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What you can do about unpaid oil and gas royalties

Landowners across the United States have benefited greatly from our country's unique approach to mineral rights. By making royalty deals for the oil and gas on their property, many people in rural areas have been able to have more financial security and better quality of life for their families. However, a significant number of those people have also been taken for a ride by oil and gas companies.

How are oil purchasers or well operators expected to pay out royalties? If royalties go unpaid, what recourse to royalty owners have? Today, we cover what the law requires when it comes to royalty payments, and what landowners can do about unpaid royalties.

State law requirements for oil and gas royalties

The Texas Natural Resources Code requires royalty payments to be paid out on or before 120 days after the end of the first month of sales from that well. After that, the parties can either contract their own payment schedule or follow the default from the Natural Resources Code:

  • 60 days after the end of each calendar month for oil sales
  • 90 days after the end of each calendar month for gas sales

If producers fail to pay royalties according to your contract or the periods discussed above, royalty owners can claim interest on those royalties. Generally, the Natural Resources Code allows for an interest rate 2% higher than the current Federal Reserve rate charge on loans. In some cases, the royalty owners can collect legal fees from the payor as well.

Important questions

If you suspect you are owed oil or gas royalties, ask yourself these questions:

  • Is there a producing well on the property connected to your royalty interest?
  • Who is responsible for paying royalties on that well?
  • Have royalties accrued in an amount over $100?
  • Did you sign a division order with the current operator or purchaser?

There also could be a title problem causing the delay in royalties. An attorney experienced in oil and gas litigation can help you determine the best way to resolve a possible title issue.

All too often, companies will purposely miscalculate or intentionally deny royalty payments, citing inflated drilling expenses or other production costs. When that happens, landowners can still assert their rights.

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Brock Upham Yost PLLC
616 E. Blanco Rd.
Suite 202B
Boerne, TX 78006

Phone: 830-275-5607
Phone: 830-816-9033
Fax: 830-584-0774
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