After not receiving a payment for two months I sent an inquiry to the company. They stated that there was a processing error (human error) by third party provider and that I have been overpaid for the last 4+ years. They now want to recoup the overpayment of over $7500! Any advice on how to proceed? Thank you!
It does happen. Contact the revenue or division order department of your operator and ask for a statement outlining just what happened. With the higher prices about to show up in royalty statements, you may get evened out faster than you would have with lower prices.
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Thank you for your response. I understand that mistakes happen but I would think that there would be some kind of audit so a mistake like this is caught quickly and not spread over four plus years. The division order department has been giving me the run around and blaming a third party. How do I even know if the mistake is legitimate?
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Audits are done for various reasons, so this caught the error. Different companies do them at different schedules. That is why you want to ask for a schedule for when the error began, what net acres and royalty amount they hold for you, etc. Another person’s probate may have triggered the audit or an accounting glitch or a lawsuite or any number of things can cause the audit. Request the statement in writing and send by certified mail return receipt.
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Thank you again! I have already requested and have received the statement. The overpayment started in July of 2017 and continued thru October of 2021.They said the royalty owners were overpaid and the working interest owners were underpaid. I would think that the working interest owners would have noticed low payments and questioned it in 2017. I never thought to question payments increasing each month because all accounts go up and down. I have asked many questions and have been told that they do not have to disclose the requested information. It seems they have all the power and can do whatever they want.
Do you have any reason to believe they are doing somethin wrong? You were overpaid. They furnished you the statements detailing what payments you received. What else do you think they should give you?
If you really feel like you have been shorted, hire your own accountant and conduct your own audit. You have that right.
I have a problem with them taking 4+years to discover their mistake. I have received an itemized payment statement that shows how much I have been paid but not what the overpayment is. Most of my questions to them are answered with a quick “we do not disclose that information”. Am I just suppose to assume that they are correct in the amount I owe? I assumed they were paying me correctly for the last 4 years. The third party provider (where they claimed the mistake happened) will not answer any questions. They will not even tell me the name of the third party provider. I had to do the research and find it for myself. Yes, I have hired professional help with this. Thank you for your input.
Short of heading into some level of litigation, there will be very limited disclosure on this issue. They do have to supply with a detailed statement (which it sounds like you have in your possession) annotating the amounts paid as well as the corrections(these can be difficult to follow). You should also see the remaining balance due on the statement. If you do not find a remaining balance, then request that from the company.
Thank you Mr. Garner. I have contacted an attorney specializing in royalties. I am not sure how we will proceed at this point in time but at least I will know what options are available, if any, and get some answers to my many questions. The main one being how did it take them this long to find their mistake.
This happens more than you would think, but does not generally amount to all of that much. Which Producer/1st Purchaser is the one with the over payment issue. Are they asking you to pay it back or will they recover it through future revenues? You may want to attempt to get more information from the company prior to having an attorney involved since the cost can escalate rather quickly.
In my case it amounted to a $7500 overpayment. This is a small account compared to my other accounts and is the first time I have been in an overpayment situation. The company is not very forthcoming with information which leads to mistrust. It involved one well but the overpayment is being deducted from 3 wells. I just want an explanation from the company of how it went undetected for so long. Again, thank you for your input.
They should only be balancing against the well where the excess payments were issued. You need to put them on notice of this fact if you have not already done so. Good luck.
Thank you! I will notify them.
its funny how they claim statue of limitations when they don’t pay you at all for 10 years and will only pay back 2 years to the statue of limitations in Texas, but if you owe them money they go back as far as they want, and you cant stop them from taking from what they are currently paying. they decided to overpay or underpay should fall on there shoulders not yours. Makes 0 sense
I think they should accept responsibility for there mistakes, when they overpay or underpay. Neither seem to be the case, in fact most of the industry is designed around getting rich at someone else expense, or moving the liability around. Just my opinion from my 15 years dealing with it
- If a mistake was made, the royalty owner does not get to keep the money. Bank error in your favor, collect $200 only applies in a Monopoly game, not in real life.If a bank mistakenly puts money in your account, you don’t get to keep it. For that matter, if you lease a mineral interest that was HBP, the mineral owner doesn’t get to keep the bonus money due to the doctrine of unjust enrichment.
- The company is not limited to recovery only from the well in which the overpayment was made. They can recover from any well from which the owner owns an interest. Nelson v. Linn Mid-continent. Now, the recovery can only be from Beatles12. If Beatles 12 also has a LLC or a corporation, the company cannot recover from that separate entity.
Thank you for your response. My main concern is how an error like this can go undetected for over 4 years. This is bad business management. They will not respond as to how this happened and actually treat me as if I should not question their business practices. I am not seeking unjust enrichment, just answers.
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