A Few Things you Need to Know about the Reporting of Unclaimed Mineral Proceeds

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A Few Things you Need to Know about the Reporting
of Unclaimed Mineral Proceeds
NAST Treasury Management Conference Scottsdale,
Arizona 12.5.04
Presented by Paula Smith Executive
Consultant
People Making Technology Work
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U.S. Oil Production

• U.S. is ranked eleventh highest in the world for
  proven reserves
• 80 of proven reserves in the U.S. come from
  Texas, Alaska, Louisiana, and California

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Factors that may impact how much unclaimed
property is reported

• Technology

• Price of Oil and Gas

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There are royalty owners in every state in the
union. Just because a state does not have oil,
gas or coal production, does not mean that the
state will not receive unclaimed property for
state citizens.
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Colorado About 2 of its unclaimed property came
from mineral proceeds last fiscal year Kansas
About 6.5 of the total number of owners reported
own unclaimed mineral proceeds Maine Has
received more than 50,000 in mineral proceeds
over the last 8 years Texas About 2 of
collections, 4.5 million dollars, came from
mineral proceeds last fiscal year.
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So what are the five things an unclaimed property
administrator needs to know?
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5. Terminology

• Suspense
• Aggregation
• Division Orders
• Fractionalization
• Lessor/Lessee
• Current Balance (or Current Pay)

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22 States now have current balance provisions
AL, AK, AZ, AR, CT, IN, KS, LA, ME, MA, MT, NE,
NJ, NM, NC, ND, OH, OK, TX, UT, WV, WY
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4. Who is the key source of information in an oil
and gas company?
Company Division Order Analyst
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3. Common Misconceptions

• The company only has to report to the state of
  production
• If property is suspended, it does not have to
  be reported

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2. Information Resources
Oil and Gas Law in a Nutshell by John Lowe,
published by West Chapter 9A, Unclaimed Property
Owed by Mineral Producers and Purchasers
Unclaimed Property Law and Reporting Forms by
David Epstein et al. www.nadoa.org www.naro-us.org

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1. A mineral interest is different from mineral
proceeds
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The owner of an underlying mineral interest may
have some of the following responsibilities

• May have a duty to reclaim the surface after
  surface mining
• May only use and occupy the surface land for
  purposes reasonable necessary for oil and gas
  production
• Owner or lessee may be liable under theory of
  nuisance for failure to fill abandoned wells and
  failure to remove cement foundations and
  equipment
• Negotiates the term of the lease

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Virtually all state unclaimed property laws are
drafted to avoid the state or unclaimed property
administrator from taking custody of the
underlying mineral interest.
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Questions
Paula Smith Executive Consultant paula.smith_at_acs-i
nc.com 617-722-9602