Underpaid Royalties

General Mineral Rights Discussion
1

I have recently discovered that our division order decimal is wrong on a new Bakken well spudded two years ago. Also the Madison wells producing since the late 50’s and early 60’s are also wrong.


The oil company has us owning 23% of the mineral rights on 320 acres, however according to courthouse records and a title opinion we actually own 59%. (no other mineral owners were over paid, so there is no dispute on who owns the minerals, just that the oil company shows less than the title opinion and the court records)

I called the oil company and they are researching the records. One of their mineral analysts told me if what I am telling him is true, we have been underpaid since production began on the land.


Assuming I am correct, what do you think the oil company will do? Will they pay any “back pay”?



2

Dear Mr. Dahl,

There is some case law out there – actually a a North Dakota case – that does allow recoupment for underpaid royalties. You might also be eligible for penalties and interest as well. I do not have the case citation.

The amount of time that you can go back may be subject to the statute of limitations for North Dakota.

3

Mr. Cotton,

Thank you for answering my question. The mineral analyst said they will research this and let me know the results. How long do you think I should give them?

Thanks,

Jay

4

Dear Mr. Dahl,

One thing that I would count on is that they will know their legal obligation before getting back in touch with you. In all liklihood, they will extend an offer to settle accounts somewhere beneath the level of their legal obligation. I would and you would have to assume that they would also.

If this were me, my business advice to myself is to arm myself with the same knowledge that they are going to arm themselves with and that would require the assistance of legal council.

The simple answer is 30 days or you will have to explore other remedies available to you.

Jay Dahl said:

Mr. Cotton,

Thank you for answering my question. The mineral analyst said they will research this and let me know the results. How long do you think I should give them?

Thanks,

Jay