Don't lose your minerals and get the legal help from Graft and Walraven.

Protecting your Oklahoma Mineral Interests

How to avoid accidentally losing your minerals

This article is meant for educational purposes only for land  and mineral owners in Oklahoma. 

Landowners can’t accidentally lose their minerals, right? The answer might surprise you.

It’s a story you may have heard before. An Oklahoma landowner who owned both surface and minerals entered into a contract to sell the surface interest only. The contract specifically reserved the minerals to the seller. But at closing, the title company made a mistake and prepared a deed that failed to reserve the minerals. The seller signed the deed prepared by the title company and the sale was completed. 

Fast-forward to several years later, and the seller realizes he isn’t receiving any offers to lease his minerals. He then learns that the buyers were able to sign a lease and get paid for his minerals. The seller does some investigating and learns that the deed he signed 5 years ago failed to reserve the oil, gas, and other minerals. The result of this tiny omission in the deed is that the seller essentially gifted away all of his Oklahoma mineral interests.

The seller decides to hire an attorney and recover his minerals. All parties—the seller, the buyers, even the title company—agree that the intent was to only sell the surface interest. Everyone agrees that the sales price was for the surface-interest only, and the contract clearly states as much. But the buyers nevertheless claim they don’t have to return the minerals because of something called the statute of limitations. The seller files a lawsuit to recover his minerals. 

If you think the seller can recover his minerals, you might be surprised to find out that the buyers are probably right. 

Similar situations were addressed by Oklahoma Supreme Court decisions in Calvert v. Swinford and Scott v. Peters. Similar to the scenario above, in Calvert two sisters entered into a contract to sell the surface-interest only for a tract of property. The sales contract clearly reserved the minerals to the two sisters. But the title company that closed the sale inadvertently prepared a deed that failed to reserve the minerals. Several years after the sale, the sisters learned that the buyers were receiving the payment on the sisters’ minerals. The sisters sued to correct the mistake in the deed (called “reformation of deed” in legal jargon). The sisters rightly claimed that it was obviously a scrivener’s error and not their intent to sell the minerals. 

Here is where the statute of limitations comes into play. Even though everyone agreed that it was a mistake in the deed to transfer the minerals, the Oklahoma Supreme Court ruled in favor of the buyers. The Court held that once the deed was filed of public record, the sisters were put on notice of the error. The sisters argued that they had no knowledge of the error because the recorded deed was never sent to them. This argument was unpersuasive. The Court found that whether or not a party receives an actual copy of the recorded deed is irrelevant. Once the deed is filed of public record, the 5-year statute of limitations begins to run. This is the law in Oklahoma.

What does this mean for minerals owners who sell the overlying surface? It means that once the deed is filed with the county clerk, a 5-year statute of limitations begins to run. In general, this means that if there are any mistakes in the deed (often called scrivener’s errors) the seller has 5 years to correct the mistake by reforming the deed. Once the 5-year period runs, as a general rule the seller can no longer correct the mistakes in the deed. In Calvert, because the sisters filed their lawsuit more than 5 years after the deed was recorded, the sisters could not reform the deed. Their minerals were gone forever. 

A similar situation arose in Scott v. Peters, where a seller executed a deed for the surface but forgot to reserve the minerals. Several years later when he discovered the mistake, he also sought to reform the deed. Like the sisters in Calvert, the seller was again unable to recover his minerals because more than 5 years had passed since the deed was filed of record with the county clerk.

While these situations are rare, they happen more than you might think. Most closing agents are quite good at what they do and routinely prepare deeds correctly based on the sales contracts. However, mistakes can still happen, and when they do it can cost a mineral owner dearly.

So, what can you do about your Oklahoma mineral interests?

  1. Ask an experienced real estate attorney to review the sale closing documents before you sign. Yes, you may have an extra cost for an attorney to review the deed. Yes, waiting for an attorney might slow things down. But consider the cost of failing to properly reserve your mineral interests. An experienced real estate attorney can catch these mistakes for you
  2. Ask for a recorded copy of the deed to be sent to you. You can also look for a copy of your recorded deed online. Remember, the statute of limitations begins running from the moment your deed is filed of record. Review the recorded copy of your deed to make sure there are no errors. If you catch them in time, most errors can be easily corrected.
  3.  If you are receiving royalty payments on oil and gas production, pay attention to any change in your decimal interest or ownership amount. This can often times tip you off if something has changed in your title. 

Remember, you are your own best advocate. Don’t be shy about asking questions about Oklahoma mineral interests, and don’t be afraid to seek legal advice.  

Earn 6 percent on suspended royalty checks.

Gain Up To 6% Interest On Suspended Royalty Checks

Have you ever had your oil and gas royalties withheld in suspense due to a title issue? If so, did you know that the operator is required to pay you interest on the amount held in suspense? Interest is owed at 6%, compounded annually, for time periods prior to Nov 1, 2018. Thereafter, interest is owed at the prime interest rate reported by the Wall Street Journal. See Oklahoma Statutes Title 52 Section 570.10 for more information.

Learn how much you could be owed for late royalty check payments.

Does It Pay To Be Late?

Did you know that oil & gas operators are required to pay royalty owners interest on late royalty payments? If you receive oil & gas royalties, the operator must pay you within 6 months of the first sale of production and thereafter by the end of the second month following subsequent sales. If they do not pay within this time, you as a royalty owner are owed interest at 12%, compounded annually, on the unpaid royalties. In most cases, even if you are entitled to unpaid interest, the operator may not pay you automatically. You may have to expressly request interest on late payments from the operator. See Oklahoma Statutes Title 52 Section 570.10 for more information. 

28 percent miss their royalty checks.

Are You Missing 28% On Your Royalty Checks?

Did you know that failing to include your social security number on your division order can cause an approximate 28% deduction on your royalty check? If you live in Oklahoma, you should be exempt from the State Withholding deduction. However, if you have not provided your SSN or EIN to the Operator of your well, each check could be reduced by approximately 28%. See this blog post for more information. 

Learn about the small print on your mineral lease contract with our Mineral and Gas attorneys.,

Did You Read the Small Print On Your Mineral Lease Contract?

If you own oil and gas mineral interests in Oklahoma, chances are you may have received an offer to lease. While this can be exciting, remember that an oil and gas lease is a contract and the terms of this contract can have a big impact on your rights. This includes your future royalty payments. The oil and gas lease you sign today can control how your royalties will be paid for decades to come, and small clauses in your lease can mean big differences in the amount of royalty payments you eventually receive. Ask your attorney to review any oil and gas lease before you sign. 

Royalty deductions seem nice but can get tricky. Have an Graft and Walraven Oil and Gas Law Attorney help you maximize your deduction.

Royalty Deductions – What Are They and What Can You Do About Them?

For royalty owners under Oklahoma oil and gas wells, certain post-production deductions can mean a substantial loss of royalty revenue. In some cases as much as 30% of your royalty payment can be taken from you in the form of “deductions.” Depending on your lease, you may be able to force the lessee to refund you these deductions. To learn more, read about royalty deductions and what you as a mineral interest owner can do.

Learn about your royalty check stub with the help of our Oklahoma Gas Law lawyer.

What Does My Check Stub Say?

As a royalty owner, you may wonder how you can receive information about your Oklahoma oil and gas well, including how much production it has and what the production is worth. Each time you receive a royalty payment, you should also receive a check stub or report containing certain information about the production from your well. Some of the information that is required to be reported with your payment includes the total volumes, the price per barrel or MCF, and your specific share of the total value of sales. Read the statute that entitles you to be informed as to how your royalties are calculated and paid.