Lost Money – Unclaimed Royalties Not in the Owner’s Name
Every oil company I’ve ever worked for has routinely paid unclaimed royalties for an account usually title, “Unknown Owners” or some variation of that moniker. Some or all of the money paid over to a State Treasury from such an account by a particular oil company actually belongs to someone unidentified. But how can these unidentified owners know they have money owed to them?
First, what is the account “Unknown Owners” for, and why aren’t they “known”?
The simplest answer to this question is that the courthouse records are either incomplete or ambiguous, or the known current owner can’t be located—no one knows his address. The title examiner (usually an attorney) looked at everything available in the courthouse records and can’t determine from what is there who the current owner or owners might be, or their address. As an example, if the last document of record covering a tract of land is a deed dated 1928, you can be assured that the Grantor (buyer) in that deed is no longer living. But if there are no probate documents of any kind filed anywhere in that county’s records, how can current owners be located?
The well gets drilled with that tract “unleased”, but when the well reaches 100% payout (most states), that tract’s share of revenues will begin to pile up. Eventually, those revenues must be paid over by law to the State Treasury for the state of incorporation of the company remitting it. The money will not be paid to the State Treasury for the state in which the land is located (famous Texas v. New Jersey supreme court case).
The rightful owners of that lost interest are somewhere today (most likely), but they don’t know that they own those mineral rights. Often, Great-grandpa passes away without ever telling anyone he owned just the mineral rights in a piece of land somewhere. He might even have forgotten, especially if he never saw income from it. And he wouldn’t have paid taxes on it, because mineral rights aren’t taxed as property until they produce income.
This happens more than you can believe. In Texas, the laws of descent and distribution (but every state has them) automatically vests the interest in the heirs-at-law of Great-grandpa at the time he passed away. After that, as each heir passes away, the interest is passed on to new heirs, ad infinitum. That means a significant number of people own mineral rights, by law, that they don’t know they own!
How can they find out? First, genealogy back 100 years is the best place to start. In the process, they find out where each ancestor grew up (usually where they were born, back then). Then they can check NAUPA.org, searching on the name of each ancestor. Many times the division order analyst will put the interest in the name of the last-known owner, even if only the last name, but place the account in permanent suspense. No matter how old the money, correct and complete paperwork can get the money paid over to the rightful owners.
Checking the courthouse records for any documents containing the name of the ancestors not appearing in the NAUPA records would be next, doing this for every ancestor coming forward to about 1980. An online website such as courthousedirect.com can allow anyone to do this on their computer at home, but only if it is a county for which they have records going back that far. Otherwise, it means a trip to the courthouse in the county where the ancestor grew up, or where they died.
I can hear some of you asking, “What about ad valorem (property) taxes? If they weren’t paid, the ownership in the land would have gone to a Sheriff’s Sale, right?” Yes, but only if those mineral rights produced revenues at any time in the past, and the operator of the well or wells didn’t pay those taxes and deduct them from accrued proceeds. Many, many of the tracts of land suddenly producing oil or gas today never produced anything before. There never has been previous income from the property. Every state has a redemption period after a Sheriff’s Sale, usually a number of years, for the rightful owner to step forward, pay the taxes owed, and get the land deeded back to them.
If you would like to see what I’m talking about, go to www.naupa.org and select the state of Delaware. This is the most common state of incorporation for oil companies, but there are others, such as Nevada, that companies incorporate in, and not their state of residence. When the Delaware website comes up, enter the name “Suspense” (another common dummy-account name used by oil companies) and see what comes up. As of June 12, 2019, there are 43 pages for Delaware, mostly submitted by oil companies.
Delaware (and other states) learned long ago to not state the full amount of money submitted for that name by that remitter. “Over $50” can actually run into millions of dollars, no kidding.
Just for grins, take a look at the name “Leasehold Suspense”. It’s “Over $50” and was remitted by Enron. Enron! They haven’t been around for almost 20 years! But Delaware still has the money, in case anyone can prove that part of it belongs to them.
You will also find Delaware entries for “Conoco Suspense”, “Crichton Suspense Account”, “Farmwell Suspense”, and “Lease Suspense” plus a host of others. All of these are bucket accounts for unknown owner interests. Much of this is royalty money effectively paid over to the State Treasury under a name that makes it highly unlikely anyone will claim it.
This is why Delaware relies on Unclaimed Property remittances alone for approximately 85% of its annual State budget!