can a unit be amended in size after production has commenced

i am in a CV unit in texas and recently received a new division order to sign. the new DO accounts for the addition of 4 acres to the unit. this unit has been in production for about three years. i have it on (pretty good) authority that this would be a rare occurrence and that all interest owners must agree and the royalty must be adjusted all the way back to the beginning of production in order to redistribute the revenue according to the new division.

does anyone else have experience with a situation like this?

kj

Tags: amendments, division, order., unit

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I've seen companies "correct" division orders occasionally.  Sometimes they discover problems after the fact and sometimes the mineral owners find them.  I'm always uneasy when i see corrected division orders... but i'm fortunate because family members are very smart about these matters and know what's right and what's wrong.  You'll need to also check with your local tax office because if the division order is changed... or incorrect.... the taxing authority will have incorrect information as well!  Hope this helps.  jhh

thanks for the reply jhh. i hadn't thought about amended taxes, now that sounds like a head-ache. when i asked a few questions about this proposed amendment, the company rep. became irritable and combative  and finally said, " you don't have to sign anything", well, at that point i stopped listening. and i should mention, there is a list of clauses at the end of the page to which one agrees to upon signing...dirty pool if you ask me. 

kj

Unfortunately, you should suspect everything.  I'm not sure the Reagan approach... "trust but verify" works anymore.

 

What is their basis for adding the acreage to the unit? 

i couldn't get a straight answer. i was told that was a technical issue at one point and a survey issue at another point. then, that is when the person became irritable and told me i didn't have to sign anything...they are only trying to add 4 acres to a 600 hundred acre unit. it wouldn't make much of a difference in the overall division, but what i am skeptical of is the clauses at the end of the amendment. smells like bad fish to me !

kj

Monkey business?  80)
Good point GoshDarn.

after giving this matter some thought, i have decided not to sign anything. i notice the decimal has already been adjusted and applied on my last three checks. it's the clauses that i believe is motivating this company, and oh, did i mention their name? encore/denbury/ whoever just bought them out. their office is the absolute worst RR, i have encountered. with that said, i don't have any leases with CK...lol

kj

Not so unusual for me- old surveys are often corrected using GPS to get the most accurate results. A new survey can result in a shift of the division orders.

 

TXRRcom will eventually force a redistribution, but you don't have to worry about tax adjustments.  If you are in the positive you simply report this as royalty in the year you receive it.  If you come out on the negative side it will wash out with a smaller amount reported as royalties from the same producer on your 1099.

 

GLTA

 

 

It could be a legitimate issue. Taking Gosh Darn's point in mind, it may not be worth it to you financially to deal with the frustration of finding out. If it is, you should press them for a straight answer and it all depends who the company is as to how straight the answer will be or whether you will need to get a lawyer involved to force a straight answer out of them.
King John-- I was told that the operator could add contiguous leased acreage anytime as long as total stayed within allowable unit size ie for gas 640+/- 10%. I had well drilled permitted as 40 acres and after well drilled the DO showed 480 acres in the unit because operator JV with another leasee contguous with their acreage. I ask operator and TRRC if there was deadline to add acreage and was told NO DEADLINE but must be contiguous acreage leased. The operator can get permit with minimal require acreage for field rules of the formation planned to drill and admend at any time with filing only at court house and not necessary on RRC site permit admendment showing data but will be in DO admendment to royalty owners
Mike R--- I think this maybe due to wording in your lease regarding pooling of your minerals-- maybe some of our experts on lease terms would like to comment and educate us on this issue.

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