When it comes to mineral management, you might one day find your funds in suspense. What does this mean? Oil and gas companies are responsible for regularly distributing royalty payments to holders of mineral and royalty deeds. These operators don’t want to make a mistake or pay the wrong people, so they may put funds in a suspense account and hold payment if something doesn’t line up.
The good news is that there are simple explanations why, and there’s almost always something you can do about it. Whether you’re dealing with money currently in suspense or are just trying to make sure it doesn’t happen to you, knowing why it happens and how to fix it can be extremely valuable for mineral owners.
Why Is Your Money in Suspense?
There are a few common reasons why your funds might be stuck in limbo. It could be as simple as an incorrect address or an unreturned form, such as your Division Order or W-9. It could also have to do with an error in your title that needs to be addressed before things can move forward.
If it’s not a matter of documentation, then chances are there’s some problem involving the determination of the rightful owner of the property. Ownership might have been improperly transferred between relatives, or there may be a complicated dispute between multiple parties.
While an ownership issue will present greater difficulties than a problem in documentation, there are solutions. You just need to know your best course of action.
How to Deal With Funds in Suspense
If you’ve determined that your obstacle stems from a missing or incorrect document, then getting your funds out of a revenue suspense account should be straightforward. Simply making the necessary corrections or turning in the missing documents should likely solve your problem. However, if the title is at fault and it’s not a simple clerical error or typo, then you’ll need to go through the title curative process to solve any defects in chains of title.
If there’s a dispute over the deed or question of legal ownership, you may need to file a claim in probate, a motion to determine the inheritance of the property, or a title action. While you can file these things yourself, it would be wise to enlist the aid of professionals with experience in this area. This might seem intimidating, but many of these problems can be cleared up relatively quickly with the right team in your corner.
3 Mineral Asset Management Strategies
That said, when it comes to dealing with funds in suspense, the old saying holds true: an ounce of prevention is worth a pound of cure. Here are three ways to help ensure your money doesn’t end up in a revenue suspense account:
1. Stay organized. It can be difficult to keep track of all the documents and updates associated with your mineral assets. But by making a concerted effort to organize things and put everything in one place, you’re much less likely to let vital documents slip through your fingers or miss errors that could end up costing you down the road. In today’s world, you’ll likely want to consider digital organization methods, tools, or platforms. Technological capabilities allow you to more efficiently keep track of your assets.
2. Keep the lines of communication open with operators. Stay in touch with the operators you lease with. By keeping the lines of communication active and open, you’ll be more likely to proactively hear about unexpected problems instead of after your funds have been suspended.
3. Enlist experts at the start. Instead of waiting for something bad to happen and then hiring an expert to fix it, consider hiring a professional firm to handle your mineral assets from the start. This will not only make it less likely that your money will be suspended, but it will also unburden you of most management responsibilities. You won’t need to spend time tracking down and contacting operators.
The main point to remember: Whether you’re trying to prevent suspension or dealing with its fallout, you must be proactive and act quickly. The faster you can identify the problem and resolve it, the faster you’ll have your funds at your disposal.
Jason Beck is the director of land and mineral management at Valor, a specialty asset services provider focusing on mineral management, oil and gas operator services, accounting, and back-office outsourcing.
The information provided by Valor in this blog is for general informational purposes only, not to provide specific recommendations or legal or tax-related advice. The blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.