Newspaper article THE JOURNAL RECORD

House Panel Approves Royalty Payments Bill

Newspaper article THE JOURNAL RECORD

House Panel Approves Royalty Payments Bill

Article excerpt

Mineral owners are hopeful that a bill passed Wednesday by a Oklahoma House of Representatives panel can prevent oil and gas royalty payments from being thwarted by court action.

Senate Bill 107 was unanimously approved by the House Oil and Gas Committee, and now goes to the full House for consideration. It has cleared the Senate.

Co-authored by Sen. Ray Giles, D-Pocasset, and Rep. Kevin Easley, D-Tulsa, the bill says an oil and gas lease, and not the division order, is the binding contract in a transaction.

Nothing in the division order can change the terms of the lease, the bill says.

A division order is a document signed by the mineral owner and the oil producer, which is given to the buyer so he or she can pay them.

It includes such information as identification of the lease or well, date of sale, quantity of oil or gas bought, purchase price and taxes, and the recipient's tax identification number.

The problem the legislation seeks to address is that some third-party oil and gas purchasers would insert excessive, supplemental language into division orders so that they resembled mini-leases, officials said.

"In the last 10 years, the division order has evolved from a simple half-page document to 20 to 30-page documens, that in many cases distorts and erodes the intent of the oil and gas lease," said Jim Stafford, executive director of the Oklahoma chapter of the National Association of Royalty Owners.

"In many cases, the courts have been ambivalent on how they handled these. Some courts wouldn't pay unless the mineral owner signed a division order."

Although the lease was supposed to be the binding document in an oil and gas deal, an industry representative said the courts have had problems agreeing with that because the division order was the most recent document. …

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