Replies to This Discussion

Permalink Reply by jffree1 on February 8, 2011 at 12:21

"your lessee has most of the information"

But your lessee is not going to volunteer that information so how do you get at it if you suspect some sort of "unintentional" error or wrong-doing?  And, what's to make you suspicious if you have absolutely no experience with oil & gas operators prior to when your first and only "fabulous" Haynesville well began production?

Permalink Reply by Ben Elmore on February 8, 2011 at 18:11

Good questions that have been raised before our appellate courts. Unfortunately the reality does not always match up with our courts' opinions. Royalty owners who are new to the industry, should begin learning everything they can about their acreage, their lease and the meaning of its terms, their obligations, their lessee's obligations, and what the info on their check stubs means. Talk to your neighbors and share info with each other, especially check stub info, such as prices and deducts. Ask questions of your lessee. Hire your own experts to help analyze your check stubs. All of these things are actions our courts have already identified as things a royalty owner should due in the exercise of reasonable diligence to protect his interests.

If you suspect wrongdoing, hire an expert or attorney to investigate. You are more likely to get better info from your lessee if they know you have professional help. That is simply the reality of the situation. Some companies will provide more info than others. Ultimately it is up to each individual to protect themselves.

Permalink Reply by jffree1 on February 9, 2011 at 3:56

About check stubs... if the only thing shown on stub is one "total deductions" figure, how can you get the operator to give you a detailed breakdown on those deductions?  Or, can you?

Permalink Reply by Ben Elmore on February 9, 2011 at 4:05

Texas Natural Resources Code § 91.502 - check stubs must include

(1)  Identity of lease, property, or well and location;

(2)  Owner’s decimal interest;

(3)  The month and year of sale;

(4)  Volume (bbls or mcf) sold

(5)  Price per bbl or mcf

(6)  Severance and any other taxes

(7)  Deductions (transportation, compression, processing, etc..)

(8)  Gross value of sale, and Owner’s share of gross value;

(9)  Net value of sale, and Owner’s share of net value; and

(10) Royalty Owner hotline for information.

 

Texas Natural Resources Code § 91.504 - provides a royalty owner may request additional information from lessee on deductions, Btu value of gas produced or sold, and RRC ID #s for lease and wells.  Request must be sent via certified mail and lessee must respond in 60 days.

 

Texas Natural Resources Code § 91.507

If the lessee fails to provide the information requested under Section 91.504 within the 60-day period, the royalty owner may bring a civil action to enforce the provisions of Section 91.504.

The prevailing party is entitled to recover reasonable court costs and attorney's fees.