Checks stopped
The royalty checks stopped. Here is why, in order of likelihood.
Checks that used to arrive every month stop, or shrink to nothing, or come from a company you have never heard of. Seven things cause it, and the first three are paperwork, not geology. Start at the top.
- Most often
- The well was sold. The new operator needs a new division order and tax form from you before it pays.
- Next
- Returned mail or an owner’s death put the account in suspense. The money is held, not lost.
- Then
- The balance is under the operator’s minimum, the well is shut in or plugged, or prices fell. The well page tells you which.
Seven reasons, and how to check each
The well changed hands
Wells are sold between operators constantly. The buyer takes over the pay list but often needs a fresh division order and tax form from every owner first, and its first letter looks like junk mail. Check: the well page lists every record, newest first; a new operator name is the sign. Fix: call the new operator’s owner relations desk and ask what it needs.
The account went into suspense
A check returned twice, a death in the family, or a bank account closed, and the operator holds payment until someone fixes the record. Check: ask the operator whether the account is in pay or in suspense and why. Fix: the paper it names, usually an address, a death certificate with heirship, or a tax form. Getting paid covers suspense in detail.
The balance is below the minimum
Most operators hold small balances until they pass a threshold, often paying once a year instead. A well in steep decline can drop a small interest under it. Check: the last statement, and ask the operator its minimum. Fix: none needed; the money accrues. Ask for annual payment if offered.
The well is shut in or plugged
Shut in means temporarily closed, for repairs, low prices, or pipeline work; plugged means permanently sealed. Neither produces, so neither pays. Check: the well page shows the status and the plugging record if there is one. Fix: for a shut-in well, the lease may require a shut-in payment to stay alive; for a plugged well, the lease may be over, which is worth knowing before anyone offers to lease you again.
Prices fell
A gas royalty follows the price the operator receives, which sits below the headline Henry Hub price and swings with it. Checks shrink before they stop. Check: the prices page shows the moves and the reasons; your statement shows the price you were paid. Fix: none, but compare the statement price with the index to make sure deductions are not the real cause.
The lease or the unit changed
A unit was reformed, a lease expired, or an operator decided an old lease no longer holds your tract and stopped paying under it. Check: ask the operator in writing why payment stopped; it has to tell you. Fix: depends entirely on the answer, and this is the point to involve an attorney if the operator says the lease has ended.
The operator failed
Small operators go bankrupt or walk away from marginal wells. Royalties stop, sometimes with months owed. Check: the well page may show a new operator, the state, or nothing; the regulator’s orphan well program lists wells left behind. Fix: file a claim in any bankruptcy, and treat the lease as possibly over when the next company calls.
What to have in front of you when you call
Questions owners ask
A company I have never heard of sent me a division order. Is it legitimate?
Probably the new operator of a well that was sold. Check the well page: the newest record names the current operator. If the names match, it is routine. Check the decimal before signing, as with any division order.
How long can an operator hold my money?
Until the record is fixed, and then for a period set by state law, after which it goes to the State Treasurer as unclaimed property. Either way it stays yours. Search the state’s site if more than a few years have passed.
The checks were small. Is it worth chasing?
Suspended money accumulates, and a small check from a well in decline is often the sign of a larger balance held somewhere. The calls are free. Decide after you know the balance.
Would you buy an interest whose checks stopped?
Yes, once the reason is known. An interest in suspense for paperwork is one we can research and make a written offer on; one whose lease has ended is a different interest, and the offer would say so. The free screening is the same first step.