As Texas oil and gas attorneys know, each year, probably hundreds of thousands, maybe even millions, of dollars in oil and gas royalties from wells produced in Texas are lost to their rightful owners through a process called escheat. Specifically, when oil and gas companies cannot find the correct owner of mineral royalties, they are required to turn this money over to the Texas Comptroller.
How this happens is not difficult to understand. Let’s say Mom and Dad bought 100 acres in Texas many years ago. They got a deed to the land and the deed was filed in the deed records of the county where the land is located. They purchased both the surface and the minerals. A while later, they sign an oil and gas lease, and shortly after that, they began getting royalty checks. They don’t tell their children about the royalties, or maybe they do and the children forget about them. Many years later, Mom and Dad die, leaving five children. Maybe Mom and Dad died without leaving a will, or maybe they both had wills, but none of the children, for whatever reason, decided to have the wills probated. The five children just assume they each now own a one-fifth share of Mom and Dad’s land, or 20 acres each.
Three factors now come into play that result in royalties to Mom and Dad being overlooked by the children. First, most oil and gas companies have certain minimum amounts of royalties that must accrue before they will send a check. If an individual mineral owner has a small share of the royalties on a well, checks may be sent out every few months, or even once a year. Secondly, all wells are shut down from time to time, for repairs or perhaps while a new gas pipeline contract is being negotiated. During this time royalty checks may not be sent out. One of the children or a grandchild may collect Mom and Dad’s mail for a time after Mom and Dad die. At some point, they stop doing so, or perhaps the Post Office forwarding order expires and is not renewed. When royalty checks resume, they are returned to the oil or gas company as undeliverable. At that point, Mom and Dad’s royalty account is put in suspense, or on hold. After a certain amount of time, the oil or gas company is required by the Texas Property Code to turn all accrued royalties over to the Texas Comptroller.
A third factor that contributes to royalties being overlooked by heirs is that the well that produces royalties for Mom and Dad may not be on the family land. In fact, the well may be a considerable distance away from the family land. The reason is that most oil or gas wells are required by law to be part of a pooling unit. The pooling unit may be as small as eighty acres, in the case of an oil well, or it may be several hundred acres in size, in the case of a gas well. When the well is a distance from the family land, it may not occur to the heirs that the family land is actually part of that well’s pooling unit.
(Keep in mind that the oil and gas company must depend on the county deed records to determine property ownership. If Mom and Dad did not have wills, or if they did and they were not probated, or if the wills were probated but the executor of the wills did not prepare a deed transferring the family land to the heirs, or if deeds were prepared but were not actually filed in the county deed records, then nothing shows up in the deed records to show the change of ownership! In addition, keep in mind that it is the heirs’ responsibility to keep the oil or gas company informed of changes in ownership. It is not the oil or gas company’s job to keep up with the heirs!)
One day, a grandchild or great grandchild may decide to investigate whether royalties are due, and if so, from what company. They will want to be sure that any royalties are paid to the current heirs. The good news is that a Texas oil and gas attorney with experience in this type of investigation can do this for you. Usually, all that is needed is one document relating to the land, such as a deed, an old tax statement, a plat, a survey, a copy of the county appraisal district map showing the land, a stub from an old royalty check, or even just an address. With just this small bit of information, an experienced oil and gas attorney can determine whether this land is part of a pooling unit, whether the well in the unit is producing, and whether royalties are due. Your attorney can then get the records corrected both with the county and the oil or gas company so that royalties are sent to the current heirs.
My office charges a modest fixed fee for this kind of investigation. The payoff for a small investment might just be substantial, not only in terms of monetary return, but also in terms of having title to the family land cleared up for future generations! Please call me if you think there may be missing royalties in your family.