Podcast