Here's the Texas law. And it looks to me like they can delay payment almost forever with no consequences to them if they claim ownership type issues.
The requirements covered in this brochure are outlined in the Texas Natural Resources Code Section 91 Subchapters J and L.
These requirements include:
- When to pay royalties, when royalties can be suspended, and what interest rate to pay when interest is due
- What should be reported with a payment
- The statutory components of a division order
- What kind of notice to provide royalty owners when you buy a working interest or when the payor changes
- What information a royalty interest owner can request
WHEN TO PAY
Section 91.402(a) and (f)
Initial payment
- 120 Days after end of month of first sale
Ongoing payments
- 60 days after end of calendar month in which oil production sold
- 90 days after end of calendar month in which gas production sold
Payments must be paid when the payment reaches $100, or
- If payments do not reach $100 within 12 months and are greater than $10, the aggregated amount must be paid
- Amounts that do not aggregate to $10 must be paid upon the sale or plugging of the property or at the owner's request
- If an owner requests payment more frequently, only aggregate to $25
WHAT YOU HAVE TO REPORT WITH A PAYMENT (amended effective 9/1/2002)
Section 91.502
- Property Identification (Name, Number, or both; and County and State)
- Sales month and year
- Volume sold
- Price per barrel or Mcf
- Severance or other taxes deducted
- Windfall profit taxes (repealed 1989)
- Other deductions or adjustments
- Net value
- Owner decimal interest
- Owner gross value
- Owner net value
- Address and phone number where additional information can be obtained
ROYALTY OWNER REQUESTS
Section 91.404(b)
If a royalty owner notifies you in writing of failure to make timely payment, you must either make payment or respond in writing within 30 days of receipt of the notice.
Section 91.504 (amended effective 9/1/2002)
Requests sent by certified mail for information regarding itemized deductions, adjustments, the heating value of gas, or the Railroad Commission of Texas identification number for the lease, property, or well must be responded to within 60 days of receipt of the request.
Section 91.505 (amended effective 9/1/2002)
Additional requests sent by certified mail for information not covered by Section 91.504 must be responded to within 30 days of receipt of request.
CHANGE OF PAYOR
Section 91.407 (a), (b), and (c)
If there is a change of payor, the new payor must notify the payee in writing of the change at the payee's most recent known address. The notice must include property name and number, effective date (month and year), and payor's address and phone number.
A division order, check detail, or other written communication that includes all of the above information will satisfy this requirement.
BUYING A WORKING INTEREST
See "Change of Payor." When buying a working interest, you should determine who will pay the royalties due and ensure that the notice of the change of payor will be provided as required.
SUSPENDING PAYMENTS
Section 91.402(b) and (f)
Payments can be suspended without interest (provided the lease does not provide otherwise) if:
- A dispute concerning title exists that would affect distribution of payments
- A reasonable doubt exists that the payee has sold or authorized the sale of its share of the oil or gas to the purchaser
- A reasonable doubt exists that the payee has clear title to the interest in the proceeds of production
- A title opinion requirement placing the title, identity, or whereabouts of the payee at issue remains unsatisfied after a reasonable request for curative has been made.
- Payments are aggregated as provided by statute
WHEN INTEREST IS DUE
Section 91.403 and 91.407(d)
Late payment interest is due at a rate of 2 percentage points above rate charged on loans to depository institutions by New York Federal Reserve Bank when:
- Payment is late and the title is clear
- Payment is late, a division order is offered that does not comply with statutes, and the division order is not signed
Late payment Interest is due at a rate of 4 percentage points above the rate charged on loans to depository institutions by the New York Federal Reserve Bank when:
- Payment is late and notice that you are the new payor has not been provided