Recently discovered on inherited 160 acre oil/gas lease the operator has been reporting oil production from well on my property to a another oil lease acct on the RRC website. Royalties have been paid over the last 13 years but upon receiving the run sheets from the oil company that purchased the oil from the operator, the royalties paid are approx 25% of the correct amount. The RRC has inspected the locations and has issued to the operator an extensive list of issues to correct within 30 days.
What is the statue of limitations to recover past mineral payments?
What are grounds for breach of contract to remove the operator?
Hi, Joan!
Welcome to The Forum.
It sounds like what you need is an experienced Oil and Gas Attorney to review your circumstances with you. If you do not know one, there are several who answer questions here on The Forum, or any number of us can suggest a few to you.
If you can prove fraudulent intent, then I do not believe there there would be a Statute of Limitations.
If it is just a circumstance where you had not or have not properly notified the Operating Company of the change in Ownership, then you need to review the terms of the subject Oil and Gas Lease(s) your mineral or royalty interest is subject to.
Not all Leases are the same, but generally speaking it is my understanding that the Operator is under no obligation to switch over to paying the new Owners of any interest until 30 days after having received notice of the change(s) in ownership and certified copies of documentation evidencing the same.
When did you inherit the minerals and when did you send notice of your inheritance to the Operator of the Well?
As far as royalties being inaccurately paid or paid to the wrong party, you would need evidence of those issues in order to present it to the Operating Company and possibly submit to a Court. That might entail the preparation of a Title Run Sheet and obtaining a Title Opinion from an Attorney on the subject interests and a through review of the Drilling and Production Historical Records on the Well(s) - all of which can be very costly.
As to the relationship between the RRC and any Operator, I am fairly certain that the RRC has that under control. It might take them a while to inspect a given property - they only have so many Inspectors. But they'll get around to them all eventually.
Unless you are a Working Interest Partner in the Well(s), I am not aware of any influence you would have in trying to replace or remove the current Operator. Even if you were a Working Interest Partner in the Wells(s), most Operating Agreements have a provision that it would take a more than 75% vote of the Partners to have the Operator replaced or removed. And most Operators own at least 25% of the Working Interests and aren't likely to vote against themselves.
Hope this helps -
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
There is a general 3 year statute of limitations. The statute starts to run when the royalty owner knew or should have known about the issue. Your post indicates that the operator filed the volumes to the wrong well and under-reported the production volumes from your well by 75%. So your check stub volumes would have matched the RRC site volumes. Then, it would seem that your notice would start when the corrected volumes were filed, not when you were paid. This is a reason to not only match volumes as paid, but to check later for corrected RRC filings. Your first step should be to send a certified letter to the operator demanding the payment for the revised volumes. And you should also have an oil and gas attorney who is cc'd in the letter. As always, your rights depend on the facts and circumstances and your lease terms. As a mineral owner it is extremely unlikely that you can have an operator removed. Possibly your lease can be terminated, but you have to have specific rights specified in the lease language. Posting the well name and operator will alert other mineral owners to check RRC records and to ask questions.
Whatever your state's S of L is, is it. You cannot get much relief beyond that normally, sometimes even when gross negligence can be shown. It all revolves around the court's view of whether you had a "due diligence" to "discover" the error. If they attempted to conceal the issue, then there might be a case for conspiracy to commit fraud. You got good advise from Tooke.
One thing that should be noted is that what is reported to the RRC is what was PRODUCED. Your checks and check stubs, however, will only reflect what was SOLD. The two sets of figures will probably never match.
The closest publicly available figures you can reasonably accurately compare your checks and check stubs to will be the Severance Tax figures available through the Texas Comptroller of Public Accounts' Records. At least, to my knowledge.
Texas taxes production, so every load of oil and contract for gas has to be reported, along with their declared values. You can use those two figures to determine what the company received "per barrel" or "per mcf" for each load or contract.
You can request that information from the Comptroller's Office. They'll send it to you in a spreadsheet, I think.
It is also available through DrillingInfo.com's "DIDesktop" application, but that is an expensive online subscription service.
Hope this helps -
Charles
When they get it figured out that it was billed wrong can she ask that her interest be carried in those Wells and end up with 8/8th of the acreage that was paid wrong?? How Good were the wells?
bc
If the Texas Railroad Commission has issued an order to make corrections because of misreporting you should be able to go back to where they correct the issues. In the raw data from the RRC they have a report date. It is up to the royalty owner to verify payments are made correctly. With that if the reports to the RRC and Comptroller are incorrect and corrections have to be made, you would not have been able to make sure correct payment has been made with publicly available information. If you have less than ten wells or around there you should calculate the royalties paid to date before corrections are made to the RRC and TXCPA. When the changes are made to the RRC and TXCPA you will be able to see the difference in volumes and sales data. If you have more than 10 or unable to verify what has exactly been paid on a well by well basis, I would recommend having an audit/review done by someone who does reviews/audits. I do not know how others charge for initial reviews on whether it is worth the a review. I always take a preliminary look and recommend to a prospective client if it is going to be worth the cost of the full audit/review. Recently I have done some preliminary reviews for royalty owners that either had no visible underpayment and if there was any it was so little that it would not be worth proceeding as the cost would outweigh the recovery amount. You also may be subject to an increase in ad valorem taxes. This would be up to the Chief Appraiser of the county but he is limited to 5 years in normal situations. This situation may be different. I would definitely have someone take a look or do it yourself if you can figure it out.