Top Complaints of Royalty Owners & Solutions
The top complaints of royalty owners when communicating with operators and discover practical solutions to improve communication and relationships. Learn about the National Association of Royalty Owners (NARO) and the benefits of effective communication in the industry.
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THE TEN BIGGEST ROYALTY OWNER COMPLAINTS ABOUT COMMUNICATING WITH OPERATORS -A MODEST PROPOSAL By: G. WADE CALDWELL Caldwell, East & Finlayson, PLLC (210) 228-3617 gcaldwell@ceflegalsa.com ceflegalsa.com President, National Association of Royalty Owners May 27, 2021
Who is NARO? National Office in Tulsa, OK & 11 CHAPTERS The National Association of Royalty Owners was founded in September of 1980. NARO Appalachia (serving West Virginia, Kentucky and North Carolina) NARO Arkansas NARO California NARO Colorado NARO Louisiana NARO North Dakota NARO Ohio (our newest) NARO Oklahoma (the first chapter) NARO Pennsylvania NARO Rockies (serving Montana, Idaho, Wyoming, Nevada, Utah, Arizona and New Mexico) NARO Texas The rally call came from our founder Jim Stafford to mineral, royalty, working interest owners and industry to put an end to Windfall Profit Tax. Our first large rally was held in Oklahoma City and attended by over 500, including Congressmen, to listen to Jim and others about defeating this tax. Since then, NARO has grown to ten chapters covering eighteen states, with thousands of members. NARO National Office 7030 S. Yale Ave, Ste 404 Tulsa, OK 74136 Website: naro-us.org Email: naro@naro-us.org Phone: (800) 558-0557 Interested in learning more or joining? Call, email or go online!
Advantages of Better Communications Because of message boards, blogs and email, the days of owners being isolated from each other is rapidly disappearing Reduced complaints and questions for your staff Reduced audit requests More cooperation for leasing, amendments, pooling requests, etc. Lower leasing costs Lower legal costs and cheaper settlements Better morale with staff Disadvantages of Better Communications Upfront costs with developing website and systems to respond Increased staff load when implemented (but should lessen over time) May mean less money held in suspense
No. 1 - Operators Who Cannot Be Contacted Put your Owner Relations phone number and email address on run checks Have a website and make sure it has an Owner Relations page and tab Have a telephone number (but urge owners that email is preferred in the message) Ask callers to leave an email address in addition to phone number Return calls Respond to emails promptly (this shows owners they can get information if they use email) Set up auto-response on new emails ( Thank you for contacting us ) Sign for certified mail and respond to letters
No. 2 - Let Owners Know When They Are Put In Suspense And Why Nothing raises owner suspicions more Do at least one follow-up unreturned division orders Reduces chance you will be included in title dispute lawsuits Owners with multiple wells may not realize payments have stopped Run suspense reports regularly
No. 3 - Provide Allocation Well Formulas (Without being asked) Greatly reduces requests for information if you provide with the division order Include copy of an As-Drilled Plat Include allocation formula used
No. 4 - Failing to Obtain Consents When Required Pooling and allocation wells Saves operator from potential disastrous results Burden on operator to show production percentage when commingled
No. 5 - Provide Information on Post-Production Deductions Have safeguards to prevent no-deduction leases from being included Send notice that lease has been re-evaluated if deductions are going to be started Reducing complaints starts with check stub transparency Add explanations of deductions on Owner Relations page of website (gives you a chance to tell why needed)
No. 6 - Provide Copies of Agreements You Are Asking The Owner To Ratify (Without Being Asked) Mostly NPRI owners Leases, Units, etc. Provide GLO Units to reduce complaints Usually contain favorable (to owner) drilling commitments anyway Lessens owner hostility if they know GLO has approved
No. 7 - Recommend Ways Owners Can Educate Themselves The unsophisticated owner is already upset and taking up your time Many parents fail to train their kids in mineral management Especially useful for reviewing division orders Refer them to groups like NARO, TLMA, NADOA, etc. Refer them to mineral management software products Reduces mailing costs Increases use of EnergyLink, etc. for data Refer them to public record sites or provide leases With a new owner why not insert a Five Ways You Can Reduce Your Paperwork flyer along with ACH forms, etc.
No. 8 - Provide Lost Agreements Upon Request Builds credibility and reduces hostility Resolves most questions on pooling and post-production deductions because so many older leases allow them
No. 9 - Do Not Try To Amend Leases Through Division Orders Legality is questionable anyway If you are using the Texas Statutory form why not say so on your division order? With sophisticated owners prompts more audits and scrutiny
No. 10 - A Modest Proposal Owner Portals Already done for check stubs and drilling reports Why not expand to details on that owner s wells? Why make owners go to RRC website for outdated production and sales data? Would reduce questions on prices on check stubs Would eliminate the need for mineral management software for owners who have a small number of wells
SUMMARY Investing in improved owner communication Increases your credibility with owners Reduces meritless complaints and audit requests Makes future deals with owners easier Improves your reputation in the owner community Makes your staff happier
