Arte Energy sent DO’s. They have very onerous hold harmless language (basically, they are not responsible for anything and I’m letting them entirely off the hook). I spoke with them. They said they would not pay if I didn’t sign. Send them an alternative. I did, by deleting the one paragraph. They said no way. Is there a standard Division Order for TX that I can legally ask that they use, and the law would require them to do so?
Thanks!
Yes, Texas has a standard form. See Texas Natural Resources Code § 91.402 for a copy of the form. The statute provides: “(e) If an owner in a producing property will not sign a division order because it contains provisions in addition to those provisions provided for in this section, payor shall not withhold payment solely because of such refusal. If an owner in a producing property refuses to sign a division order which includes only the provisions specified in Subsection (c) of this section, payor may withhold payment without interest until such division order is signed.”
The NADOA form can be downloaded (https://nadoa.org/wp-content/uploads/2021/11/div_ord.pdf) for use.
Thank you very much for making it quite clear actually.
Thank you so much for providing the information you did. I was surprised to see that their language was really pretty close to the standare. Here’s the language from the NADOA doc regarding indemnity. INDEMNITY: The owner agrees to indemnify and hold payor harmless from all liability resulting from payments made to the owner in accordance with such division of interest, including but not limited to attorney fees or judgments in connection with any suit that affects the owner’s interest to which payor is made a party. Arte added "…payor, (its successors and assigns, and its agents, servants and employees). The rest is the same. I think I’m ok with the addition of this language as it looks to me like the people who work there want to protect themselves. I was reading this more broadly than what I think it means. What I’m concerned about is that this is on a large lease, with various operators over the years. I want to make sure that wells that may have been drilled and we were not paid on, or the leasehold interest was taken up by a unit that we were not paid on…those types of concerns, which could mean a fair amount of money are not covered under this language. Does the language here in this DO (which is for a specific well, with a specific interest) ONLY apply to this one well? Meaning the idemnity language would not extend to the scenario I pointed out above? Appreciate your input on this one. Thanks in advance!
Amanada,
My 2 cents is get an oil and gas lawyer to look at the language. It may seem like a lot of money up front, but they’re usually worth it in the long run!
If it’s OK to ask, roughly how much do oil and gas lawyers charge per hour, and how many hours of legal work does it generally take to resolve a Division Order dispute?
By the way, I have my own lease form which states that royalties shall be paid without the necessity of a division order. When division orders arrive, I use WordPerfect, my favorite word processing software, to create something laid out similarly, and I omit the indemnification. I don’t mind hold-harmless, but I am shy about indemnifying anybody for anything. I sign my DIY Division Order and send it with a transmittal letter/memo in which I state something along the lines of “I believe I own 5 nma’s in the SW/4 of the SW/4 of Section x in Township Y Range . . . and I have reviewed the calculation of the decimal interest and it seems to be correct.” I might add that every now and then the decimal interest shown on their division order is wrong, and I am able to alert the operator about an error that was made.
An operator in Texas cannot require you to sign a division order that exceeds the state Natural Resources Code - which is reflected in the NADOA form. When I get objections from operators over this, I usually just mail the signed form in - rather than by email - and magically it gets accepted and I get paid. You could include a recorded copy of your lease highlighting the obligation of royalty payments without the necessity of a division order also.
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