Minimum Payment State Statutes

You have probably heard the term "marginal well" used in the oil and gas industry. A marginal well, sometimes called a "stripper well", is often defined as a well that produces less than ten barrels of oil or 100,000 cubic feet of natural gas a day. Currently, there are more than 67,000 active marginal wells in Oklahoma and 95,000 in Texas. The livelihood of some of these marginal wells is threatened by the inability of the producer to economically sell product due to excessive administrative costs. Even as production decreases, the number of royalty owners often increases due to heirship and assignments. In some cases, the monthly royalty payment may be less than the cost of issuing the check.

The new laws that were passed in Kansas, Oklahoma, Texas and Louisiana allow a reduction in the number of checks that must be written, not the total dollar amount paid. This affects proceeds from property located in Kansas, Oklahoma, Texas and Louisiana. See Provisions. 

Issuing fewer royalty checks can create beneficial savings for everyone involved. Often, it can cost more to write and send a check than the actual check amount. By lowering costs, the new laws create the potential to keep some wells producing longer and may encourage drilling of new wells. See Benefits.

As a royalty interest owner, operator, or investor you are a vital member of the oil and gas industry, please consider the benefits of cost reduction before exercising your option to receive more frequent payments.