• Oil Patch Press

The Other Company Didn’t Ask Me for That. Why Are YOU?

This is one of the most frustrating experiences for a mineral rights owner or a royalty owner. They are being paid by two (or more) different companies, so they call or email one of them to find out what they need to submit in order to get the company’s records changed. A parent has passed away, or they bought or sold mineral or royalty rights. They naturally expect to be able to give copies of the same set of documents to each of the two companies. So just asking one of them should be good enough, right? Not necessarily.


The owner mails off copies of the same documentation to both companies. Then they get a letter from the one they didn’t call, telling them that additional documents are required, or that one or more of the documents they submitted were rejected because the document was not complete. What a pain!!


Why do owners have to jump through all of those hoops to get the records changed and start getting payments owed to them? The answer is simple, surprisingly. Differences in documents are required by companies because each company has the right to decide what level of financial liability they will assume.


To illustrate what I mean by that, “level of financial liability,” let’s say you own a car that is four years old. You just paid the final payment on the loan and have received the transfer of title to the car showing the lien against it is removed. You have a decision to make. You can now drop comprehensive insurance on your car (the most expensive part of car insurance for most people) and carry only liability insurance, much cheaper. Without the comprehensive insurance, a car owner can’t add uninsured driver insurance.


But ah, the rub. If you are hit by an uninsured driver (countless numbers of them out there!) you will not get your car replaced by an insurance company unless you have the uninsured driver insurance. You are left without a car and without any money to buy another one, when you just paid off that $35,000 car two months ago!


Most people won’t drop the comprehensive insurance on their paid-off car until the car model year drops out of the Kelly’s Blue Book. When it drops out of the Book, the insurance company will pay you only salvage value for your car if it’s totaled, but they continue to charge you a high rate for comprehensive insurance.


Just like a car owner has options with insurance after paying off a car, an oil company has options with what documents they believe are sufficient to protect them if they change payments and the change is wrong. An oil company can decide what documents would most likely prove to a judge in court that the company was right to rely on that document, and therefore their financial liability is minimized.


Some companies are very strict, others are very lax. You might encounter a company that says, “Just send us a copy of the Last Will and copy of the Death Certificate, and we will change our records.” Another company (most of them) might say, “We must have a copy of the probated Last Will documents plus a copy of the Death Certificate.” Both choices carry very different levels of financial liability.


The bottom line an owner needs to know is this: every oil company has the right to decide what level of financial liability they are willing to accept for any transaction with an owner. Some companies are willing to accept a higher risk, as demonstrated by their requirement only for copies of documents that are not recorded yet. For the others, they will accept only a recorded copy, or other more final piece of documentation, because they want low financial liability in the transaction.


What to do? Take a deep breath, roll your eyes, and contact both companies (or all of them if more than one). You will save yourself a whole lot of headaches later.




© 2018 by Oil Patch Press