If you have a leased mineral interest, you should be
sent a division order by the company paying your royalty. This division order
is meant to confirm your interest, address, tax information, and other relevant
information related to payment of your royalty.
Subchapter J of the Texas Natural Resources Code
addresses payment of oil, gas, and mineral sales. Most companies paying revenue will withhold
production payments from royalty interest owners until they fully execute and
return the division order. Section
91.402(c) of the Texas Natural Resources Code lists the provisions a company
may include in a division order whose execution and return is a condition
precedent to receiving production payments.
Section 91.402(d) of the Texas Natural Resources Code includes an
example form of a division order for oil payments that complies with Section
91.402(c). The example form division
order with some notes is included below.
DIVISION ORDER
TO: (Payor)Property No.
THE PROPERTY NUMBER IS A NUMBER ASSIGNED TO YOU BY THE PARTY PAYING
REVENUE. IT HELPS THE PAYOR IDENTIFY THE
PROPERTY IN THEIR SYSTEM. IF THERE ARE
MULTIPLE PARTIES PAYING REVENUE, YOU WILL LIKELY BE ASSIGNED MULTIPLE PROPERTY NUMBERS.
Effective THE EFFECTIVE DATE EXPLAINS THE PRODUCTION TIME PERIOD THE DIVISION
ORDER COVERS. THIS MAY DIFFER GREATLY FROM THE DATE THE DIVISION ORDER IS SENT. (Date)
The undersigned severally and not jointly certifies it is the
legal owner of the interest set out below of all the oil and related liquid
hydrocarbons produced from the property described below:
OPERATOR:THIS TELLS YOU WHO IS
OPERATING THE WELL.
Property name: THIS
IS THE NAME OF THE WELL(S) COVERED.
County:THE COUNTY THE PROPERTY IS
LOCATED State:
TEXAS
Legal Description: IF
THE WELL(S) ARE IN A UNIT, THIS GENERALLY DESCRIBES THE ENTIRE UNIT AND NOT
JUST THE TRACT YOU HAVE AN INTEREST IN. IT SHOULD STATE THE TOTAL ACRES IN THE
UNIT OR COVERED BY THE WELL(S).
OWNER NO.SIMILAR TO
THE PROPERTY NUMBER, THE OWNER NUMBER IS A NUMBER ASSIGNED TO YOU BY THE PARTY
PAYING REVENUE. IT HELPS THE PAYOR
IDENTIFY YOU IN THEIR SYSTEM. IF THERE
ARE MULTIPLE PARTIES PAYING REVENUE YOU WILL LIKELY BE ASSIGNED MULTIPLE OWNER
NUMBERS.
TAX I.D./SOC. SEC. NO. PAYEE IF YOU DO NOT PROVIDE A TAX I.D. NUMBER OR SOCIAL SECURITY NUMBER, A
NON-REFUNDABLE PERCENTAGE OF YOUR PAYMENTS MAY BE WITHHELD FOR TAXES. MANY COMPANIES WILL NOT MAKE PAYMENTS WITHOUT
BEING PROVIDED A VALID TAX I.D. NUMBER OR SOCIAL SECURITY NUMBER.
DIVISION OF INTEREST
BEFORE SIGNING A DIVISION ORDER MAKE SURE THIS
DIVISION OF INTEREST (ALSO CALLED NET REVENUE INTEREST) DECIMAL IS
CORRECT. FOR A ROYALTY INTEREST, THIS
GENERALLY SHOULD REFLECT YOUR MINERAL INTEREST IN THE TRACT MULTIPLIED BY THE
ROYALTY PERCENTAGE MUTLIPLIED BY THE TRACT PARTICIPATION FACTOR (BEING THE
NUMBER OF ACRES IN YOUR TRACT/THE TOTAL NUMBER OF ACRES IN THE UNIT). FOR EXAMPLE IF YOU HAVE A ½ MINERAL INTEREST
WITH A 25% ROYALTY INTEREST IN A 10 ACRE TRACT IN A 320 ACRES UNIT, YOUR
DIVISION OF INTEREST DECIMAL SHOULD BE 0.00390625 [(1/2)*25%*(10/320)=0.00390625]
THIS AGREEMENT DOES NOT AMEND ANY LEASE OR OPERATING AGREEMENT
BETWEEN THE INTEREST OWNERS AND THE LESSEE OR OPERATOR OR ANY OTHER CONTRACTS
FOR THE PURCHASE OF OIL OR GAS.
The following provisions apply to each interest owner
("owner") who executes this agreement:
TERMS OF SALE: The
undersigned will be paid in accordance with the division of interests set out
above. The payor shall pay all parties
at the price agreed to by the operator for oil to be sold pursuant to this
division order. Purchaser shall compute
quantity and make corrections for gravity and temperature and make deductions
for impurities.
PAYMENT: From the effective
date, payment is to be made monthly by payor's check, based on this division of
interest, for oil run during the preceding calendar month from the property
listed above, less taxes required by law to be deducted and remitted by payor
as purchaser. Payments of less than $100
may be accrued before disbursement until the total amount equals $100 or more,
or until 12 months' proceeds accumulate, whichever occurs first. However, the payor may hold accumulated
proceeds of less than $10 until production ceases or the payor's responsibility
for making payment for production ceases, whichever occurs first. Payee agrees to refund to payor any amounts
attributable to an interest or part of an interest that payee does not own. UNDER
SECTION 91.402(f) OF THE TEXAS NATURAL RESOURCES CODE, UPON WRITTEN REQUEST OF
THE PAYEE (I.E. THE INTEREST OWNER), THE PAYOR (I.E. THE COMPANY PAYING
REVENUE) SHALL REMIT PAYMENT ANNUALLY IF THE ACCUMULATED PROCEEDS ARE LESS THAN
$10 AND MONTHLY IF THE ACCUMULATED PROCEEDS ARE GREATER THAN $25 DOLLARS BUT
LESS THAN $100. WHEN RETURNING A
DIVISION ORDER, I RECOMMEND REQUESTING IN WRITING PAYMENT OF ACCUMULATED SUMS
OF LESS THAN $10 ANNUALLY AND PAYMENT OF ACCUMULATED SUMS GREATER THAN $25
DOLLARS BUT LESS THAN $100 MONTHLY.
INDEMNITY: The owner agrees
to indemnify and hold payor harmless from all liability resulting from payments
made to the owner in accordance with such division of interest, including but
not limited to attorney fees or judgments in connection with any suit that
affects the owner's interest to which payor is made a party.
DISPUTE; WITHHOLDING OF
FUNDS: If a suit is filed that affects
the interest of the owner, written notice shall be given to payor by the owner
together with a copy of the complaint or petition filed.
In the event of a claim or dispute that affects title to the
division of interest credited herein, payor is authorized to withhold payments accruing
to such interest, without interest unless otherwise required by applicable
statute, until the claim or dispute is settled.
TERMINATION: Termination of
this agreement is effective on the first day of the month that begins after the
30th day after the date written notice of termination is received by either
party.
NOTICES: The owner agrees
to notify payor in writing of any change in the division of interest, including
changes of interest contingent on payment of money or expiration of time.
No change of interest is binding on payor until the recorded copy
of the instrument of change or documents satisfactorily evidencing such change
are furnished to payor at the time the change occurs.
Any change of interest shall be made effective on the first day of
the month following receipt of such notice by payor.
Any correspondence regarding this agreement shall be furnished to
the addresses listed unless otherwise advised by either party.
In addition to the legal rights provided by the terms and
provisions of this division order, an owner may have certain statutory rights
under the laws of this state.
Signature of
|
Social Security/
|
||
Witness
|
Interest Owner
|
Tax I.D. No.
|
Address
|
____________
|
_________________
|
_________________
|
____________
|
____________
|
_________________
|
_________________
|
____________
|
____________
|
_________________
|
_________________
|
____________
|
Failure to furnish your Social Security/Tax I.D. number will
result in withholding tax in accordance with federal law, and any tax withheld
will not be refundable by payor.
Before blindly signing a division order, I suggest
confirming that the information on the division order is correct, especially
the division of interest decimal shown, the name shown as the owner, and the
address where payments and communications from the revenue payor will be sent. You should also check that the division order
does not contain any additional substantive terms not allowed by the Texas
Natural Resources Code. Remember the payor cannot withhold payment for your
refusal to sign a division order that contains provisions in addition to those
allowed and exemplified in Sections 91.402(c) and Sections 91.402(d). However, under Section 91. 402(e) of the
Texas Natural Resources Code, production payments may be withheld if an
interest owner refuses to sign a division order that contains only those
provisions allowed by Section 91.402(c).
If you have any questions or concerns over division
orders, contact our office to schedule a consultation.
*Please note this post was written for the purposes of
providing general information. This post
was not written to provide individualized legal advice or counsel and should
not be construed as such.
713 227-1717
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