Company A is paying me royalties on 3 wells. All 3 wells are defined as NPRI on the DOs. All 3 wells are substituting the reserve interest from the lease (20%) for the 1/8 stipulated on my deed. The company provided me the relevant portions of the drilling opinion and the lease.
Company B is or has paid royalties on 72 wells over 4518 acres and 5 abstracts. All the wells are listed on the DOs as just RI (royalty interest). At least 16 of those wells are paying a higher decimal interest that can be obtained by multiplying the factors listed on the royalty deed - 317/716155 of 1/8. Since the maximum well allocation is 1.0, I am under the impression the only way this can occur is if the reserve interest on the lease is substituted for the 1/8.
With that in mind, I recently reached out to the DO analyst staff of company B and requested the relevant portions of the drilling opinion and the lease on some of the wells. I was told that since my holdings are NPRI, I am not entitled to the lease info. Company A does not charge any fees except taxes. Company B has been charging “owner fees”.
Question 1 - Is the determination that the lease reserve interest is to be substituted for the deed interest made from the royalty deed or the lease?
Question 2 - If 16 wells that I hold an interest in are subject to the substitution, are not all the wells from the same royalty deed if the lease reserve is different than the factor on the deed?
Question 3 - What is the best way to formulate a question to the DO analyst to find out what the “owner fees” are and if they are indeed entitled to withhold those funds?
After posting the above, I stumbled across another post that states that if a royalty deed transfers the rights to a percentage of all royalties from the area it becomes a floating royalty and is dependent on the percentage reserved in the lease. Does this answer my question one?
Both the royalty deeds I am referring to grant a percentage of all royalties with a minimum of 1/8.
You have some complex title and accounting questions going on here. Short of posting your actual deed or deeds for examination, you can expect only general answers. You also need to post the State and Operators for the most useful feedback.
The DOA may be working from a Paydeck with some related title opinion clips, so your issue may have to be pushed to a landman or legal for an answer. If that is the case, get ready for a lengthy response period.
You may want to get a professional involved that can help you work through these issues.
All companies define NPRI’s differently. Your questions are quite confusing. Guessing these are older royalty deeds, the 1/8th simply refers to all royalty for the mineral owner. But, you have to account for the % granted and then how many mineral acres the mineral owner owned at the time for each tract of land. A NPRI is carved out of the mineral owners royalty interest. Im not sure what you mean by subsituted, but your % interests stay the same if the NPRI was done in 1 conveyance covering all of the properties mentioned, if they come in multiple royalty deeds, well thats whole other can of worms. But, the only thing that changes would be the new oil and gas royalty that leases were taken under after you got the NPRI. Whats the approximate amount of the owner fees that you are being charged per month? This seems to be what you are trying to fight? If its not much, Id drop it and move on as this will cost you quite a bit to figure out as NPRI’s are the most complex title for mineral owners especially when company B has been paying you for quite awhile on the majority of your interests
These are Fischer and Midland county Texas holdings.
Bob77, I apologize if my questions are confusing if that is the result of my wording. If it is due to different companies’ inconsistency, than I guess you understand why I am trying to seek clarification. Yes, these are deeds dating to the early 50’s that I inherited from.
@min4me The deeds contain the same grant language. Possibly, the issue arises from language in a previous deed. A Grantor cannot convey more than what was intended in the original grants. There may be multiple OGL that affect this interest to add to the complexity. You will have to run the complete title in order to discover the conflict or defend your position.
Im guessing your grandma was Blanche? In the first one she gets 317/716,155 interest into the royalty, or 0.00044264% interest out of the mineral owners royalty in Midland Co. In the 2nd one, she gets 0.000366086% interest in Fisher County. So on that end, the only other question would be, did Ted own all of the minerals in the tracts listed, if he did not then you would have to reduce those numbers based on what he owned at the time.
But the main and quite simply the only question is, how much are the mineral fees vs how much the monthly checks are for? That seems to be your battle that you are trying to fight, this wont be a simple thing to solve, so youre looking at an expensive legal bill to figure it out, meaning if the monthly fees arent that much, why spend thousands to fight it? Good luck sir
On both these deeds, I am receiving a minimum payable decimal interest as computed by the factors in the royalty deed on all wells. I believe this confirms that Ted Weiner owned all the minerals. On company A, I am receiving a higher decimal interest that is based on substituting 20% royalty reserve for the 1/8 royalty (min) stipulated in the royalty deed. For company B, on 16 of 70+ wells, I am receiving a higher decimal interest than expected based on the royalty deed,. leading me to the conclusion that I have a floating royalty interest and multiple OGLs involved.
I am not fighting any battles, preparing to sue anyone, etc. I am simply trying to educate myself on my holdings and learn how to ask intelligent questions of a DO analyst.
Blanche was a step mother-in-law. The mineral fees in question would have been withheld from 2002 to the current.
Given the granting language of the deeds and your additional information, then you are correct that the controlling OGL creates the varied NRI. The distribution of additional costs may be attributable to the OGL or the producer interpretation of the documents or internal policies.