Does anyone know what the statute of limitation for unpaid royalties in TX .
DStorm
4 years from date of underpayment. Used to be the discovery rule applied, such that the 4 years does not begin to run until in the exercise of reasonable diligence the royalty owner discovered or should have discovered the underpayment. That rule has since been gutted by the Texas Supreme Court and you should not expect to receive any benefit from asserting it (though you can still assert it, just unlikely the courts will apply it).
1 Like
Copied from Oil And Gas Lawyer Blog Page 2
Based on the Texas Supreme Court's holding in BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011). In that case, the Texas Supreme Court makes clear that no lies on the part of a lessee(oil company), however self-serving and egregious, are sufficient to toll limitations, as long as it is technically possible for the lessor(mineral owner) to have discovered the lie by resort to the Railroad Commission records. This burden the Court imposes upon lessors(mineral owner) is severe. It is now a lessor's(mineral owner) duty to presume that any statement made by its lessee(oil company) is false and to ransack the esoteric and oft-changing records at the Railroad Commission to discover the truth or falsity of its lessee's(oil company) statements. If, as is often the case, these records are technical in nature and require expert review to ferret out the truth, it is the lessor's(mineral owner) job to hire experts out of its own pocket to perform such a review. If a lessor(mineral owner) fails to take these steps, then it will have failed in exercising reasonable diligence to protect its mineral interests and, if the lessee's(oil company) fraud is successful for longer than the limitations period, the lessor's(mineral owner) claims will be barred by limitations.
The lesson: mineral owners should reserve the right to audit their royalty payments, and they should exercise that right at least every 3 to 4 years, to be sure that their royalties are being paid in accordance with their lease.
Clint Liles
1 Like