Replies to This Discussion

Permalink Reply by linda alexander on January 17, 2014 at 10:12

thank you, I will  do that today.

 

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Permalink Reply by 1kw6x71km1v37 on January 17, 2014 at 10:39

I'd go back and examine your old records to make sure about the overpayment, Paul. Then I'd go see an attorney who needs to make some fees paid for by the company, because what they told you sounds like pure side-steppin' boilerplate to me. For instance, without further accounting for production, how are you going to track the payback and know when it's over? Fat chance they will ever bring it up. Good luck.

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 10:56

CHK did a lousy job with too many inexperienced landmen in their rush to lease up lands in the areas they targeted.  An incredible number of their units had open acreage when first wells went into production and some still do to this day.  Very unprofessional however no O&G attorney is likely to take this as a contingency case.  They are too familiar with this scenario because it has happened so much.  The question is whether CHK will now withhold payments until they recoup what the other ownership interest is owed?  State law allows for a mineral owner to get back royalty payments for only the last three years, not to the first production of the well if it started producing over three years ago.  Their shoddy title work is inexcusable.

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Permalink Reply by Robert B Dunlap on January 17, 2014 at 11:02

I agree with Cheap Shot.  Send them the demand letter.  Make them send you a written explanation.  You only have a chance at being treated fairly if you hold their feet to the fire.  Also remember the issue of prescription.  After 3 years you start to lose unpaid or underpaid royalties every month unless you file suit.  Conversely, they can only recover overpaid royalties back 3 years.  I have clients who are alleged to be "overpaid" as well and are having royalties withheld.  However, the overpayments alleged are over 3 years ago.  So, you need to look closely at what was overpaid, if anything, and when the overpayment occurred.  

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 11:12

Guys the problem with advocating a demand letter is that few mineral lessors know how to word one.  What to demand.  That's where an O&G attorney comes in.  In my experience that's not something they do on a contingency basis.  There will be a cost to have capable representation from an attorney that CHK would recognize as an experienced O&G attorney capable of following up should they not fully comply or can not provide a satisfactory answer.

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Permalink Reply by Robert B Dunlap on January 17, 2014 at 11:35

The Louisiana statute provides for attorneys fees.  No need for contingency fee.

Read L.S.A. R.S. 31:137 through 31:142 starting here:

https://www.legis.la.gov/Legis/Law.aspx?p=y&d=87829

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 11:38

Only if a lessor goes to court and prevails.  The statute does not cover simply writing a demand letter.  The vast majority of demand letters do not lead to litigation.

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Permalink Reply by Robert B Dunlap on January 17, 2014 at 11:52

You are right on both counts.  But a demand letter is easily done.  If you hire an attorney who has done it before, it won't take long to draft the letter.  Alternatively, you can simply draft it yourself.  Identify the well and the Lease.  Demand that they begin making royalty payments or correct royalty payments if underpayment is the issue (i.e. deducting for costs in a no-deduct lease) or that they provide a reasonable explanation for why they aren't paying or are under paying.  Tell them they have 30 days from receipt of the letter to respond or pay.  Send it certified.  They will pay attention to that letter when they will not pay attention to multiple phone calls.  They may provide a reasonable explanation for why they are or are not paying what you think they should be paying.  If so, no harm done; you got your answer.  If not, then you have set yourself up to file suit without having to wait another 30 days and if you win, you may recover all the damages and penalties set out in the statute.  You are not likely to get the lease dissolved.

On the other hand, if you do nothing, nothing is likely to happen at all.  That's my point.  

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 12:16

I understand but my take on this situation is that there was a mistake in the division order title review that omitted an interest which has diminished Paul's family unit interest.  It's a little different kind of demand letter and would best be done by an O&G attorney.  That means accepting the fact that incurring an expense is required. 

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Permalink Reply by Paul on January 17, 2014 at 15:55

First, Thank you all for the great informative advice given here. As to an attorney, this is simply not possible. We are broke, we are barely able to feed ourselves. The royalties we received from Chesapeake allowed us to keep above water, barely, now that that is gone we are deep in debt and trying to stay in our home. The economy is so bad right now and I'm afraid it's going to get worse when Obamacare takes full effect. I'm disabled and my wife is a wonderful artist but she can only paint so much and no one is buying right now because of the economy. So that's my sad story. If someone here could tell exactly what to write that would be so helpful. I;m very glad that the payments only go back 3 years or we'd never see another check. Does it matter that they have withheld royalty payments before for "over payment'? They've done this 4 times.

Thanks Again,

God Bless You All,

Paul Schmidt

Permalink Reply by 1kw6x71km1v37 on January 20, 2014 at 8:14

There are a lot of attorneys out there now, and more coming than the market can absorb. The competition is fierce. Find one freshly minted and he or she might take a case for court awarded fees out of desperation to generate cash flow.

As an E&P is required by LA law to timely respond with a reason why royalties have not been paid. That is easy enough, as we have seen here. But how can the veracity of the company's affidavit be determined short of going to court?

Permalink Reply by Preston J. Dugas III on September 5, 2014 at 3:26

Paul,

CHK is doing this to everyone, including DFW airport the Bass family in Fort Worth, etc.  You are not alone.  It looks like your lease is over minerals in LA, so you should send written notice pursuant to Mineral Code Art. 137 to CHK and any other lessees, assignee/sublessees.  CHK will then have 30 days to respond.

In all honesty, I doubt CHK responds.  You really should seek legal counsel. 

Preston

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