October 24, 2022 • 36 mins
On today's episode, we are talking with guest Wade Caldwell, President of the National Association of Royalty Owner. Wade is here to share the Top 5 complaints of Royalty Owner complaints about communicating with operators. Hear first-hand how you can implement the changes needed to support your Royalty Owners.
On this episode we will talk about:
• The biggest change when it comes to the availability of community of information to mineral and Royalty Owners.
• The biggest advantage to operators in improving their communications and the ability of mineral and Royalty Owners
• The number 1 complaint from Royalty Owners
• How to get division orders for allocation wells.
• What happens when operators failed to obtain the consents required under a lease?
To listen to this episode check it out on iTunes + Stitcher or on the website.
About SherWare, Inc.
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SherWare creates software to simplify your accounting needs so you have more time to do the things that matter. We serve independent oil and gas operators, accountants and investors with a platform to manage their distributions and joint-interest billings on a platform — and we’re the only software on the market that can integrate with your QuickBooks company.
Click here to watch a demo of the software in action right now.
About NARO:
NARO is a volunteer led, member based, 501(c)6 education and advocacy organization established in 1980 to assist US mineral owners.
The mission of NARO is to support, advocate and educate for the empowerment of mineral and royalty owners.
Find a chapter near you.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Tom Wireman (00:01):
Hi and welcome to the oil and gas accounting
podcast. I'm your co host TomWireman, Executive Director of
Copus, the Council of PetroleumAccountants Societies. I'm here
with my co host Phil Sherwood,owner and founder of sure where
the provides software for oiland gas operators and
accountants. If you're a CPA, anaccountant, a bookkeeper and
office manager. Or if you're anoil and gas operator doing your
(00:22):
own accounting, this podcast isfor you.
Phil Sherwood (00:24):
We're here talking with the experts in
their respective accountingareas to keep you up to speed on
the latest accounting news rulesand data. There is so much
happening in the world today,especially in oil and gas that
affects the accounting functionof a business. Our job on this
podcast is to keep you up todate and help you see more, no
(00:45):
more and do more as anaccounting professional in our
field. Let's get started.
Welcome again to The Oil and GasAccounting Podcast. I'm Phil
Sherwood, and I'm here with myco host, Tom Wireman.
Wade Caldwell (00:57):
Hey, everybody.
It's good to be here with youtoday.
Phil Sherwood (00:59):
Tom, why don't you tell us a little bit about
the topic for today's episode.
Tom Wireman (01:03):
Our guest today is Wade Caldwell. Wade is the
President of the NationalAssociation of Royalty Owners.
I'm gonna let him give you alittle bit more about his
detailed resume. But his topicis the 10 biggest royalty owner
complaints about communicatingwith operators. And he's got a
modest proposal for that. SoWade, why don't you give us a
little bit about yourbackground. And we'll get
started.
Wade Caldwell (01:22):
Well, Tom and Phil, thank you very much for
having me today. I'm delightedto be on this podcast. And I'm
oil and gas attorney 63 yearsold. I live in San Antonio. And
I am on the mineral andlandowner side almost
exclusively, and also manage famfamily minerals for family
(01:43):
interests in mostly in WestTexas. But anyway, I've been
doing this for quite a while andreally enjoyed what I'm doing.
So thank you for having me.
Phil Sherwood (01:57):
Tom mentioned that you are the President of
NARO. Can you tell our listenersa little bit more about the
organization? What it does?
Maybe start with what theabbreviation that stands for.
Wade Caldwell (02:07):
NARO stands for National Association of Royalty
Owners. This is a 42 year oldorganization that's based out of
Tulsa. It's basically aeducation and advocacy 501c6
organization for mineral andRoyalty Owners around the
country. We have chapters in 11Different states or regions. And
(02:30):
we have several 1000 members.
That's one of the oldest andlargest of the royalty owner
organizations. And it's one ofthe very few that is national in
scope. The way it's set up isyou have chapters that form and
then advocate or educate on thison the state level for oil and
gas, mineral and Royalty Owners.
(02:54):
And then the umbrellaorganization or national board
keeps an eye on what's going onin Washington and tries to
advocate and educate on behalfat a national level for the
those members. So that's prettymuch what we do. And it's my
second year as president of theNational Organization. I'm
(03:16):
rolling off at the end ofDecember, but it's been a really
great experience.
Tom Wireman (03:23):
Well, again, thank you for being here with us
today.
Phil Sherwood (03:25):
Yeah, how many members? Did you say nationally
there are at NARO?
Unknown (03:29):
We have about 2,500 full time members. And you know
it fluctuates largely with theprice of oil. That's really
about the current membership.
Phil Sherwood (03:43):
And which state association would you say is the
largest?
Unknown (03:46):
Texas is the largest chapter as you would expect. The
organization was founded inOklahoma was actually founded
back in the 1970s to combat thewind windfall profits tax. So
it's kind of interesting to hearthat name again, being
circulated and grew out of thatorganization and established
(04:07):
chapters in these other states.
But Texas and Oklahoma are thelargest, but we have substantial
chapters in Ohio Appalachia, theRockies, Colorado, California
has a chapter Louisiana andanyway it's it's in primarily in
the oil and gas producingstates.
Tom Wireman (04:26):
You know, some of our listeners are operators or
they have departments thathandle revenue distributions to
working interested in RoyaltyOwners, what's changed in the
mineral community that wouldmake these companies rethink how
they communicate with theowners? And really kind of point
maybe to the point of whatyou're going to get to today.
Wade Caldwell (04:43):
Tom, the biggest change that I've seen is the
availability of community ofinformation to mineral and
Royalty Owners. You know, backin the old days, Mineral and
Royalty Owners were typicallyranchers and farmers in a local
community The if you needed toget deed records to find out who
else owned minerals around you,you had to go down the
(05:06):
courthouse or hire land man todo so or go to the local title
company. And to be able toexchange information, you have
to go down the Dairy Queen andbuy a cup of coffee that has
changed. In today, you haveinternet message boards, very
active on the mineral androyalty owner side exchanging
information. All of theexclusivity of the local deed
(05:29):
records is who owns what is goneaway. It's now available at your
fingertips if you know how torun a computer and know what
sites to go to. And so what thathas happened, what's happened in
along with organizations likeNARO is that middle and Royalty
Owners are able to shareinformation a lot more and are
(05:50):
willing to share thatinformation a lot more than in
the old days? And so it'sprobably been a good development
because it's caused a moresophisticated and knowledgeable
group of Mineral and RoyaltyOwners that deal with operators
on leasing or production issues.
Tom Wireman (06:08):
So what are the advantages for an operator for
improved communications with theRoyalty Owners?
Wade Caldwell (06:16):
Being on the Mineral and Royalty Owner side
and seeing the frustrations thatpeople have in dealing with
operators, the biggest advantageI see to operators in improving
their communications and theability of mineral and Royalty
Owners to get hold of them isreducing their complaints and
their questions for their staff.
I'm sure that most of youroperators think of the brand new
(06:39):
mineral owner that doesn't knowanything that just inherited it
from the parents and nevertaught them how to manage
minerals, they're unsure ofthemselves, they're scared,
they're frustrated, and you youget those calls. So you know, I
think that improvedcommunications reduces those
complaints. It also has othereffects of reducing audit
(07:03):
requests on royalties. It's allabout establishing trust with
your middle and landowners. Andif you improve your
communications, it allows you tobuild that level of trust. So
that then when you need to goback and do lease amendments,
get pooling, agreements,ratifications, other types of
(07:23):
agreements, you've got thatlevel of trust built up where
you get more cooperation, Ithink it also lowers your
leasing costs, because mineraland Royalty Owners want to go
with somebody that they trust,even if perhaps the bonus is not
quite as high as somecompetitor. And finally, it
lowers your legal costs andresults in cheaper settlements
(07:46):
when you do get into disputeswith owners. Because if they
view you as a cooperative andtransparent company, they're
more likely to I mean, I knowthere's exceptions to every
rule, but they're more likely tocause you less of a headache and
less expense. And mostimportantly, probably from the
COPUS point of view is bettermorale with your staff, not
(08:09):
having to deal with angry oruneducated middle owners all the
time.
Phil Sherwood (08:17):
You know, being a software provider, we have
software for operators, and wehave software for royalty
owners. And it's interestingwhen we go to talk to the
different groups, there seems tobe a big distrust between the
royalty and the mineral ownersto the operators. I think there
are some, maybe some biggeroperators in the past that have
given them reason to distrust.
How do you see the picture now?
Unknown (08:39):
It's improved quite a bit. Since I've been involved,
the level of mistrust has gonedown one reason is because of
the better communication amongmental and Royalty Owners.
Secondly, the availability ofinformation, mineral and royalty
owner knows what they're doingand go and can go find out what
information is available onlinebefore they make that first
(09:00):
phone call. It helps, you know,certainly there's still some
operators out there that have aprobably a well deserved
reputation for somebody to keepan eye on. But in general, you
know, I see the level ofmistrust going down. That's
good.
Tom Wireman (09:20):
You know, I remember back in the days when I
was kind of at shirttailrelationship with with royalty
owners, managing the revenuedepartment at the company that I
was at, we added a divisionorder department that really
took care of most of the issues,but owners sometimes depend on
those checks. And when theydon't come in for some reason,
and they've they've got anunexpected expense. And I
remember in this case, it was alittle lady from Weibull,
(09:43):
Montana, and the garage dooropener went out and she wanted
to know where oil Tech was shehit by a new garage door opener.
So you just it's interestingsome of the little details and
things that happen, but youknow, just spending some time
with her and explain why shedidn't get a check that month.
property was actually in herworkover. And she didn't really
understand all that. Sohopefully I got some golden
(10:05):
graces in her books, and shetrusted me come forward. But I
think that's what your point ishere to you is just spend that
time and help people understandwhat the issues are.
Wade Caldwell (10:14):
Yes. And you know, we've done some studies.
And you know, our estimates arethat there's over 11 million
mineral and Royalty Owners inthe US. And the average mineral
and royalty owner is aretirement age widow that's
getting about $800 a year inroyalties. So there are a lot of
(10:35):
small mineral and Royalty Ownersstill out there that have held
on to these minerals, becausethey see it as part of their
family heritage. And certainly,you know, they depend on that
money. So the idea that this is,you know, a bunch of large
landowners is really not thecase for the average person
Phil Sherwood (10:54):
is the US one of the few countries that allows
private ownership of minerals?
Wade Caldwell (10:59):
Yes, US and Canada have always had private
ownership, whereas many othercountries at the beginning of
the foundation of the countrydecided that they would own the
resource, the natural resources,ie Mexico.
Tom Wireman (11:14):
Phil, let's shift gears for just a minute here.
Again, your presentation wasentitled The top 10 complaints.
What the top complaint thatyou're hearing today from
Royalty Owners was number one?
Wade Caldwell (11:24):
By far the largest complaint is operators
that can't be found, you get anotice that the operators
changed in this is mostlysmaller operators. And there's
no website, if they if they havea telephone number on the check,
although they're supposed tohave a telephone number, it goes
to voicemail, there's no emailto contact anybody. If you leave
(11:50):
a voicemail, the calls don't getreturned. And so immediately,
that puts the middle royaltyowner in the position of having
to write letters. And if they'vegone to that trouble, they're
probably mad already. So I wouldurge every operator to have a
website, to have an ownerrelations page, to have good
information on that ownerrelations page to try to get out
(12:13):
the appearance of being easy tocommunicate with, they'll
respond to emails quicklyrespond to telephone messages
just to get left on a voicemailbox. So that's by far the
biggest complaint is just thesmall operators that make
themselves hard to find.
Phil Sherwood (12:32):
The ideal with a lot of small operators, and I do
know that a lot of them do nothave websites. So that would be
probably one of the biggestthings because when you go to
look for information, you'regonna go to Google first thing
and those companies website isgoing to come up. So that is a
great suggestion that everyoperator have their own website,
it just has to be a one pagewebsite with your contact
(12:53):
information. Pretty much. Butyeah, what would you say the
number two complaint is?
Wade Caldwell (12:58):
The number 2 complaint is about owners that
get put in suspense, and aren'ttold that they've been put in
suspense, you know, some titleissues come up. And maybe it's a
well, that they're only gettinga check on once a year. And it's
a small check. And you know thata lot of them just don't realize
that they've been put insuspense, and they're not
(13:20):
getting checks anymore. And sowe actually tried to get a law
passed in Texas that would haverequired a mandatory notice be
sent to owners if they get putin suspense. We weren't able to
get that passed in the lastsession. But we're going to try
again, in the upcoming session.
In a lot of a lot of these I'verun across many cases where
somebody got put in suspensebecause of a computer error, or
(13:42):
a cheque that got returnedbecause the post office messed
up. And if there was somemechanism in place where there
was an effort made to contactthose people and let them know
that they've been put insuspense. I think it would help
a lot in terms of ratchetingdown the level of mistrust.
Tom Wireman (14:03):
I guess what you're what you're saying a little bit,
too is so I have siblings and alot of other Royalty Owners and
things have siblings. So I getmy check and my sister doesn't
get hers, she immediately thinksokay, what's going on? Why did
you get your check? I didn't getmine. And that's back to the
point here. If it was a computermistake where something got
overridden in the system or thepost office returned the check
(14:24):
for no apparent reason. Maybethrough no fault of her own. She
signed the division order andeverything and no fault of her
own she she got suspended so butyou know, I'm sure she would be
feeling like something wasn'tquite right. And she'd be a
little upset about I guessthat's kind of the point that
you're making here. So
Wade Caldwell (14:42):
Yes, and there's some I think benefits for
operators here that if you ifthere is a title dispute that
comes up is to notify the themineral and Royalty Owners or
get put in suspense because ifthey decide that they need to
file suit to clear up that titledispute, they're a lot less
likely to include the operatorin that lawsuit. If they feel
(15:06):
like the operator was proactiveand let them know what the
dispute was, and who was raisingit, and make the fight between
the owners that have the disputeand not involve the operator.
Tom Wireman (15:18):
That's a good point. You mentioned when we
were talking earlier about, youknow, making sure that we have
good relationships between theoperator and the royalty owners.
And you mentioned, you know,things for reasons such as lease
amendments and that sort ofthing. But what about
allocation? Wells? Are youhearing anything about that?
Unknown (15:37):
Yes, that's a very hot topic. In Texas, at least,
people are getting divisionorders for allocation wells. And
it's really impossible to checkto see if your royalty interest
is correct, unless you know whatthe allocation formula is. And
so some operators will includethe plat, and they'll tell you
(15:59):
what allocation formula theyused, and how much of the
wellbore was on your tractversus your neighbors to make it
easy to do. But there's a lotthat don't. And so, I do suggest
that operators if they aredrilling allocation wells
provide that information alongwith the division order. I think
it again, helps reduce calls andcomplaints, it also results in a
(16:24):
higher percentage of divisionorders getting signed and
returned. So that's been a bigissue in Texas, people are
learning what allocation wellsare, but they still need the
basic information to be able tocheck the figures, correct.
Phil Sherwood (16:39):
You know, what happens when operators failed to
obtain the consents requiredunder a lease? You know, they
failed to notify they've beenput into suspense, there's a
title thing? Or are they youknow, the leases, they have to
consent to have something doneon their property? Or their
Well, what? What types of thingscome up then?
Wade Caldwell (16:57):
That's a bit of a major area of complaints, you
know, if you have a lease thatrequired your consent for
pooling. For example, first ofall, you know, not setting up
your lease in your system toflag those issues, is a common
mistake that I see made. And youknow, it can have really
(17:19):
disastrous results foroperators, they fail to get
pooling consent. And it's asubstantial owner in the wells
on their tract. And they say,No, we don't agree, you know,
the wells have been drilled andthe checks are going out. And
they say, Hey, we don't agree tothis unit, you got to shrink it
down. And you know, it cancreate a lot of havoc. So the
(17:42):
failure to obtain consent,whether it's pooling, or if
you've got a surface owner,you're dealing with on the weld
location, or laying flow lines,you know, those types of issues
that are commonly put into alease that require consent.
Tom Wireman (17:59):
I've been to conferences before I'm thinking
about one in particular, when Iwent to the, the one you want,
like geske, for instance, StateCollege, Pennsylvania, this was
early on, and people were tryingto understand why their checks
had deductions that theirneighbors didn't have any. And
again, you talked a little bitearlier about how people compare
information and notes back thenit would have been a lot more
(18:22):
manual. But what issues are youseeing with like post production
deductions and things from fromchecks of the royalty owners?
Wade Caldwell (18:30):
Well, the biggest issue is companies that are
taking deductions on nodeduction leases. And I can't
tell you how many operators havecalled when you get the first or
second check and see that andthey say, oh, sorry, we just, we
messed up when we set it up inour system. But again, that's a
intake and flagging issue withthe operator that needs to those
(18:55):
safeguards need to be put intoplace. And the second thing I've
seen commonly is where a newoperator takes over and they
reevaluate the leases and decidethat it does allow them to take
deductions, and they state starttaking deductions on wells that
haven't had deductions taken onthem for years. So to me, the
(19:19):
the being able to reduce thosecomplaints on the operator side
starts with a check stubtransparency, you know, having
codes on the bottom that you'resupposed to have under most
state laws as to what thedeductions are for possibly
adding to your owner relationspage on your website, an
explanation of the deductionsand why they're necessary from
(19:42):
the operator point of view. Italso gives the operator the
chance to put their story outthere as to why they need
particularly on gas productionto be able to deduct some of
these expenses. You know, a lotof less sophisticated mineral
owners that may be getting paidon an old Amid finished product
out of the gas plant don'trealize that those deductions
(20:05):
may be benefiting them becauseit's making them more valuable
product to sell. So those arethe types of issues that we see
that are the complaints that aremost often raised.
Tom Wireman (20:20):
One thing I was going to ask you to just if this
kind of stuck in my mind. Iremember back in the day, is
North Dakota, the only statethat's pretty, very
prescriptive, I guess, in termsof what their check stub detail
looks like, or states adoptedsimilar kinds of things? I know,
I know, it was very, very clearat one point that you had to
have all the attributes that thestate required is that it's
(20:43):
common now? Or is that just kindof state by state?
Wade Caldwell (20:46):
Yes, most of the oil and gas producing states
have some sort of checks todisclosure law. Texas has a
pretty good one, Oklahoma has apretty good one, in what I see
more often is particularlysmaller operators that just
don't follow what the lawrequires. But even beyond that,
(21:09):
may be possible to comply withthe law, but still not give
enough detail that's a mineralowner can look at the check stub
and in really understand whatthe deductions are for whether
this processing transportation,marketing, compression, whatever
the the type of deduction maybe.
Phil Sherwood (21:29):
So what complaints that you receive
regarding ratifications?
Wade Caldwell (21:32):
Ratifications is a important issue, particularly
for non participating RoyaltyOwners, which there are a lot of
them out there. They don't evenknow that Elise has been done.
In many cases, they don't knowthat a well has been drilled.
And here they get a ratificationand a division order in the
mail. And so, you know, theirfirst question is, well, what,
(21:55):
what lease got signed here? Andso I've always wondered why, if
you're going to send somebody aratification, ask him to ratify
a lease or a pooling agreement.
Why don't you just go ahead andinclude the underlying lease and
the pooling agreement withratification, because any more
sophisticated middle enrolled,the owner is not going to sign
(22:15):
that until they get a copy ofthat document. So to me, it
again, builds credibility by theoperator to provide that
underlying document withouthaving to request it.
Phil Sherwood (22:29):
It seems like, again, this is communication
coming up again, do you thinkit's better for operators to
over communicate with theirmineral owners? I know some
operators, they like to send aslittle as possible to try to
avoid questions, because some,sometimes the more information
you get, the more questionsthere are. What do you say on
that?
Unknown (22:49):
Well, I can see that, you know, if you are, it may
provoke more questions from lesssophisticated owners. But the
things that I'm suggesting hereare things that a reasonably
sophisticated owner, or is goingto ask for and so it's really,
you know, like providing theunderlying document with a
(23:10):
ratification agreement. If thatprocedure or safeguard was built
into the system on the operatorside, is going to first
eliminate all those follow upcalls. And, you know, again,
build trust, let's say you weredealing with a very
sophisticated owner, and theysaid, Hey, man, this guy sent me
(23:32):
the lease without me even havingto ask for it. And when he sent
me this ratification. I likethat company. It builds that
level of trust, and probablyreduces the level of phone calls
that you get, you know, andparticularly in an example like
that, I don't see that it'sgoing to generate more phone
(23:53):
calls by including theunderlying lease along with a
ratification request, ifanything is going to result in
less phone calls.
Tom Wireman (24:01):
By my count, we're kind of up to point number seven
in your tenant complaints. Whatcan operators do to help educate
owners? Because I think one ofthe points that you've been
making along the way is that,you know, owners just they can't
educate themselves necessarily.
So they need some help, what canoperators see to help that?
Wade Caldwell (24:19):
You know, I think that operators need to realize
that if they've got the angryperson on the phone that really
doesn't know about minerals.
They may be upset because theirparents didn't explain this to
him. They may be upset becausethey don't get along with the
siblings and the siblings arenot sharing information with
them. And so I think it's itwould be helpful if operators
(24:42):
were to help guide mineralowners to the organizations that
are out there groups like Nehru,Texas Land and mineral Owners
Association, Nadella that have alot of information that somebody
can go and read.
mineralrightsforum.com. Forexample, if you're providing
(25:04):
that information, I've alwayswondered why they don't include
with the, if you've got a newowner that just took over
because dad or granddad died,why there isn't some sort of
flyer that goes with thedivision order or transfer order
that says, hey, here's the listof organizations that you may
(25:24):
want to check on To find outmore information about mineral
and royalty ownership. Becauseto me, a more sophisticated
mineral and royalty ownerreduces workload for operators
rather than increases.
Phil Sherwood (25:38):
Yeah, those were a lot of great resources.
Another one would be the MineralRights Podcast.
Wade Caldwell (25:47):
Yes. Yeah, that's a great pod podcast as well.
Phil Sherwood (25:51):
There's a complaint probably when
agreements and paperwork gettinglost. Do you have any thoughts
here on how the operator canhelp Royalty Owners when they've
misplaced agreements, so theycan't find the least they can't
find their paperwork?
Wade Caldwell (26:05):
Yes, you know, understanding, again, you may be
dealing with somebody who's thefamily's fractured in this, the
sibling or the executor of theestate, is not given in that any
information. So they'refrustrated and upset, they don't
have a copy of the lease, theydon't know how to go and find,
and usually the leases are notin the deed records anyway. And
(26:29):
so to me, it builds a lot ofcredibility with that owner, if
you provide them last documents,like leases, like a pooling
consent that's been signed or aunit, you know, to zation
agreement that's been signed itmost operators have it at their
fingertips at the end of acomputer mouse and consented
pretty easily. And so I thinkthat providing those agreements
(26:53):
to owners is a constructivething that that helps operators.
So it and also may answer a lotof the questions that people
have, like, you know, theythey'd call about post
production deductions on theircheck. Well, email them, the old
producer, at least that grandpasigned to show that, yes, those
(27:15):
deductions are allowed, and thatprobably is going to be the end
of the conversation. But if yourefuse to provide that lease,
then you know, you get theformal notices pursuant to state
law to provide that you have torespond to and to me, I just
think that anything that you cando to help provide that
(27:35):
information to him is probablygoing to reduce your workload in
the long run.
Where do you see operatorstrying to mend leases through
the division order process? Isthat Is that a concern?
It is, you know, the law is alittle bit murky on that in some
states. You know, in Texas, forexample, you can revoke any
(27:56):
division order you sign with 30days notice. But, you know, we
have seen some operators thatparticularly try to get language
on post production deductions,and put into the division in
order that maybe the leasedidn't allow. And so, you know,
most states have a statemandated division order form
(28:19):
that the operators have toaccept. If they don't, there's
the Nadella form out there. Andsince I haven't seen any big
advantage to an operator to tryto gain any legal leverage by
including stuff in a divisionorder that doesn't really belong
there. So my pitch withoperators to stick with the
(28:41):
Nadella are state mandatedforms. And it's going to reduce
your workload, because theyagain, the people they're going
to catch that are the moresophisticated owners, they're
going to send you a nasty lettersaying, Okay, I'll see you tried
to amend my lease, well, here'sthe state mandated division
order that I've signed. And thenyou've got to go back and check
to see they didn't changeanything. Or change the, the Ri
(29:05):
on the division order that theythey created themselves and
signed and sent back to you. Soagain, I would discourage
operators from trying to dothat.
Tom Wireman (29:17):
What about portals and things? I mean, I know
that's probably one of thethings that you'll get into here
a little bit more, but is thatsomething that that NARO is is
really, I guess promoting,
Wade Caldwell (29:28):
I don't know the NARO is promoting it, I've been
promoting it, because that'sthat's really the way that I see
this going. You know, you've gotthis great explosion of
information that's available tomineral enrollments, theatres,
inverse with buying every checkprocessing company they can get
(29:50):
their hands on, and theoperators that are pushing
mineral and Royalty Owners toget their check stub data
electronically, because once youget it set up, it's a lot He's,
you're on the owner as well. Andso what I see this going to is
really a form of a portal thatoperators should set up for
(30:11):
their owners. Where you and I'vedone this for to get drilling
reports, you know, the, theoperator provides me a portal
that I log in and pull drillingreports on. Well, that's been
drilled, you know, there'sportals that exist for check
stub data. Why are those portalsbeing expanded to a a owner
(30:32):
portal in general, where theowner of ll say, Okay, here's
the production on my wells,without having to rely on the
delayed data that's comingthrough a state agency website,
for example. They can go in andmaybe get more detail on the
deductions that have been takenand answer their questions so
(30:54):
that you don't get emails orletters asking for audits, I
think that would first smalleroversee would probably eliminate
the need for them, you know,having to get a CPA to set them
up, if they had a way to go getdigital data directly
themselves. So anyway, I justsee a lot of benefits to these
(31:15):
baby steps of little miniportals and different facets of
middle ownership being combinedinto one big portal. And, and,
you know, it's, you know, thesecurity on it, I think can be
set up. I know, it's just ahassle to monitor the security
with all the tricks going on outthere. But it seems to be the
(31:37):
way that we're heading.
Phil Sherwood (31:39):
What would ideally be included in a portal
like that you talked aboutdrilling reports, check stub
data, what other types ofinformation would you like to
see out their production data?
Wade Caldwell (31:50):
You know, if a wells been shut in for being
worked over, and there's a delayin when it's reported to the
state, and when the owner can goand get the information from the
state. And usually, it's beenmore than the 60 to 90 days work
over provision in a lease, butthat that information is
(32:11):
available to the operatorimmediately. So if there was a
note, okay, well, we'll shut into replace the downhole pump.
That's one saved phone call orone save letter that you don't
have to respond to. And sothose, that's the type of
information that I see ownerswould want through an owner
portal.
Phil Sherwood (32:31):
Would they like to see like the joint agreement,
the lease agreement out thereany any kind of documents
associated with it?
Wade Caldwell (32:38):
Well, that would be nice to have, you know, if
they could go in and get theirmissing documents through the
portal, particularly when youhave a change of ownership,
somebody dies, and all thedocuments got tossed in the
estate sale, or the house cleanout, you know, it helps new
owners rebuild their library.
And, again, this is stuff that'sprobably already set up on the
(33:03):
land side. Even if it's justavailable, it would, I think in
the long term, you know, there'sthere's a lot of, I can't
downplay the amount of time itwould take to set this up and
implement it. But if the longterm workload should be less for
operators, in a lot ofcircumstances,
Tom Wireman (33:23):
Thanks Wade maybe just to wrap things up. Today,
you've given those of usinvolved in revenue
distribution, some helpfulguidance and addressing
ownership complaints or ownercomplaints from there, but maybe
summarize just a handful ofthose key points for our
listeners today.
Wade Caldwell (33:37):
If you're looking for a top five, it would be
number one. Have a website and agood owner relations page;
return your emails and phonecalls on time. Number two is to
provide the allocation formulas,the Azrael plat and the
allocation formula being usedwith allocation wells. Number
(34:01):
three would be to providemissing documents that an owner
needs without making itdifficult for them. And Number
four would be to provideparticularly on ratifications
the underlying document thatyou're asking people to ratify
those things of and bythemselves would I think, build
(34:24):
that credibility with yourowners, help your owner
relations reduce stress on yourstaff from having to deal with
angry or, or upset people, andin the long term, reduce your
workload.
Phil Sherwood (34:39):
Great, thanks.
Yes. Very good. Thanks for beingour guest today, Wade. This has
been a really interestingdiscussion. Sitting here taking
notes, and we provide for a lotof our operators for uploading
documents. So I wanted to pickyour brain to see what what
other stuff we should Add to theportals that our operators have.
(35:01):
So, thanks for providing thatinformation through a
conversation.
Wade Caldwell (35:08):
Thank you for having me. I've enjoyed it very
much.
Phil Sherwood (35:12):
Well, that wraps up this episode. Thanks to
everybody for listening, Wade'scontact information and such
will be included in the shownotes if you wish to contact him
if you have more questions aboutRoyalty Owners and royalty owner
associations. Also, please leaveus a rating and review on Apple
podcasts. Subscribe to the showso that you're notified when we
drop the next episode.
Wade Caldwell (35:33):
Again, Wade, thank you so much. Until next
time, listeners have a greatday.
Unknown (35:38):
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SUBSCRIBE And leave us a review
Hi and welcome to the oil and gas accounting
podcast. I'm your co host TomWireman, Executive Director of
Copus, the Council of PetroleumAccountants Societies. I'm here
with my co host Phil Sherwood,owner and founder of sure where
the provides software for oiland gas operators and
accountants. If you're a CPA, anaccountant, a bookkeeper and
office manager. Or if you're anoil and gas operator doing your
(00:22):
own accounting, this podcast isfor you.
Phil Sherwood (00:24):
We're here talking with the experts in
their respective accountingareas to keep you up to speed on
the latest accounting news rulesand data. There is so much
happening in the world today,especially in oil and gas that
affects the accounting functionof a business. Our job on this
podcast is to keep you up todate and help you see more, no
(00:45):
more and do more as anaccounting professional in our
field. Let's get started.
Welcome again to The Oil and GasAccounting Podcast. I'm Phil
Sherwood, and I'm here with myco host, Tom Wireman.
Wade Caldwell (00:57):
Hey, everybody.
It's good to be here with youtoday.
Phil Sherwood (00:59):
Tom, why don't you tell us a little bit about
the topic for today's episode.
Tom Wireman (01:03):
Our guest today is Wade Caldwell. Wade is the
President of the NationalAssociation of Royalty Owners.
I'm gonna let him give you alittle bit more about his
detailed resume. But his topicis the 10 biggest royalty owner
complaints about communicatingwith operators. And he's got a
modest proposal for that. SoWade, why don't you give us a
little bit about yourbackground. And we'll get
started.
Wade Caldwell (01:22):
Well, Tom and Phil, thank you very much for
having me today. I'm delightedto be on this podcast. And I'm
oil and gas attorney 63 yearsold. I live in San Antonio. And
I am on the mineral andlandowner side almost
exclusively, and also manage famfamily minerals for family
(01:43):
interests in mostly in WestTexas. But anyway, I've been
doing this for quite a while andreally enjoyed what I'm doing.
So thank you for having me.
Phil Sherwood (01:57):
Tom mentioned that you are the President of
NARO. Can you tell our listenersa little bit more about the
organization? What it does?
Maybe start with what theabbreviation that stands for.
Wade Caldwell (02:07):
NARO stands for National Association of Royalty
Owners. This is a 42 year oldorganization that's based out of
Tulsa. It's basically aeducation and advocacy 501c6
organization for mineral andRoyalty Owners around the
country. We have chapters in 11Different states or regions. And
(02:30):
we have several 1000 members.
That's one of the oldest andlargest of the royalty owner
organizations. And it's one ofthe very few that is national in
scope. The way it's set up isyou have chapters that form and
then advocate or educate on thison the state level for oil and
gas, mineral and Royalty Owners.
(02:54):
And then the umbrellaorganization or national board
keeps an eye on what's going onin Washington and tries to
advocate and educate on behalfat a national level for the
those members. So that's prettymuch what we do. And it's my
second year as president of theNational Organization. I'm
(03:16):
rolling off at the end ofDecember, but it's been a really
great experience.
Tom Wireman (03:23):
Well, again, thank you for being here with us
today.
Phil Sherwood (03:25):
Yeah, how many members? Did you say nationally
there are at NARO?
Unknown (03:29):
We have about 2,500 full time members. And you know
it fluctuates largely with theprice of oil. That's really
about the current membership.
Phil Sherwood (03:43):
And which state association would you say is the
largest?
Unknown (03:46):
Texas is the largest chapter as you would expect. The
organization was founded inOklahoma was actually founded
back in the 1970s to combat thewind windfall profits tax. So
it's kind of interesting to hearthat name again, being
circulated and grew out of thatorganization and established
(04:07):
chapters in these other states.
But Texas and Oklahoma are thelargest, but we have substantial
chapters in Ohio Appalachia, theRockies, Colorado, California
has a chapter Louisiana andanyway it's it's in primarily in
the oil and gas producingstates.
Tom Wireman (04:26):
You know, some of our listeners are operators or
they have departments thathandle revenue distributions to
working interested in RoyaltyOwners, what's changed in the
mineral community that wouldmake these companies rethink how
they communicate with theowners? And really kind of point
maybe to the point of whatyou're going to get to today.
Wade Caldwell (04:43):
Tom, the biggest change that I've seen is the
availability of community ofinformation to mineral and
Royalty Owners. You know, backin the old days, Mineral and
Royalty Owners were typicallyranchers and farmers in a local
community The if you needed toget deed records to find out who
else owned minerals around you,you had to go down the
(05:06):
courthouse or hire land man todo so or go to the local title
company. And to be able toexchange information, you have
to go down the Dairy Queen andbuy a cup of coffee that has
changed. In today, you haveinternet message boards, very
active on the mineral androyalty owner side exchanging
information. All of theexclusivity of the local deed
(05:29):
records is who owns what is goneaway. It's now available at your
fingertips if you know how torun a computer and know what
sites to go to. And so what thathas happened, what's happened in
along with organizations likeNARO is that middle and Royalty
Owners are able to shareinformation a lot more and are
(05:50):
willing to share thatinformation a lot more than in
the old days? And so it'sprobably been a good development
because it's caused a moresophisticated and knowledgeable
group of Mineral and RoyaltyOwners that deal with operators
on leasing or production issues.
Tom Wireman (06:08):
So what are the advantages for an operator for
improved communications with theRoyalty Owners?
Wade Caldwell (06:16):
Being on the Mineral and Royalty Owner side
and seeing the frustrations thatpeople have in dealing with
operators, the biggest advantageI see to operators in improving
their communications and theability of mineral and Royalty
Owners to get hold of them isreducing their complaints and
their questions for their staff.
I'm sure that most of youroperators think of the brand new
(06:39):
mineral owner that doesn't knowanything that just inherited it
from the parents and nevertaught them how to manage
minerals, they're unsure ofthemselves, they're scared,
they're frustrated, and you youget those calls. So you know, I
think that improvedcommunications reduces those
complaints. It also has othereffects of reducing audit
(07:03):
requests on royalties. It's allabout establishing trust with
your middle and landowners. Andif you improve your
communications, it allows you tobuild that level of trust. So
that then when you need to goback and do lease amendments,
get pooling, agreements,ratifications, other types of
(07:23):
agreements, you've got thatlevel of trust built up where
you get more cooperation, Ithink it also lowers your
leasing costs, because mineraland Royalty Owners want to go
with somebody that they trust,even if perhaps the bonus is not
quite as high as somecompetitor. And finally, it
lowers your legal costs andresults in cheaper settlements
(07:46):
when you do get into disputeswith owners. Because if they
view you as a cooperative andtransparent company, they're
more likely to I mean, I knowthere's exceptions to every
rule, but they're more likely tocause you less of a headache and
less expense. And mostimportantly, probably from the
COPUS point of view is bettermorale with your staff, not
(08:09):
having to deal with angry oruneducated middle owners all the
time.
Phil Sherwood (08:17):
You know, being a software provider, we have
software for operators, and wehave software for royalty
owners. And it's interestingwhen we go to talk to the
different groups, there seems tobe a big distrust between the
royalty and the mineral ownersto the operators. I think there
are some, maybe some biggeroperators in the past that have
given them reason to distrust.
How do you see the picture now?
Unknown (08:39):
It's improved quite a bit. Since I've been involved,
the level of mistrust has gonedown one reason is because of
the better communication amongmental and Royalty Owners.
Secondly, the availability ofinformation, mineral and royalty
owner knows what they're doingand go and can go find out what
information is available onlinebefore they make that first
(09:00):
phone call. It helps, you know,certainly there's still some
operators out there that have aprobably a well deserved
reputation for somebody to keepan eye on. But in general, you
know, I see the level ofmistrust going down. That's
good.
Tom Wireman (09:20):
You know, I remember back in the days when I
was kind of at shirttailrelationship with with royalty
owners, managing the revenuedepartment at the company that I
was at, we added a divisionorder department that really
took care of most of the issues,but owners sometimes depend on
those checks. And when theydon't come in for some reason,
and they've they've got anunexpected expense. And I
remember in this case, it was alittle lady from Weibull,
(09:43):
Montana, and the garage dooropener went out and she wanted
to know where oil Tech was shehit by a new garage door opener.
So you just it's interestingsome of the little details and
things that happen, but youknow, just spending some time
with her and explain why shedidn't get a check that month.
property was actually in herworkover. And she didn't really
understand all that. Sohopefully I got some golden
(10:05):
graces in her books, and shetrusted me come forward. But I
think that's what your point ishere to you is just spend that
time and help people understandwhat the issues are.
Wade Caldwell (10:14):
Yes. And you know, we've done some studies.
And you know, our estimates arethat there's over 11 million
mineral and Royalty Owners inthe US. And the average mineral
and royalty owner is aretirement age widow that's
getting about $800 a year inroyalties. So there are a lot of
(10:35):
small mineral and Royalty Ownersstill out there that have held
on to these minerals, becausethey see it as part of their
family heritage. And certainly,you know, they depend on that
money. So the idea that this is,you know, a bunch of large
landowners is really not thecase for the average person
Phil Sherwood (10:54):
is the US one of the few countries that allows
private ownership of minerals?
Wade Caldwell (10:59):
Yes, US and Canada have always had private
ownership, whereas many othercountries at the beginning of
the foundation of the countrydecided that they would own the
resource, the natural resources,ie Mexico.
Tom Wireman (11:14):
Phil, let's shift gears for just a minute here.
Again, your presentation wasentitled The top 10 complaints.
What the top complaint thatyou're hearing today from
Royalty Owners was number one?
Wade Caldwell (11:24):
By far the largest complaint is operators
that can't be found, you get anotice that the operators
changed in this is mostlysmaller operators. And there's
no website, if they if they havea telephone number on the check,
although they're supposed tohave a telephone number, it goes
to voicemail, there's no emailto contact anybody. If you leave
(11:50):
a voicemail, the calls don't getreturned. And so immediately,
that puts the middle royaltyowner in the position of having
to write letters. And if they'vegone to that trouble, they're
probably mad already. So I wouldurge every operator to have a
website, to have an ownerrelations page, to have good
information on that ownerrelations page to try to get out
(12:13):
the appearance of being easy tocommunicate with, they'll
respond to emails quicklyrespond to telephone messages
just to get left on a voicemailbox. So that's by far the
biggest complaint is just thesmall operators that make
themselves hard to find.
Phil Sherwood (12:32):
The ideal with a lot of small operators, and I do
know that a lot of them do nothave websites. So that would be
probably one of the biggestthings because when you go to
look for information, you'regonna go to Google first thing
and those companies website isgoing to come up. So that is a
great suggestion that everyoperator have their own website,
it just has to be a one pagewebsite with your contact
(12:53):
information. Pretty much. Butyeah, what would you say the
number two complaint is?
Wade Caldwell (12:58):
The number 2 complaint is about owners that
get put in suspense, and aren'ttold that they've been put in
suspense, you know, some titleissues come up. And maybe it's a
well, that they're only gettinga check on once a year. And it's
a small check. And you know thata lot of them just don't realize
that they've been put insuspense, and they're not
(13:20):
getting checks anymore. And sowe actually tried to get a law
passed in Texas that would haverequired a mandatory notice be
sent to owners if they get putin suspense. We weren't able to
get that passed in the lastsession. But we're going to try
again, in the upcoming session.
In a lot of a lot of these I'verun across many cases where
somebody got put in suspensebecause of a computer error, or
(13:42):
a cheque that got returnedbecause the post office messed
up. And if there was somemechanism in place where there
was an effort made to contactthose people and let them know
that they've been put insuspense. I think it would help
a lot in terms of ratchetingdown the level of mistrust.
Tom Wireman (14:03):
I guess what you're what you're saying a little bit,
too is so I have siblings and alot of other Royalty Owners and
things have siblings. So I getmy check and my sister doesn't
get hers, she immediately thinksokay, what's going on? Why did
you get your check? I didn't getmine. And that's back to the
point here. If it was a computermistake where something got
overridden in the system or thepost office returned the check
(14:24):
for no apparent reason. Maybethrough no fault of her own. She
signed the division order andeverything and no fault of her
own she she got suspended so butyou know, I'm sure she would be
feeling like something wasn'tquite right. And she'd be a
little upset about I guessthat's kind of the point that
you're making here. So
Wade Caldwell (14:42):
Yes, and there's some I think benefits for
operators here that if you ifthere is a title dispute that
comes up is to notify the themineral and Royalty Owners or
get put in suspense because ifthey decide that they need to
file suit to clear up that titledispute, they're a lot less
likely to include the operatorin that lawsuit. If they feel
(15:06):
like the operator was proactiveand let them know what the
dispute was, and who was raisingit, and make the fight between
the owners that have the disputeand not involve the operator.
Tom Wireman (15:18):
That's a good point. You mentioned when we
were talking earlier about, youknow, making sure that we have
good relationships between theoperator and the royalty owners.
And you mentioned, you know,things for reasons such as lease
amendments and that sort ofthing. But what about
allocation? Wells? Are youhearing anything about that?
Unknown (15:37):
Yes, that's a very hot topic. In Texas, at least,
people are getting divisionorders for allocation wells. And
it's really impossible to checkto see if your royalty interest
is correct, unless you know whatthe allocation formula is. And
so some operators will includethe plat, and they'll tell you
(15:59):
what allocation formula theyused, and how much of the
wellbore was on your tractversus your neighbors to make it
easy to do. But there's a lotthat don't. And so, I do suggest
that operators if they aredrilling allocation wells
provide that information alongwith the division order. I think
it again, helps reduce calls andcomplaints, it also results in a
(16:24):
higher percentage of divisionorders getting signed and
returned. So that's been a bigissue in Texas, people are
learning what allocation wellsare, but they still need the
basic information to be able tocheck the figures, correct.
Phil Sherwood (16:39):
You know, what happens when operators failed to
obtain the consents requiredunder a lease? You know, they
failed to notify they've beenput into suspense, there's a
title thing? Or are they youknow, the leases, they have to
consent to have something doneon their property? Or their
Well, what? What types of thingscome up then?
Wade Caldwell (16:57):
That's a bit of a major area of complaints, you
know, if you have a lease thatrequired your consent for
pooling. For example, first ofall, you know, not setting up
your lease in your system toflag those issues, is a common
mistake that I see made. And youknow, it can have really
(17:19):
disastrous results foroperators, they fail to get
pooling consent. And it's asubstantial owner in the wells
on their tract. And they say,No, we don't agree, you know,
the wells have been drilled andthe checks are going out. And
they say, Hey, we don't agree tothis unit, you got to shrink it
down. And you know, it cancreate a lot of havoc. So the
(17:42):
failure to obtain consent,whether it's pooling, or if
you've got a surface owner,you're dealing with on the weld
location, or laying flow lines,you know, those types of issues
that are commonly put into alease that require consent.
Tom Wireman (17:59):
I've been to conferences before I'm thinking
about one in particular, when Iwent to the, the one you want,
like geske, for instance, StateCollege, Pennsylvania, this was
early on, and people were tryingto understand why their checks
had deductions that theirneighbors didn't have any. And
again, you talked a little bitearlier about how people compare
information and notes back thenit would have been a lot more
(18:22):
manual. But what issues are youseeing with like post production
deductions and things from fromchecks of the royalty owners?
Wade Caldwell (18:30):
Well, the biggest issue is companies that are
taking deductions on nodeduction leases. And I can't
tell you how many operators havecalled when you get the first or
second check and see that andthey say, oh, sorry, we just, we
messed up when we set it up inour system. But again, that's a
intake and flagging issue withthe operator that needs to those
(18:55):
safeguards need to be put intoplace. And the second thing I've
seen commonly is where a newoperator takes over and they
reevaluate the leases and decidethat it does allow them to take
deductions, and they state starttaking deductions on wells that
haven't had deductions taken onthem for years. So to me, the
(19:19):
the being able to reduce thosecomplaints on the operator side
starts with a check stubtransparency, you know, having
codes on the bottom that you'resupposed to have under most
state laws as to what thedeductions are for possibly
adding to your owner relationspage on your website, an
explanation of the deductionsand why they're necessary from
(19:42):
the operator point of view. Italso gives the operator the
chance to put their story outthere as to why they need
particularly on gas productionto be able to deduct some of
these expenses. You know, a lotof less sophisticated mineral
owners that may be getting paidon an old Amid finished product
out of the gas plant don'trealize that those deductions
(20:05):
may be benefiting them becauseit's making them more valuable
product to sell. So those arethe types of issues that we see
that are the complaints that aremost often raised.
Tom Wireman (20:20):
One thing I was going to ask you to just if this
kind of stuck in my mind. Iremember back in the day, is
North Dakota, the only statethat's pretty, very
prescriptive, I guess, in termsof what their check stub detail
looks like, or states adoptedsimilar kinds of things? I know,
I know, it was very, very clearat one point that you had to
have all the attributes that thestate required is that it's
(20:43):
common now? Or is that just kindof state by state?
Wade Caldwell (20:46):
Yes, most of the oil and gas producing states
have some sort of checks todisclosure law. Texas has a
pretty good one, Oklahoma has apretty good one, in what I see
more often is particularlysmaller operators that just
don't follow what the lawrequires. But even beyond that,
(21:09):
may be possible to comply withthe law, but still not give
enough detail that's a mineralowner can look at the check stub
and in really understand whatthe deductions are for whether
this processing transportation,marketing, compression, whatever
the the type of deduction maybe.
Phil Sherwood (21:29):
So what complaints that you receive
regarding ratifications?
Wade Caldwell (21:32):
Ratifications is a important issue, particularly
for non participating RoyaltyOwners, which there are a lot of
them out there. They don't evenknow that Elise has been done.
In many cases, they don't knowthat a well has been drilled.
And here they get a ratificationand a division order in the
mail. And so, you know, theirfirst question is, well, what,
(21:55):
what lease got signed here? Andso I've always wondered why, if
you're going to send somebody aratification, ask him to ratify
a lease or a pooling agreement.
Why don't you just go ahead andinclude the underlying lease and
the pooling agreement withratification, because any more
sophisticated middle enrolled,the owner is not going to sign
(22:15):
that until they get a copy ofthat document. So to me, it
again, builds credibility by theoperator to provide that
underlying document withouthaving to request it.
Phil Sherwood (22:29):
It seems like, again, this is communication
coming up again, do you thinkit's better for operators to
over communicate with theirmineral owners? I know some
operators, they like to send aslittle as possible to try to
avoid questions, because some,sometimes the more information
you get, the more questionsthere are. What do you say on
that?
Unknown (22:49):
Well, I can see that, you know, if you are, it may
provoke more questions from lesssophisticated owners. But the
things that I'm suggesting hereare things that a reasonably
sophisticated owner, or is goingto ask for and so it's really,
you know, like providing theunderlying document with a
(23:10):
ratification agreement. If thatprocedure or safeguard was built
into the system on the operatorside, is going to first
eliminate all those follow upcalls. And, you know, again,
build trust, let's say you weredealing with a very
sophisticated owner, and theysaid, Hey, man, this guy sent me
(23:32):
the lease without me even havingto ask for it. And when he sent
me this ratification. I likethat company. It builds that
level of trust, and probablyreduces the level of phone calls
that you get, you know, andparticularly in an example like
that, I don't see that it'sgoing to generate more phone
(23:53):
calls by including theunderlying lease along with a
ratification request, ifanything is going to result in
less phone calls.
Tom Wireman (24:01):
By my count, we're kind of up to point number seven
in your tenant complaints. Whatcan operators do to help educate
owners? Because I think one ofthe points that you've been
making along the way is that,you know, owners just they can't
educate themselves necessarily.
So they need some help, what canoperators see to help that?
Wade Caldwell (24:19):
You know, I think that operators need to realize
that if they've got the angryperson on the phone that really
doesn't know about minerals.
They may be upset because theirparents didn't explain this to
him. They may be upset becausethey don't get along with the
siblings and the siblings arenot sharing information with
them. And so I think it's itwould be helpful if operators
(24:42):
were to help guide mineralowners to the organizations that
are out there groups like Nehru,Texas Land and mineral Owners
Association, Nadella that have alot of information that somebody
can go and read.
mineralrightsforum.com. Forexample, if you're providing
(25:04):
that information, I've alwayswondered why they don't include
with the, if you've got a newowner that just took over
because dad or granddad died,why there isn't some sort of
flyer that goes with thedivision order or transfer order
that says, hey, here's the listof organizations that you may
(25:24):
want to check on To find outmore information about mineral
and royalty ownership. Becauseto me, a more sophisticated
mineral and royalty ownerreduces workload for operators
rather than increases.
Phil Sherwood (25:38):
Yeah, those were a lot of great resources.
Another one would be the MineralRights Podcast.
Wade Caldwell (25:47):
Yes. Yeah, that's a great pod podcast as well.
Phil Sherwood (25:51):
There's a complaint probably when
agreements and paperwork gettinglost. Do you have any thoughts
here on how the operator canhelp Royalty Owners when they've
misplaced agreements, so theycan't find the least they can't
find their paperwork?
Wade Caldwell (26:05):
Yes, you know, understanding, again, you may be
dealing with somebody who's thefamily's fractured in this, the
sibling or the executor of theestate, is not given in that any
information. So they'refrustrated and upset, they don't
have a copy of the lease, theydon't know how to go and find,
and usually the leases are notin the deed records anyway. And
(26:29):
so to me, it builds a lot ofcredibility with that owner, if
you provide them last documents,like leases, like a pooling
consent that's been signed or aunit, you know, to zation
agreement that's been signed itmost operators have it at their
fingertips at the end of acomputer mouse and consented
pretty easily. And so I thinkthat providing those agreements
(26:53):
to owners is a constructivething that that helps operators.
So it and also may answer a lotof the questions that people
have, like, you know, theythey'd call about post
production deductions on theircheck. Well, email them, the old
producer, at least that grandpasigned to show that, yes, those
(27:15):
deductions are allowed, and thatprobably is going to be the end
of the conversation. But if yourefuse to provide that lease,
then you know, you get theformal notices pursuant to state
law to provide that you have torespond to and to me, I just
think that anything that you cando to help provide that
(27:35):
information to him is probablygoing to reduce your workload in
the long run.
Where do you see operatorstrying to mend leases through
the division order process? Isthat Is that a concern?
It is, you know, the law is alittle bit murky on that in some
states. You know, in Texas, forexample, you can revoke any
(27:56):
division order you sign with 30days notice. But, you know, we
have seen some operators thatparticularly try to get language
on post production deductions,and put into the division in
order that maybe the leasedidn't allow. And so, you know,
most states have a statemandated division order form
(28:19):
that the operators have toaccept. If they don't, there's
the Nadella form out there. Andsince I haven't seen any big
advantage to an operator to tryto gain any legal leverage by
including stuff in a divisionorder that doesn't really belong
there. So my pitch withoperators to stick with the
(28:41):
Nadella are state mandatedforms. And it's going to reduce
your workload, because theyagain, the people they're going
to catch that are the moresophisticated owners, they're
going to send you a nasty lettersaying, Okay, I'll see you tried
to amend my lease, well, here'sthe state mandated division
order that I've signed. And thenyou've got to go back and check
to see they didn't changeanything. Or change the, the Ri
(29:05):
on the division order that theythey created themselves and
signed and sent back to you. Soagain, I would discourage
operators from trying to dothat.
Tom Wireman (29:17):
What about portals and things? I mean, I know
that's probably one of thethings that you'll get into here
a little bit more, but is thatsomething that that NARO is is
really, I guess promoting,
Wade Caldwell (29:28):
I don't know the NARO is promoting it, I've been
promoting it, because that'sthat's really the way that I see
this going. You know, you've gotthis great explosion of
information that's available tomineral enrollments, theatres,
inverse with buying every checkprocessing company they can get
(29:50):
their hands on, and theoperators that are pushing
mineral and Royalty Owners toget their check stub data
electronically, because once youget it set up, it's a lot He's,
you're on the owner as well. Andso what I see this going to is
really a form of a portal thatoperators should set up for
(30:11):
their owners. Where you and I'vedone this for to get drilling
reports, you know, the, theoperator provides me a portal
that I log in and pull drillingreports on. Well, that's been
drilled, you know, there'sportals that exist for check
stub data. Why are those portalsbeing expanded to a a owner
(30:32):
portal in general, where theowner of ll say, Okay, here's
the production on my wells,without having to rely on the
delayed data that's comingthrough a state agency website,
for example. They can go in andmaybe get more detail on the
deductions that have been takenand answer their questions so
(30:54):
that you don't get emails orletters asking for audits, I
think that would first smalleroversee would probably eliminate
the need for them, you know,having to get a CPA to set them
up, if they had a way to go getdigital data directly
themselves. So anyway, I justsee a lot of benefits to these
(31:15):
baby steps of little miniportals and different facets of
middle ownership being combinedinto one big portal. And, and,
you know, it's, you know, thesecurity on it, I think can be
set up. I know, it's just ahassle to monitor the security
with all the tricks going on outthere. But it seems to be the
(31:37):
way that we're heading.
Phil Sherwood (31:39):
What would ideally be included in a portal
like that you talked aboutdrilling reports, check stub
data, what other types ofinformation would you like to
see out their production data?
Wade Caldwell (31:50):
You know, if a wells been shut in for being
worked over, and there's a delayin when it's reported to the
state, and when the owner can goand get the information from the
state. And usually, it's beenmore than the 60 to 90 days work
over provision in a lease, butthat that information is
(32:11):
available to the operatorimmediately. So if there was a
note, okay, well, we'll shut into replace the downhole pump.
That's one saved phone call orone save letter that you don't
have to respond to. And sothose, that's the type of
information that I see ownerswould want through an owner
portal.
Phil Sherwood (32:31):
Would they like to see like the joint agreement,
the lease agreement out thereany any kind of documents
associated with it?
Wade Caldwell (32:38):
Well, that would be nice to have, you know, if
they could go in and get theirmissing documents through the
portal, particularly when youhave a change of ownership,
somebody dies, and all thedocuments got tossed in the
estate sale, or the house cleanout, you know, it helps new
owners rebuild their library.
And, again, this is stuff that'sprobably already set up on the
(33:03):
land side. Even if it's justavailable, it would, I think in
the long term, you know, there'sthere's a lot of, I can't
downplay the amount of time itwould take to set this up and
implement it. But if the longterm workload should be less for
operators, in a lot ofcircumstances,
Tom Wireman (33:23):
Thanks Wade maybe just to wrap things up. Today,
you've given those of usinvolved in revenue
distribution, some helpfulguidance and addressing
ownership complaints or ownercomplaints from there, but maybe
summarize just a handful ofthose key points for our
listeners today.
Wade Caldwell (33:37):
If you're looking for a top five, it would be
number one. Have a website and agood owner relations page;
return your emails and phonecalls on time. Number two is to
provide the allocation formulas,the Azrael plat and the
allocation formula being usedwith allocation wells. Number
(34:01):
three would be to providemissing documents that an owner
needs without making itdifficult for them. And Number
four would be to provideparticularly on ratifications
the underlying document thatyou're asking people to ratify
those things of and bythemselves would I think, build
(34:24):
that credibility with yourowners, help your owner
relations reduce stress on yourstaff from having to deal with
angry or, or upset people, andin the long term, reduce your
workload.
Phil Sherwood (34:39):
Great, thanks.
Yes. Very good. Thanks for beingour guest today, Wade. This has
been a really interestingdiscussion. Sitting here taking
notes, and we provide for a lotof our operators for uploading
documents. So I wanted to pickyour brain to see what what
other stuff we should Add to theportals that our operators have.
(35:01):
So, thanks for providing thatinformation through a
conversation.
Wade Caldwell (35:08):
Thank you for having me. I've enjoyed it very
much.
Phil Sherwood (35:12):
Well, that wraps up this episode. Thanks to
everybody for listening, Wade'scontact information and such
will be included in the shownotes if you wish to contact him
if you have more questions aboutRoyalty Owners and royalty owner
associations. Also, please leaveus a rating and review on Apple
podcasts. Subscribe to the showso that you're notified when we
drop the next episode.
Wade Caldwell (35:33):
Again, Wade, thank you so much. Until next
time, listeners have a greatday.
Unknown (35:38):
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