being paid the wrong amount of royalty

I recently discovered that a leased o&g interest I inherited is being paid the wrong percentage of royalty.  Our title work shows that we own 1/32 and are being paid 1/64.  I have no idea how long this underpayment has persisted, but the original lease is from 1894.  There was a subsequent 1929 lease, and then my mother bought her father's interest in 1944.  It was a fixed rate ($100/year) lease until the East Resources settlement a couple of years ago. WV DEP web site shows no production 1989-2010, but there was gas produced in 2011-2012.  I'd really like to reject the lease and start over, but I guess the production holds it for now.

I plan to contact the operator and request a corrected payment.  How much information, as far as title work or document copies, should I provide them?  Does this need to come from an attorney who certifies the title work?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on September 3, 2013 at 10:39am

So 21 years without production and now it's producing again?  I think you ought to call a lawyer before you call the operator.  

Permalink Reply by Lisa McKenzie on September 3, 2013 at 10:53am

To have the lawyer do what?  I have already sent info to my lawyer, but he hasn't responded yet.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on September 3, 2013 at 11:21am

In Ohio there has been case law that has voided these old HBP leases when the circumstances have shown companies aren't fulfilling the "P" in HBP.  21 years with no production isn't a little hiccup in the life of a well.  This isn't a case where a pipeline had to be repaired and the well was shut in for 6 months.  This was a case where the well was ostensibly dead and when the value of the deep rights became apparent the operator all of the sudden revived "production" in order to screw you and the other landowners.  This is a zombie well and it's keeping you from signing a new lease with new, better terms.  You have a strong argument that this lease is no longer in effect.  Light a fire under your lawyer's butt and get this thing moving again.

Permalink Reply by Judy McDaniel on September 3, 2013 at 12:50pm

Marcus, what does HBP stand for?

Permalink Reply by craig on September 3, 2013 at 2:05pm

Held By Production = HBP

Permalink Reply by Judy McDaniel on September 3, 2013 at 2:15pm

craig, Thanks

Permalink Reply by Bad lease on September 3, 2013 at 1:54pm

Marcus - great info, can you confirm what the name of this case it that you are referring to?

 

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on September 3, 2013 at 4:07pm

Moore v. Adams, Ohio App. 5 Dist.,2008

Permalink Reply by Shower Bath on September 3, 2013 at 11:28am

Not your family lawyer. Get an experienced oil&gas attorney.

Randy

Permalink Reply by Lisa McKenzie on September 3, 2013 at 11:36am

Thanks.  The 1929 lease the well is "at present producing gas but not in sufficient quantities to warrant its being called a gas well within the meaning and intention of the aforesaid (1895) agreement". 

WV DEP issued a new permit in August 2011, which presumably is why there is now production.

Permalink Reply by Nancy Mosley on September 3, 2013 at 3:18pm
By "1/32" do you mean 1/32 of all oil and gas, or 1/32 OGM (royalty interest)? Old leases had the wording1/32 or 1/16 when they would use 1/4 of a 1/8 royalty or 1/2 or a 1/8 royalty. Have they been paying your share of $100 all those years? Yes, it sounds like you need an attorney to determine if the lease is valid. About providing proof of ownership, probably the pertinent deed or deeds where your mother and her father received their interest. Have you been paying taxes on this over the years, and what fraction was on that from the assessor?
It looks like you have 2 different things to get clear: 1) is the old lease valid and if not is the current producer trespassing, and 2) what paperwork you have to make clear your ownership interest.
Permalink Reply by Lisa McKenzie on September 3, 2013 at 3:39pm

The tax bill's title is "1/64 oil roy & 1/8 gas roy".  Yes, Mom paid taxes on this since she acquired her interest from her father in 1944.  Her attorney concluded in 2009 that her interest "should probably be assessed as 1/32 oil and 1/4 gas royalty", but said "from the terms originally used this should mean a 1/4 royalty interest in both the oil and gas, and perhaps an overall 1/4 interest". Makes my head hurt. 

I have old check stubs where Mom has received $3.13/quarter on this lease for a long time, so I conclude that South Penn and its successors have paid that $100/year proportionately since 1929.  I am not clear on the status of the 1895 lease since I don't have a copy.  The 1929 lease purports to cover 100 acres of the 156 acres in the 1895 lease.

I believe we have all the ownership paperwork in hand.

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