Cole, Cole, Easley and Sciba Trial Attorneys can help your oil and gas company through a royalty dispute in Texas. The oil and gas industry is good business here in Texas, but there’s also a lot of competition. That can sometimes lead to disputes about what you should get from your operations, equipment, even your workers. Our team can help you sort through it all. Set up a free consultation today.
Does a Lawyer Make Sense in This Situation?
When you work in the oil and gas industry, you already know how much money can flow in and out depending on the operation. But one part of the business that can get overlooked is royalties. That is, until, those payments start looking light or not what you agreed to.
That’s when it makes sense to bring in somebody that understands how royalties work in this industry and what options your company might have for making things right. Our team at Cole, Cole, Easley, and Sciba can help by:
- Reviewing the oil and gas lease and any related agreements
- Going through division orders and royalty statements
- Comparing production and sales records to the payments you received
- Looking at deductions or other amounts taken out of your royalty payments
- Reviewing emails, letters, and other communications with the operator, purchaser, or payor
- Gathering the records and other evidence that can help show what is owed
- Working with the other side to try to resolve the dispute
- Taking the dispute to court if it cannot be resolved another way
When a royalty dispute starts getting more complicated, it’s helpful to have fresh eyes. Our team can take on a lot of the legwork that comes with tracking down paperwork and records, while you focus on moving the business forward.
Where Royalty Disputes Come Up in Oil and Gas
Legally speaking, a dispute over royalty payments is effectively a contract issue. But it’s not just about some numbers in a contract or on a spreadsheet. These types of problems can come up at almost any stage of production. Most of the time, though, they come up through issues with:
- Royalty payments your company is either getting or not getting based on the agreement.
- Costs, expenses, or other deductions that are being taken out of royalty payments when they shouldn’t be.
- Production numbers not matching up on royalty statements based on the well or field
- Problems with your product, the purchaser, or something else that royalty calculations are based on.
Of course, issues can come up based on the actual paperwork or deal itself, which usually leads to problems with:
- How the lease should be interpreted or utilized
- Late or missing royalty payments
- Not getting the correct amount of royalties from a unitized property or operation
As you can probably tell, production is only part of the larger business of an oil and gas company. Any successful company is going to be diverse in terms of how they make money based off of the product, and that includes royalty agreements. But disputes come down to the specifics, and that means information is important.
What Information Can Help My Company in a Royalty Dispute?
When your company starts to feel like it’s not getting the correct amount of royalties or something just feels off, getting access to certain documentation can really help. And thankfully, this documentation isn’t all that difficult to find. Here’s what can help:
- Your company’s original oil and gas lease
- Any amendments, assignments, or other agreements affecting your company’s interest
- Division orders showing your company’s ownership interest
- Royalty statements and payment records your company has received
- Production records for the wells or leases involved
- Sales records and information showing how the oil or gas was sold
- Records showing deductions, expenses, or other adjustments made to your company’s royalty payments
- Your company’s accounting and payment records
- Well and lease information available through the Texas Railroad Commission
- Emails, letters, and other communications between your company and the operator, purchaser, or payor
- Documents showing your company’s ownership interest and any changes to that interest
Remember, even if you have all these things at your disposal, it’s still not automatic. Contracts, paperwork, agreements, and everything else that comes with a royalty dispute can be interpreted in a lot of different ways. From your company’s perspective, it’s about putting these pieces together to tell the full story. And from there, it’s about actually going forward with the legal system.
Legal Options to Resolve a Royalty Dispute
Like a lot of contract situations, your options aren’t solely legal. There’s quite a few steps between sitting down at a table and going to court with a royalty dispute. At the same time, if your company is facing such a dispute, it’s helpful to know what your options are. Usually, it involves the following:
- Direct negotiations/mediation. Not every royalty dispute needs to end up in court. If your company believes it has been underpaid, the first step may be to take the issue to the operator, purchaser, or payor and try to work it out. Usually, that involves going through the lease, royalty statements, production records, and other information to show where the numbers don’t match up. If there was a mistake, the parties may be able to correct the payments and resolve the dispute without filing a lawsuit.
If that doesn’t fix the problem, mediation may be another option. This is where a neutral third party can help you work through the dispute and see if you can reach an agreement.
- A lawsuit. Of course, if direct negotiations don’t work, your company can file a lawsuit in court. An oil and gas lease is a contract. If your company believes the other party did not follow the terms of that contract—including the requirements for calculating or paying royalties—a breach of contract claim could be on the table. And once you decide to go that route, a judge and potentially a jury will decide what the language says and whether royalties were paid out correctly. In legal terms, your company can recover certain “damages” based on:
- Unpaid or underpaid royalties
- Other financial penalties or interest
- Attorney’s fees and court costs
Oil and gas royalties in Texas aren’t anything to take lightly. That’s why it’s helpful to explore all your options and have a really good idea of what’s going on before moving ahead. That’s where our team can step in and handle things for you and your company.
Get Help With Oil and Gas Royalty Disputes in Texas
When you’re in the day-to-day of oil and gas operations in Texas, it’s hard to focus on other parts of the business. But that’s exactly where money your company should be getting can disappear or not come through in the way it should.
At Cole, Cole, Easley, and Sciba Trial Attorneys, our Texas oil and gas lawyers will take a look at the paperwork, contracts, and all the other documentation to figure out why royalties are in dispute and what you can do to make things right. Set up a free consultation today.
