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Division Order Antics by Oil Companies

I don’t know about you, but out here in Oklahoma there are a lot of division orders being sent out to mineral owners for the recently-completed wells that have been drilled in Beckham, Roger Mills, and other nearby counties. I expect the same is true for other areas of the state with activity as well.

After taking a look at one of those division orders recently I grew concerned that some of the language contained in it was contrary to what I’d agreed to in my lease. Now as most of you, in Oklahoma at least, have been told, a division order cannot change the terms of your oil and gas lease. I had also heard that said so decided to look up the section of the Oklahoma Statutes pertaining to division orders. Title §52-570.11 reads in part:

Terms of a division order which conflict with the terms of any oil and gas lease are invalid, unless previously agreed to by the affected parties. This subsection shall only apply to division orders executed on or after July 1, 1989.

That sounded pretty good to me, until I got to that bit about “unless previously agreed to by the affected parties.” What does THAT really mean? Answer is I’m not really sure there is a definite answer because I don’t think any court has readily ruled on exactly how that language is to be interpreted.

An oil company might argue that “previously agreed to” means once you’ve signed the division order you’ve (previously) agreed to change the terms of your lease for as long as the division order is in effect (division orders are revocable by either party of course.) A mineral owner on the other hand, would likely argue that unless there is language in the lease stating that he/she agreed to be bound by the terms of a division order later signed, then signing a division order would not change or override any terms of the lease, even temporarily.

Since the “previously agreed to” language in the §52-570.11 is, in my opinion, still open to interpretation I always assume that signing a division order WILL change the terms of my lease for as long as the division order is in effect, and so I will either “strike” any language in the division order that attempts to change the terms of my lease, or will simply request they send me a NADOA Model Form division order instead, which basically just states my “name, rank, serial number” without all the confusing and troublesome language found in some division orders that are being sent out.

The purchasers and oil companies can read Title §52-570.11 as easily as you or I can, and the fact that they still send out division orders that conflict with the terms of the oil and gas leases they agreed to leads me to believe that they feel the “previously agreed to” language will in fact allow the division order terms to control as long as it is in force. Until an Oklahoma court rules on this I will always strike any offending language before signing and sending back a division order I’ve been asked to sign.

While signing a division order is not required in Oklahoma in order to receive payment (HULL v. SUN REFINING AND MARKETING CO. 789 P.2d 1272 (1989) I find it best to sign one if it’s in an acceptable form so that everyone is agreed on what you own. After all, a division order is, by definition, “…an instrument for the purpose of directing the distribution of proceeds from the sale of oil, gas, casinghead gas or other hydrocarbons…” Purchasers need to feel confident that they are paying the correct parties, in the correct amounts.

Frederick M. “Mick” Scott, CMM, RPL

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