I just joined this site so if I'm posting a question in the wrong area pls. correct me. I'll try to make this short but my Mom has mineral rights in a producing well in Weldon which she all of a sudden stopped getting her royalty checks roughly a year ago next month. It happened just about the time SEM purchased her well from Navidad. Been trying for months to get an answer as to why with no luck so after getting an Attorney last week I got a certified letter in the mail today concerning this matter. Basically it said as part of the due diligence with the purchase they discovered she had been underpaying the Department of Interior due to an error in the division orders she signed with Navidad. It was wording like 1/16th of royalty instead of 1/16th as a royalty that caused the problem. So they want her to refund thousands of dollars. Plus they are terminating her original division order and will issue her new ones. One problem I have is that the amount they want back is right at 30% of what she has received in total from the well. Seems like a lot to me. Anyone else have an issue like this in the area or any comments relative to this would be welcome.
Thanks
Lynn
You really need to look at the original lease, as well as the division orders that were signed. The lease should spell out what kind of an interest you have. Both of those documents may or may not contain provisions about who is responsible for incorrect payments as well.
Thank you so much Kitchen for your response. I've been at my wits end over all of this. I've looked at both documents several time but you've given me more specifics as to what to look for. What if neither one of them spells out who is responsible for incorrect payments. Any thoughts?
Thanks again
Lynn
Kitchen said:
You really need to look at the original lease, as well as the division orders that were signed. The lease should spell out what kind of an interest you have. Both of those documents may or may not contain provisions about who is responsible for incorrect payments as well.
If neither mention the payments then you may be liable for payments in error. However, state laws apply on how far back they can go. You can always refuse to pay but you could be sued. I would be real curious at this point as to how the original lease was crafted, and also what the division order specifies for the royalty amount. Also, I wouldn’t pay them a dime until they can prove the error. “Show me the evidence”. Lots of people say that money is owed. Only some of them can legally prove it is owed.
Kitchen, Thanks again for your reply. This is all just very confusing for me. I tried reading the lease agreement and the division orders again and there is language related to repaying overpayment but I can't understand it. As far a paying they said that the current division orders would be cancelled as of today the 31st and new divisions orders issued plus two options for paying the money back would be offered. They have kept money owed for the last year in suspense so I have a feeling that one method would be to use that money plus and future royalties toward the payment until it is paid off. The lease says 3/16 royalty to be paid and the division orders just has a decimal percentage to be paid. I agree 100% about not paying until it is proven that there was an overpayment. At this point my plan is to wait until we get the new division orders and then consult an Oil and Gas Attorney to let him review everything. The other thing that strikes me as odd is the amount of money that they want back is right at 30% of the total my Mom has gotten off the well. They say it is for the DOI and others but 30% seems awful high regardless if there was an overpayment. Any further input would be greatly appreciated.
Regards,
Lynn
Kitchen said:
If neither mention the payments then you may be liable for payments in error. However, state laws apply on how far back they can go. You can always refuse to pay but you could be sued. I would be real curious at this point as to how the original lease was crafted, and also what the division order specifies for the royalty amount. Also, I wouldn't pay them a dime until they can prove the error. "Show me the evidence". Lots of people say that money is owed. Only some of them can legally prove it is owed.
Lynn,
That sounds like a good plan. What state is this lease located in?
Kitchen, It is in Houston county here in Texas.
Kitchen said:
Lynn,
That sounds like a good plan. What state is this lease located in?
I would consult with Buddy Cotten about your issue. http://www.mineralrightsforum.com/profile/BuddyCotten
He provides evaluation and consulting, and is extremely knowledgeable with decades of experience as a landman and management of oil and gas properties.
You may also consider Wade Caldwell, an attorney here in Texas who is also very knowledgeable. http://www.mineralrightsforum.com/profile/WadeCaldwell
Thanks a bunch Kitchen. I really appreciate it. I'll run this by them as you suggest if I can figure out how to manipulate through this website.
Thanks
Lynn
Kitchen said:
When you click on their profile, you have to add them as a friend and then you can communicate with them by messages directly. Both of them have their own websites. If you google their names you should be able to find them. There are rules on here about posting links, etc. so I wanted to steer clear in case of violating any rules.
Again many thanks, I kinda figured out how to do that. Wade responded as a friend but I typed a message indicating I was referred to him from someone on this site but when I asked Buddy to friend me I didn't leave a message as to why I was asking so maybe he'll friend me later. Thanks for the advice. I'll keep you posted on what I hear from them in regard to my situation. You've been a big help.
Kitchen said:
When you click on their profile, you have to add them as a friend and then you can communicate with them by messages directly. Both of them have their own websites. If you google their names you should be able to find them. There are rules on here about posting links, etc. so I wanted to steer clear in case of violating any rules.
I’ve pointed you in a good direction. Just keep in mind their advice will not be free. I think you were already prepared for that but I just wanted to make sure. I have paid Buddy for his evaluation of my situation and it was well worth the expense. Some questions on this forum warrant free advice and others are very complex and will require a detailed analysis. I look forward to hearing back on what you find out!
Dear Lynn,
Here is what needs to be determined and examined.
The document creating the royalty interest.
Any lease covering the lands in question.
Any unit document formed containing leases on the lands in question.
Any division order signed.
Copies of all check stubs.
AND, ask for a copy of the Division Order Title Opinion that sets forth your decimal interest and the pages in the DOTO for explanations of interests as it applies to you.
As a mineral manager, I can give my business opinion as to the accuracy of a division order. Anything past that, such as protesting computation, etc., you will need a good lawyer. For example, if you or I ask for a copy of the DOTO they will likely say no. If a lawyer asks, they will likely be more accommodating.
Best
Buddy Cotten
PS I do not visit this board every day. Also, many times I have more pressing issues.