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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Permalink Reply by Nancy Mosley on September 3, 2013 at 4:18pm

Did you say this is in WV? What county? 

You said there was a permit issued in 2011. Do you have a copy of it? Is it a different API number from the old one? Assessor's office should be able to tell you the API number of the well (wells) attached to your property. It might be a rework permit, not uncommon. 

Can you ask the assessor's office what documents they have in their file connecting your mother with this? It is possible that she somehow obtained 2 different interests of 1/8 of the royalty interests, which in the old terminology would be stated as 1/64 of all the oil under the property.

Did you mother's father inherit this royalty interest or buy it? Do you have paperwork going back to that? 

On the 1929 lease, if the wording is such that all they have to do is pay the lessors $100 a year per well rental, I don't know if it matters about production.

Here is a link to a discussion about flat rate wells:

http://gomarcellusshale.com/forum/topics/flat-rate-leases-tawney-de...

Here is a link to the document about that case

http://www.wvsoro.org/resources/minerals_royalty/TawneyOrderFlatRat...

Permalink Reply by Lisa McKenzie on September 3, 2013 at 4:49pm

Thanks for the links. 

My grandfather inherited this interest from his mother, who survived her husband by about 20 years.  She inherited it from her husband, who signed the original document.  My mother purchased her father's interest in a chancery cause in 1944.  The paper trail to my mom is well-documented.

This is Marion county WV.

The API number on the well is unchanged.  I see on the WV DEP site about the production and new permit.

An attorney mentioned trying to break the lease for non-production, but I expect it is too late for that now.

Permalink Reply by Nancy Mosley on September 4, 2013 at 6:15am

Do you have any paperwork for your great-grandfather (grandfather's father)? Sounds like you have that lease. It would help to see where he acquired his interest, and how much interest he had.

I am not sure if any records are online in Marion County. If not, if you are still trying to get your interest straight with the producer, you can ask what documents they have and will they send you copies, and title work. If their documents don't show conclusively whether you inherited a 1/8 or a 1/4 interest (stated as 1/64 oil or 1/32 oil) then if you can get to the courthouse in Marion County and research this, that would be the way to get the full information. Go back to where the surface and oil/gas were "severed" as the terminology says, and see.

If anybody drills a Marcellus well, for the amount of acreage involved it could make a big difference whether you own 1/8 or 1/4.

Permalink Reply by Lisa McKenzie on September 4, 2013 at 6:59am

This is what our attorney found as the oldest event in our title chain:

By a deed dated August 8, 1895 and recorded in Deed Book XX, at page XXX, Husband and Wife, conveyed “the undivided one-sixteenth of all Oil and Gas and one half of the Gas royalty that underlies or that may be developed from a tract of land” on Flat Run in Mannington District containing 156 acres to My Great-Grandtather and His Brother.  

There was a 5-year lease signed for this interest in 1894 by the owners and a third party.

Permalink Reply by Nancy Mosley on September 4, 2013 at 7:41am
That sounds pretty clear. Do you know if he and his brother each had 1/2 interest in that 1/2 royalty interest? And did the brother have heirs? And were there other heirs to split what looks like your great grandfather's 1/4 interest? If no more heirs to your great grandfather, you can ask the assessor's office to tell you how they came up with 1/8 instead of 1/4. With my own interests in Ritchie, I have found 3 conveyances that were misrecorded in assassors office (2 of these acknowledged so far, assessor found the mistake). For me, my share is correct, but anotherparty's share was recorded as being larger than it should have been, leaving the total more than one (in both cases recorded that surface owner owned all oil and gas, not just part, and the mistake was perpetuated a century. Leases were signed by people thinking they owned more than they did. No valid leases and no wells on the affected tracts, but landmen over the years did sloppy title work. All the more reason to get things cleared up. You have a good case, sounds like.
Permalink Reply by Lisa McKenzie on September 4, 2013 at 10:23am

Are you reading “the undivided one-sixteenth of all Oil and Gas and one half of the Gas royalty" to mean a 1/2 interest future royalties (that's the 1/16th part) and a 1/2 interest in the royalty from the 1894 lease (that's the second part)?

My great-grandfather's interest has clearly all gone to my mother. His interest separated into two parts, but both came back to my grandfather in the 1920's and then Mom bought his interest in 1944.   I do not know the other side of the family, but understand from the attorney that there are 18 heirs and that their interest was never entered on the tax rolls.  I recently sent him a Division Order that we received earlier this year because it had "address unknown" for all of the brother's heirs and I figured they would want to know about it.  That's what got this whole conversation going - I asked him if he would/could certify the title. 

I'm not sure how thorough his title work was though, since I have a copy of a 1929 lease executed by my grandfather, this same brother (his uncle) and another man that says it is for 100 acres of this same parcel.  It is for $100/year and says the three of them had equal shares.  That lease is not on his list of transactions involving this interest.

I hadn't thought to contact the assessor's office.  I asked the operator for a copy of the current lease and got pages that were clearly photocopied out of the county courthouse books because of the lovely script.  Sounds like I need to print it and compare it to what I have more carefully.

Thanks for your time!

Permalink Reply by Nancy Mosley on September 4, 2013 at 3:44pm

Hi Lisa,

You wrote: Are you reading “the undivided one-sixteenth of all Oil and Gas and one half of the Gas royalty" to mean a 1/2 interest future royalties (that's the 1/16th part) and a 1/2 interest in the royalty from the 1894 lease (that's the second part)?

Yes. I have seen several old deeds which are in my great grandfather's chain of title, or his own deeds, and that was a fairly common wording in those olden days. Early on, in the 19th century, the main interest was oil, and gas was an afterthought. The idea was that if you owned the land, as either inheritance or purchase, tracing back to the original Land Grant, and the minerals had not been "severed" or sold off, you owned ALL of the oil and ALL of the gas under that land of however many acres. If you leased it, you conveyed all your oil and gas under those acres to the lessee (the company) and in return you would be paid 1/8 of the oil, and, if a well were drilled that produced gas only, you would be paid a flat rate, $100 or $200 or something, per well, per year, for that well. If oil and gas both produced, then there was some wording on usually paying the lessor (who owns the land and oil and gas) 1/8 of the proceeds from the sale of the gas, from that well that produced oil and gas. Those were typical terms. If the landowner decided to get some cash from his property, he might sell part or all of his oil and gas under his property. This was usually referred to as selling 1/8 or 1/16 or something of the oil, meaning the 1/8 owner's portion, of the oil. I have seen some deeds where 1/10 of 1/2 of the 1/8 oil royalty was sold but leaving all the gas.

I am going on and on, but this was standard in those days.

Probably that other man besides your great grandfather and his brother, on the 1929 lease, is the surface owner who retained the 1/2 gas and 1/16 (1/2 of 1/8) oil when he sold the other 1/2 of gas and oil. Do you know who is current surface owner and current owner of the other 1/2 gas and oil (not your grandfather's uncle but the rest of it). 

Of course they could not have had equal shares under those circumstances. 

More investigating if you want to see the full picture, but well worth checking into, if you want to get your fair share of royalties.

Thanks for your time!

You're welcome! I find this sort of thing interesting, sometimes tedious, but almost addictive, to get all the information and see the full picture. 

Permalink Reply by Lisa McKenzie on September 5, 2013 at 8:58am

Tax assessor's office only has 2002 to present.  I found a 1961 redemption of lands receipt that entered this interest on the tax rolls for the first time.  Mom's attorney is the source of this error :(  Tax assessor's office wants a title letter to make the correction.  I suppose I will need that for the operator as well.

Permalink Reply by Nancy Mosley on September 5, 2013 at 5:10pm

Hi Lisa, Don't know where this reply will end up. I am replying to your later post, about the assessor's office. I expected there would be some trouble there; glad you found it for them. I think it is state law that the assessor's office needs a lawyer's title opinion to change a mistake they (assessor) made. Worth your time and lawyer fees to get cleared up, I think. See how thorough the lawyer can be this time, going back before the conveyance to your great grandfather, and going forward to get to current surface owners and the other royalty owners, besides your distant relatives. I have read on this and similar websites that one should try to trace one's title back to the patent, the original Land Grants from Virginia. That makes quite clear that you have all you think you have. 

Permalink Reply by Lisa McKenzie on September 5, 2013 at 5:53pm

 I decided to fix the tax assessment first, then tackle the fixed rate lease next.  Thanks for that court document.  

Mom's lawyer has agreed to write without doing additional research since he was paid to research fully for Mom in 2009.  The papers I have from him begin with "Farmer X died in 1854 owning 300 acres", and then states the provisions of his duly recorded will and transactions within the family.  One of his 3 sons ended up with 156 acres, which my great-grandfather and his brother purchase a  combined 1/2 royalty interest. 

This is a fun puzzle, especially since there should be some value for all this effort.

Permalink Reply by Nancy Mosley on September 6, 2013 at 3:13am

Hi Lisa, For some reason the Reply place isn't showing up under your last 2 posts.

That is great that your Mom's lawyer is going to do this. 

You can try that last step about Farmer X by going to the Virginia Land Grants index in the State Library of Virginia.

Here is a link about the West Virginia part, explaining the names of the counties over the years. I know that Ritchie was once part of Lewis, and earlier Monongalia. Perhaps Marion is also. 

Here is a link to the Land Grants:

http://lva1.hosted.exlibrisgroup.com/F/?func=file&file_name=fin...

It's possible Farmer X bought his property from one of the grantees but when it was part of a different county, and it is recorded there. Bottom line, you have it back to before the oil and gas boom started, so nobody was severing minerals, except maybe coal, in those early days. 

It will be interesting for you, and the best part is you now will get a little more money from your part of the flat rate well!

If you have any success with the flat rate situation, I hope you'll let the forum know. Many of us have this same problem.

Permalink Reply by Lisa McKenzie on September 6, 2013 at 3:23am

The flat rate situation has, I think, been remedied.  There was a class action suit against East Resources.  The "claim period" was 2003-2010, as I recall.  Our well had no production in that period, so we didn't get money from that, but a lease admin at HG Energy, East Resources' successor, tells me that they are now paying 1/8 on all their flat rate leases.  I do not have documentation for that and it is on my To Do list with our attorney.  http://www.eastresourceswvclass.com/ is the info and the preliminary settlement agreement.  I've spoken with an administrator for the class and Mom was already in her data base.  I am very frustrated to hear "I hope to get to you in a couple of weeks" from a professional.  I was in NYC for 25 years and never heard that, ever, from a professional. 

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