Being paid on time (§91.402)
Two subchapters do the work. Subchapter J, sections 91.401 to 91.407, covers payment: who counts as a payee and a payor, when the money is due, what happens if it is late, and what a new payor must tell you NRC §91.401. Subchapter L, sections 91.501 to 91.507, covers reporting: what the stub says and how you get answers.
The clock is set by NRC §91.402. Proceeds from the first sale of a well must be paid within 120 days after the end of the month of first sale. After that, payments follow the frequency in your lease or other written agreement. If nothing there sets a time, oil must be paid no later than 60 days after the end of the month it was sold, and gas no later than 90.
A payor may hold money past those limits, without interest, in a few cases: a dispute over title that affects distribution, reasonable doubt that you own the share or authorized its sale, a title opinion requirement about your title, identity or whereabouts that you have not answered after a reasonable request, or a child support lien or withholding order. It may also accrue very small amounts. The rule for small payments: a payor owing you $100 or less in total may pay once a year, and may hold anything under $10 until production ceases §91.402(f).
End of the sale month
The clock starts
Oil is due 60 days after this date, gas 90, unless your lease says otherwise NRC §91.402.The day after the due date
Interest starts
Two percentage points over the New York Fed rate on loans to depository institutions, unless payment is lawfully withheld NRC §91.403.When you decide to act
You give written notice, by mail
Notice by mail is a condition of any suit for nonpayment §91.404(a).30 days after the payor receives it
Pay, or explain in writing
The payor must pay what is due or state a reasonable cause for nonpayment in writing §91.404(b).After that
You may sue where the well is
You may file in any court with jurisdiction in the county where the well is §91.404(c). A judgment for you includes reasonable attorney’s fees, and tops damages up to $200 if they are less NRC §91.406.
For oil and gas from a well past its first sale, when your lease sets no other time. The steps are in sections 91.402, 91.403, 91.404 and 91.406.
Interest on late money (§91.403)
If payment is late for any reason other than the lawful holds above, interest begins when the time limit expires. The rate is two percentage points over the percentage rate the New York Federal Reserve Bank charges on loans to depository institutions, unless a written agreement between you and the payor sets a different rate NRC §91.403. The obligation ends when the payor delivers the proceeds and accumulated interest to the Comptroller as unclaimed property.
Our late payment interest guide works an example, and the calculator does the arithmetic for your dates.
When the payor changes (§91.407)
After a change in payor, the new payor must send every payee written notice, at the most recent known address. It is due within the time allowed for paying proceeds, counted from when the payor gets your address from the operator or lessee. It must carry the lease name and number, the sales month, a description of the property, a contact address and phone number, and the payor’s own telephone number. A division order, a check stub or an attachment counts as the writing. A payor that owes you late-payment interest and did not send this notice owes interest at a rate two percent higher NRC §91.407.
Operator changes are common: the state record shows tens of thousands of leases changing operator in the last two years. See Texas operator changes for the data, and royalty checks stopped for what to do if a switch left a month unpaid.
What the stub must show (§91.501 to §91.503)
With every payment, the payor must give you twelve items: the lease and its identification, the sale month, the volume, the price, the taxes, other deductions and adjustments, net value, your decimal, your gross share, your net share, and an address and phone number for questions NRC §91.502. The stub, an attachment or another remittance advice must carry them, and a payor that mails you a paper check may not put them somewhere else without your consent §91.506(b). Each item is explained in what the codes on a royalty stub mean.
The stub is not a courtesy. It is the law.
Your right to ask (§91.504 to §91.507)
Beyond the stub, you can ask. Every request must be in writing and sent by certified mail, and the payor must answer by certified mail. The time limits differ by what you ask for.
| What you can ask for | Section and time limit |
|---|---|
| An explanation of deductions and adjustments the stub does not explain | §91.504(a): 60 days |
| The heating value of the gas: a copy of Form G-1, or a stub or statement with it | §91.504(b): 60 days |
| A list of each lease, its name, field, county and Railroad Commission ID, for last year's payments | §91.504(c) and (d): 60 days |
| Answers to other questions about a payment | §91.505: 30 days |
| Any missing information the stub and property description should have carried | §91.507(a) and (b): 60 days |
At least once every 12 months the payor must send you a notice about the section 91.504 right §91.504(e). If it misses the 60-day limit on a section 91.504 or 91.507 request, you may bring a civil action, and the prevailing party recovers reasonable court costs and attorney’s fees §91.507(d). For a missing information request under section 91.507, either side may also ask for mediation.
A request to send by certified mail
Under Natural Resources Code section 91.504(a), please explain each deduction and adjustment on the statement for sale month [month and year], property [name], owner number [number]. Please respond by certified mail within 60 days.
Enforcing your rights
If money is late, the order matters. Give written notice by mail first, because it is a condition of any suit for nonpayment NRC §91.404. The payor then has 30 days after it receives the notice to pay or to answer in writing with a reasonable cause. If it does neither, you have a cause of action in a court of competent jurisdiction in the county where the well is. A winning plaintiff gets reasonable attorney’s fees, and damages of at least $200 NRC §91.406.
One limit to know: when a payor withholds under the lawful reasons in section 91.402(b), you do not have a common-law breach of contract claim for the withholding, unless, for a title dispute, the contract that requires payment says otherwise §91.402(b-1). The remedy there is to clear the title question.
What the statutes do not do
Subchapter J does not apply to royalties payable to the Board of Regents of The University of Texas System under a lease of land dedicated to the permanent university fund, or to the General Land Office under Chapter 52, Subchapter D §91.405. Your lease can also set terms of its own, and a division order cannot amend it.
The Railroad Commission is not the enforcer. It says lease and royalty matters, including payment of royalties, are outside its authority RRC, Royalties FAQ. Its production data, though, is public, and it is the best record of what your lease sold. Look it up with the Texas lease lookup, or line your stub up against it with the royalty audit.