Why a Potential Client May Need a Louisiana Attorney for Unpaid Mineral Royalties

Under Louisiana law, mineral rights and royalties are governed by the Louisiana Mineral Code (La. R.S. §§ 31:1 et seq.) and other related statutes. Determining whether a client is owed unpaid mineral royalties often involves navigating complex legal and contractual issues unique to Louisiana. Here’s why hiring an attorney is essential:

1. Determining Whether the Client is Owed Unpaid Royalties

• Ownership and Title Issues:
  • Mineral rights in Louisiana can be fragmented over time due to inheritance, sales, or unrecorded transfers.
  • An attorney can:
    • Perform a title examination to confirm ownership.
    • Resolve title defects that may hinder royalty payments (e.g., missing deeds or unrecorded wills).
• Lease Agreements:
  • Mineral leases in Louisiana dictate royalty payments and their terms. Common issues include:
    • Misinterpretation of lease provisions.
    • Failure to pay the agreed-upon royalty percentage.
  • An attorney can review the lease to determine if the oil and gas company is complying with its obligations.
• Royalty Calculations:
  • Louisiana law requires royalties to be calculated based on the value of production. Discrepancies may arise due to:
    • Underreporting production volumes.
    • Deductions for costs (e.g., transportation, processing) not authorized by the lease.
  • An attorney can audit production and payment records to verify the accuracy of royalty payments.

2. Why an Oil and Gas Company May Withhold Payment of Royalties

Under Louisiana law, oil and gas companies may legally withhold royalty payments in certain circumstances, but this must be justified. Common reasons include:

• Ownership Disputes:
  • If there is uncertainty about who owns the mineral rights, payments may be withheld until ownership is resolved.
• Unmarketable Title:
  • Louisiana Mineral Code allows companies to suspend payments if the title to mineral rights is unclear or defective.
• Payment Thresholds:
  • Companies may delay payments if royalties owed are below the threshold specified in the lease or allowed by law.
• Disputes Over Lease Terms:
  • Disagreements about the interpretation of lease provisions, such as allowable deductions or royalty percentages, can lead to payment delays.
• Production Issues:
  • Payments may be withheld if there are disputes about:
    • The volume of production.
    • The market price used to calculate royalties.
• Errors or Oversight:
  • Administrative mistakes, outdated ownership information, or reporting errors can also result in nonpayment.

3. Resolving Unpaid Mineral Royalty Issues Under Louisiana Law

Louisiana law provides specific remedies and procedures for addressing unpaid royalties:

A. Negotiation and Demand for Payment

• Royalty Demand Letter:
  • Louisiana Mineral Code (La. R.S. § 31:137) allows the mineral lessor or royalty owner to demand payment.
  • An attorney can issue a formal demand letter specifying the amount owed and citing relevant lease provisions or statutory requirements.
• Company Response:
  • The lessee (oil and gas company) has 30 days to respond or provide a reasonable explanation for withholding payment.

B. Enforcement of Royalty Obligations

If the company fails to pay after a demand, an attorney can pursue further remedies:

• Statutory Penalties:
  • Under La. R.S. § 31:139, if payment is unjustly withheld, the company may be liable for:
    • Interest on unpaid royalties.
    • Attorney’s fees.
  • These penalties provide leverage in negotiations and legal proceedings.

C. Resolving Ownership and Title Issues

• Title Curative Work:
  • An attorney can resolve defects in title by:
    • Filing corrective documents, such as affidavits or successions.
    • Resolving disputes among co-owners or heirs.
• Partition by Licitation:
  • If ownership disputes persist, co-owners can file for a partition by licitation (court-ordered sale), dividing proceeds among rightful owners.

D. Litigation

If negotiation fails, an attorney can initiate a lawsuit to recover unpaid royalties:

• Breach of Lease:
  • The oil and gas company may be sued for failing to fulfill its contractual obligations under the lease.
• Violations of the Mineral Code:
  • The company may be held liable for statutory violations, including bad faith withholding of royalties.
• Class Action:
  • If underpayment affects multiple royalty owners, a class action may be pursued under Louisiana law.

E. Alternative Dispute Resolution (ADR)

• Mediation:
  • Attorneys can facilitate mediation to reach a resolution without the cost and time of litigation.
• Arbitration:
  • Many leases include arbitration clauses, requiring disputes to be resolved through binding arbitration.

4. Benefits of Hiring a Louisiana Attorney

• Understanding Louisiana Law:
  • The Louisiana Mineral Code and civil law system are unique. An attorney ensures compliance and effective application of these laws.
• Accurate Evaluation:
  • Attorneys analyze leases, payment records, and production reports to identify underpayments or noncompliance.
• Enforcement and Advocacy:
  • Attorneys can enforce rights under the lease and Mineral Code, using demand letters, litigation, or negotiation to recover royalties.
• Title Clarity:
  • Attorneys resolve ownership and title issues that delay payment, ensuring rightful heirs or owners receive royalties.

Conclusion

Under Louisiana law, unpaid mineral royalties often result from ownership disputes, lease ambiguities, or oil and gas company practices. A skilled Louisiana attorney:

• Determines whether royalties are owed.
• Resolves title or ownership issues.
• Uses statutory remedies and legal action to secure payment.

Contact me today to ensure your rights as a mineral owner are protected and to recover the royalties you are entitled to under Louisiana law.