Any help would be appreciated. I received a letter wanting me to complete a W-9 for an unleased interest in two gas wells. Says I would also be responsible for expenses. I have bee diagnosed my second time with cancer that has spread to my spine and I cannot afford an attorney and I don't want to sign something that obligates me to pay money I don't have out of pocket. Can anyone give me any advice? If I don't sign, what will happen. Thank you to any help.
I am not an attorney but if a company has a producing well and you are in the unit and unleased then when the well pays out drilling expenses the company will want to pay you your share of the money. For them to pay you anything they will need your Social Security or Tax ID and a signed W-9 form. This is so they can can report the money to the IRS. You have to pay taxes on what you make off the well or wells.
Thanks! I understand what you are saying about the w 9 being needed but the letter said I would also be responsible for paying expenses related to the operation of the well. It said usually the profit is enough to cover expenses but I would be responsible for my share if profits weren't enough and I have no money to send in should this occur. My cancer meds are between $22,000 to $25,000 each month and after paying my part after insurance, I'm very broke! Lol! I don't know if I can opt out because my royalties on the previous well was very small. It was however on leased well and this one is unleased. I don't understand really what this means. Thank you for responding!
There is a whole section on unleased mineral owners on GHS. Why don't you read up on it. The expenses that they are are talking about are probably small things like your portion of the electric bill. There are plenty of good folks on this site, many of them lawyers and tax people that can give you way better advice than I can. Give them time to read your post, the traffic here is not what it use to be and most of it happens during the week days, not on the weekend.
Unleased mineral interest owners in LA are not compelled to pay their share of the expenses. The expenses are "netted out" against the revenues attributable to the owner's share. Unleased mineral interest owners typically receive nothing at the commencement of production because the statutory well costs for each such well collectable against their interest, (e.g., drilling, testing, completing, equipping, and operating the well, as well as a reasonable charge for supervision) has not been produced, saved and sold from the well (your "account" is still negative at that point).
Based upon the request, it is likely that either one or both of these wells have "paid out" (expenses have been fully recouped), with the well generating a net profit in your account from the sales and proceeds from the well. The operator is obliged to distribute your net proceeds from the well(s) to you. As this is income, the operator is required to attempt to obtain and/or confirm information from you (name, current physical address, SSN/TIN) so that their revenue / accounting department can properly set you up in their system, disburse monies, and send you a 1099 at the end of the year documenting the amount of proceeds disbursed.
Very commonly, the operator will place your proceeds in suspense until they receive this information - the idea is that if the owner has moved or is deceased, the accounting department is averse to disbursing checks to a bad address or to a dead person. The truth is that if you respond to the company and confirm your identity and information, the company is obligated to pay you, but if you fail to provide SSN/TIN information the operator is obliged to collect "backup withholding" against your share of the proceeds and remit same to the IRS to offset your possible tax liability on the basis of that income. In 2019, the rate of backup withholding is 24% - which can be a sizable portion of your potential income. If your marginal tax rate is less than 24%, it does you no favors in withholding this information.
The easiest thing to do in almost every case is to provide the requested information so that the company can set you up "in pay status" and start paying you your net proceeds.
With respect to any future bills against your interest - again, the operator generally "nets you out" against your share of the subsequent bill(s) (for instance, if a workover is required on the well that costs $250,000, the operator collects against your account the proportionate share of the cost) until that expense is recouped. If that is recovered within the same month, you will just note that you will receive a smaller check that month (much like you would if the well were shut-in for maintenance - less production, smaller check). If it takes more than a month to recoup the expenses, you will receive no check until such time as those expenses have been recouped. If you previously requested revenue and expense statements from the operator per statute, you will see these charges in your statement.
In general, the only time that the company asks for UMI owners to "pay" or return a portion of monies previously paid is if there was a gross miscalculation of your interest. Even minor miscalculations are typically adjusted on a "net out" basis because of the costs associated with the pursuit of small balances - the idea being, if the well is producing, eventually everything just works out.
IANAL, IANA CPA - just a landman who's been doing this for a while and seen a couple of things.
Thank you so much!