Missing Oil and Gas Royalty Revenues
We often get asked about missing oil and gas royalty revenues. Usually, the request comes from a descendant that recalls grandma receiving checks from an oil and gas company long ago. The most common reason oil and gas royalties go MIA is because the owner has passed away. Once the oil and gas company paying the royalties realizes the royalty owner is deceased, they typically will immediately suspend the account until they receive the necessary legal documentation to put the beneficiaries of the royalty estate in pay status.
How does the oil and gas company know to suspend the oil and gas revenues? One of three things usually happens: the person representing the royalty estate notifies the company of the death, the company receives returned mail such as a royalty check or 1099 as undeliverable, or the company discovers an owner is deceased after routinely searching the social security death index.
So what happens to royalties from oil or gas production once an account is put into suspense? Depending on the state’s escheat requirements, companies can only hold the suspended royalty funds for so long before they must hand it over to the state. This is why we suggest visiting the state unclaimed property sites to see if there are any unclaimed royalties listed. Understand that companies report the unclaimed oil and gas royalty revenue to the state of last known address. If the address of the oil royalty owner is unknown, the unclaimed funds may be reported to the state in which the oil and gas company is incorporated. Often times this is Delaware due to favorable incentives to incorporate in Delaware. Websites like www.unclaimed.org are a good starting point for your unclaimed royalty revenue search and will direct you to the individual state unclaimed sites. If unclaimed revenues are listed, the company who escheated the funds should be listed as well and contacting them will be your next step.