In Texas, if a Division Order Interest has been listed as, for example, “amount A” for many years and that “A” figure has been passed down between a series of operators over the years who simply accepted it as correct and paid royalties based on their acceptance of that “passed down” Division Order Interest “A” without issuing new Division Orders to mineral owners at the time when each new operator purchased that lease ………… and it was later discovered that the Division Order Interest should have been listed as “B” all of those years instead of “A”, would the Division Order Interest “A” be “grandfathered in” after a certain period of time (and what would that length of time be?)……… even if it’s later discovered that “A” should have been “B” for all of those years?
In short, no. Operators occasionally have the mineral title reviewed and have the right to make changes if they discover an error.
Thanks for the reply.
In Texas if an operator has the mineral title reviewed and would discover that they have been paying more in royalties than was due can the operator (and/or past operators) require the royalty recipient to retroactively repay an overpayments? Or would any correction simply begin at the time the operator would discover an error?
If a royalty recipient has, in writing/email, raised the question to the operator about the way that the royalty interest may have been calculated and has received no response from the operator, can the royalty recipient, if he so chooses, simply sign and return the Division Order which shows the operator’s figure for the royalty recipient’s interest ……… with no negative repercussion to the royalty recipient?
The thought behind this is that if the royalty recipient expects the operator to be fair and honest with him, then the royalty recipient should be fair and honest with the operator. This issue involves a small amount of money that, the royalty owner speculates, the operator may view as not worth their time and money to research and correct.
If an operator determines that a royalty owner was overpaid, for whatever reason, then the operator can ask for return of the overpayment. You would not want to do so without asking a lot of questions and considering how this would be handled from a federal tax viewpoint. Royalty owner is not obligated to return any funds but can opt to have overpayment deducted against future royalties over time. Be sure to ask at least annually what the overpayment balance is.
I was going through a similar case awhile back. But they were shorting me. Was enough to make a difference. Got back pay from day one. …012600 to .016647. Great attorney working with me.
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