A neighbor of mine has been going through the hoops with CHK for over a year now on her Royalty Interest.
Apparently CHK calculated her acreage on 1/2 an acre instead of 1 acre. She's emailed them a survey showing the correct size and they have agreed (email) that it needs to be fixed. No one has ever fixed her RI and sent her a revised division order. They keep telling her there is a backlog and continue to put it off. (I have copies of all of the correspondence via email).
At first I thought I knew the right advice to give my neighbor, but after pondering it more, I am not so sure. Has anyone else encountered such a problem, and ifso, what would be the appropriate method to get CHK to correct the RI, and get paid for the error? There is approximately 20 months worth of production so far. Thanks.
Kitchen, I don't think there is anything that can be done. It's too small to warrant a lawsuit and Chesapeake does not care. Maybe if Chesapeake could be convinced that they would get sued, lose tens of thousands of dollars in legal fees, then maybe they would do something. The thing is that Chesapeake probably feels the same as another oil company owner once stated on these forums that "the mineral owner not getting their royalty is like not getting your fries at the drive through", to the oil company, it's a non-problem.
Texas courts allow small claims suits for amounts involving less than $10,000. I can’t imagine they would want to spend more on legal fees than correcting a simple problem. To protect the owner though, would it be reasonable to rescind the division order at this point?
Kitchen, rescinding the DO might have no more effect than stopping the royalty altogether. If it isn't a great sum of money I suppose it wouldn't hurt, I haven't seen the division order so I don't know if any little extras were added in. A division order may not override a lease but that doesn't mean it can't be an agreement on something a lease is silent on and if so, it may be just one more hoop to jump through.
Really the signing and returning the division order is agreeing that the operator has your interest figured correctly so I guess it would be a necessary step to rescind the division order or the operator has the perfect excuse to not do anything because you agreed to their calculation when you returned the division order. It will have no effect on the operator, they will still sell the oil and collect the revenue no matter what. It's worth a try though.
KITCHEN, I have recently had this problem. If you are not in a hurry for your royalties, just hang in there and insist that they correct the survey problem. They will take their time because it is to their advantage to do so. Ask for a corrected division order as soon as possible. Remember that once this is corrected, your royalty checks from then on should be correct. It's too bad that you have signed and returned an incorrect division order, but it can and should be corrected, but it will take time. We asked for help from our landman and she helped to plead our case.
r w kennedy said:
Kitchen, rescinding the DO might have no more effect than stopping the royalty altogether. If it isn't a great sum of money I suppose it wouldn't hurt, I haven't seen the division order so I don't know if any little extras were added in. A division order may not override a lease but that doesn't mean it can't be an agreement on something a lease is silent on and if so, it may be just one more hoop to jump through.
Really the signing and returning the division order is agreeing that the operator has your interest figured correctly so I guess it would be a necessary step to rescind the division order or the operator has the perfect excuse to not do anything because you agreed to their calculation when you returned the division order. It will have no effect on the operator, they will still sell the oil and collect the revenue no matter what. It's worth a try though.
I appreciate all of the good advice here. I determined that the lease claims 1.17 acres, the pooling certificate indicated 1.13 acres. I was never provided a copy of the division order but I gave my neighbor the calculation for it (and provided 1.13 acres as the example) for the approximate royalty calculation so she could look again ad the DO and her check stubs. After the advice provided here, I advised her to put together all of the information, draft a letter with specifics to the issues, and copies of all relevant materials, send it certified. Wait and see what happens!
There is always the chance the lease and the pooling certificate are not correct. It is possible when the title opinion was completed, she didn't own as much as first found by the landmen. I've seen as more mistakes made by sloppy work in the leasing phase than in the final title opinions and division orders. It is still common to happen at either place.
Rick you are correct. She said the survey she paid for when she purchased the property shows approximately an acre in size. Hopefully they will get all of this information / correspondence and take care of it in the appropriate manner.
But even though it surveyed as 1.1 acres, that does not mean that she owns 100% of the minerals below. One of the early sales of the property could have retained part of the mineral rights. It was very common in the early 1900s for people to sell 1/2 their mineral rights to a farm to survive. Many of the early deeds I see have the seller retaining ¼ or ½ mineral rights. Her deed may have conveyed the surface and all of the mineral rights, but the seller cannot convey something that does not belong to him. Some of it could have been reserved 3 transactions and 75 years ago.
Some states may vary, but about the only way you can tell is with a title search. She may have an abstract that shows previous transactions that may provide clues. Even then it is possible not all mineral right transactions are documented in the abstract. If she has a abstract it would be worth looking at the documents.
I’m not a fan of some of the things CHK does, but I can promise you they are paying 100% of the acreage under that well to someone. There may be a mistake and a portion is being paid to the wrong person. Unfortunately the burden of proof may fall on her to prove it.