Oil and Gas Royalty Litigation: Be Vigilant

If you are a royalty owner in Texas, it is very important that you pay close attention to how your royalty payments are calculated. There are a number of excellent forensic accountants who can spot issues or “hot spots” related to your payment. The reason I encourage you to be vigilant is because Texas Courts are typically very wary of applying the “discovery rule” to your oil and gas royalty underpayment claim. There are 2 Texas cases of note.

In HECI v. Neel the Texas Supreme Court held that royalty owners waited too long to bring their claims against their operator. HECI had sued an operator of an adjacent tract for damaging a reservoir that was under HECI’s property. HECI prevailed in a recovery but did not share any of this recovery with royalty owners. Five years later the royalty owners sued. The Texas Supreme Court held that their claims against HECI were barred by the 4 year statute of limitations.

In Wagner & Brown v. Horwood the royalty owners sued an operator for improperly deducting compression fees from their royalties. The Texas Supreme Court held that all claims for damages more than 4 years prior to suit were barred by the statute of limitations.

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