Section 9-17-33


Published: 2015

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Section 9-17-33

Section 9-17-33Disposition of proceeds from sale of oil or gas production.

(a) As used in this section, the following terms shall have the following meanings:



(1) CHECK STUB. The financial record attached to a check, included with a check, or mailed separately at or near the time the check is mailed.



(2) DIVISION ORDER. A contract between the interest owner and the purchaser, operator, or the owner of the right to drill and to produce, directing the distribution of the value from the sale of the oil, gas, and other liquid hydrocarbons in the proportions set out in the division order, which division order is prepared by the purchaser, operator, and/or the owner of the right to drill and to produce on the basis of the ownership shown in a title opinion prepared after examination of abstracts or based on other generally acceptable legal ownership documentation and which is executed by the interest owners or others having an interest in the production.



(3) INTEREST OWNER. A person owning a royalty interest or a working interest in an oil or gas well or unit.



(b) Whenever payment is made for oil or gas production to an interest owner, whether pursuant to a division order, lease, servitude, or other agreement, all of the following information shall be included on or ascertainable from the check stub or on an attachment to the form of payment, unless the information is otherwise provided on a regular basis:



(1) Lease, property, or well identification number, if any, or reference to appropriate agreement with identification of the well or unit from which production is attributed.



(2) Month and year of sales or purchases included in the payment.



(3) Total barrels of crude oil or MCF of gas purchased or sold.



(4) Owner's final realizable price per barrel MCF, long ton, or other appropriate measurement.



(5) Total amount of severance and other production taxes, with the exception of windfall profit tax.



(6) Net value of total sales from the property after taxes are deducted.



(7) Interest owner's interest, expressed as a decimal fraction, in production from subdivision (1) above.



(8) Interest owner's share of the total value of sales prior to any tax deductions.



(9) Interest owner's share of the sales value less the share of the production and severance taxes, as applicable.



(c) The proceeds derived from the sale of oil or gas production from any oil or gas well shall be paid to persons legally entitled thereto, commencing no later than six months after the date of the first sale, and thereafter no later than 60 days after the end of the calendar month within which subsequent production is sold. The payment shall be made to persons legally entitled thereto by the first purchasers of the production by tender to the person's designated agents or at their last known address. The purchasers may remit to the persons entitled to the proceeds from production annually where the aggregate of one year's accumulation of monthly proceeds does not exceed one hundred dollars ($100). However, the purchaser may hold accumulated proceeds of less than ten dollars ($10) until production ceases or the purchaser's responsibility for making payment for production ceases, whichever occurs first. On the request of the person legally entitled to the proceeds, the purchaser shall remit payment of accumulated proceeds annually to the person if the purchaser owes the person less than ten dollars ($10). On the request of the person legally entitled to the proceeds, the purchaser shall remit payment of the proceeds to the person monthly if the purchaser owes the person more than twenty-five dollars ($25), but less than one hundred dollars ($100). In addition, before the purchaser accumulates proceeds greater than twenty-five dollars ($25), the purchaser shall provide notice to the persons entitled to the proceeds that there is an option to be paid monthly for proceeds greater than twenty-five dollars ($25). The notice to the person entitled to the proceeds shall also provide directions for requesting monthly payment and shall constitute notice to all heirs, successors, representatives, and assigns of the person entitled to the proceeds. As used herein, "first purchase" shall mean the first commercial purchaser of production after completion of the well and shall not include purchasers of oil or gas during initial testing prior to completion of the well; further provided, that any delay in determining the persons legally entitled to an interest in the proceeds from production caused by unmarketable title to the interest shall not affect payment to persons whose title is marketable. In those instances where the proceeds derived from oil or gas produced and sold after May 4, 1982, cannot be paid within the time allowed by this section because the title thereto is not marketable, the purchasers of the production shall remit to the parties ultimately determined to be the legal owners of the production, the full amount of the proceeds plus interest at the rate on a per annum basis equal to the Federal Reserve Discount Rate in effect as of the first day of each month during which interest on the proceeds is payable, the interest to accrue from the date that proceeds were due to persons with marketable title as hereinabove specified. Marketability of title shall be determined in accordance with the then current legally recognized real property law governing title to oil and gas interest. The first purchaser shall be exempt from this subsection and the operator and/or the owner of the right to drill and to produce under an oil and/or gas lease shall be substituted for the first purchaser therein where the operator and/or the owner and purchaser have entered into an arrangement where the proceeds are paid by the purchaser to the operator and/or the owner who assumes responsibility of paying the proceeds to persons legally entitled thereto. Where the operator and/or the owner of the drilling rights are substituted herein for the purchaser, the period of time set forth herein under which the parties must account to persons entitled to the production shall be determined as of the date of receipt of the proceeds for the production as opposed to the date of first sale applicable to the purchaser.



(d) Any first purchaser of production or operator and/or owner of the right to drill substituted for the first commercial purchaser as provided herein, that violates this section shall be liable to the persons legally entitled to the proceeds from production for the unpaid amount of the proceeds plus interest at the rate of 12 percent per annum, the interest accruing from the date at which the proceeds were due as specified herein.



(e) The circuit court for the county or counties in which the oil or gas well is located shall have jurisdiction over all proceedings brought pursuant to this section.

(Acts 1982, No. 82-557, p. 917, §§1-3; Acts 1991, No. 91-681, p. 1324, §1; Act 99-396, p. 657, §1.)