Oil & Gas Pro

LA. HOUSE BILL 258 BY REPRESENTATIVE BURFORD - would extend the prescriptive period for recovering royalty payments to 10 years

HLS 11RS-68 ORIGINAL
Page 1 of 2
CODING: Words in struck through type are deletions from existing law; words underscored
are additions.
Regular Session, 2011
HOUSE BILL NO. 258
BY REPRESENTATIVE BURFORD
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
PRESCRIPTION: Provides for the liberative prescription on actions to recover
underpayments or overpayments of royalties from the production of minerals
1 AN ACT
2 To enact Civil Code Article 3501.2 and to repeal Civil Code Article 3494(5), relative to
3 prescription; to provide for the liberative prescriptive period for actions to recover
4 certain mineral royalty payments; and to provide for related matters.
5 Be it enacted by the Legislature of Louisiana:
6 Section 1. Civil Code Article 3501.2 is hereby enacted to read as follows:
7 Art. 3501.2. Actions for payment of mineral royalties
8 An action to recover underpayments or overpayments of royalties from the
9 production of minerals, provided that nothing herein applies to any payments, rent,
10 or royalties derived from state-owned properties, is subject to a liberative
11 prescription of ten years.
12 Section 2. Civil Code Article 3494(5) is hereby repealed in its entirety.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Burford HB No. 258
Abstract: Changes from three years to 10 years the prescriptive period for an action to recover underpayments or overpayments of mineral royalties.
Present law provides that an action to recover underpayments or overpayments of royalties
from the production of minerals is subject to a liberative prescription of three years.
HLS 11RS-68 ORIGINAL
HB NO. 258
Page 2

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Permalink Reply by BirdDawg, plain ole' idiot on May 11, 2011 at 12:34
I agree 100% with the underpayment theory. But lets think about the OVERPAYMENT theory. The average mineral owner may have no idea what his mineral interest is. And say, for example, he does not sign a division order. And then he begins to get royalty payments. And he spends that money on monthly bills. And then the operator or the owner of the wells comes back and says " you owe me back payment for ten years". The mineral owner says " I did not tell you what I owned, you told me what I owned". The oil and gas companies are (or should be) held responsible for who to pay. If they pay the wrong party, and there is not a signed division order, it should not be the mineral owners responsibilty.

Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 11, 2011 at 12:38
Yep, it works both ways.   It depends on which situation happens more often, over-payment or under-payment.  BD,poi, as someone who has experience in these matters, which do you think is more common?
Permalink Reply by BirdDawg, plain ole' idiot on May 11, 2011 at 14:43

I'll tell you what I think. And Baron will probably correct me, and that is fine. He sure knows more than me.

My opinion is the O&G companies need to know what they are doing (who they are paying) before they pay them. In their defense, perhaps there should be a limitation on paying underpayments if no succession has been filed. I know that sometimes it is almost impossible to trace ownership without successions. And I do believe that successions are the responsibilty of the landowner (mineral owner).

But if the mineral owner has not guarenteed title as to his interest, I do not believe he should be entitled to make repayment.

I never sign a lease with a guarentee of title clause unless I am 100% sure of my title. And the same with a division order.

But then again, if there are no title problems with the mineral interest, I think the O&G company should pay 10 years back if they did not do diligent work.

My opinion is a little convoluted, but I think fair. And I know it will never be the law.

 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 11, 2011 at 15:04
I agree that the bill as written is simplistic and likely needs to have some qualifying language to more clearly define the responsibilities of lessors and lessees.  I have first hand knowledge of lessees failing to perform basic due diligence in the identification and notification of ownership interests but can also understand the complexity of determining ownership interests where there is no public record(s) of heirship.
Permalink Reply by BirdDawg, plain ole' idiot on May 11, 2011 at 16:23
I agree, Skip.

Oil & Gas ProPermalink Reply by The_Baron on May 12, 2011 at 7:30

I have a problem with this bill.

 

The concern I have is with the time frome of ten years. Ten years is a long time.

 

Also, The most common situation that concerns me, is what happens in the case of missing or unlocatble interests. after seven years a opertor is required to submit these funds to LA unclaimed property fund. What happens in these cases?

 

 

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