Oklahoma Watch: Unclaimed mineral-rights money ends up in state coffers

Increase in oil and gas production leads to increase in unclaimed royalty payments
BY CHASE COOK, For The Oklahoman Published: February 24, 2013
Advertisement
;

“It's a really cool thing. It's your birthright,” Sikes said. “To maximize it, you have to pay attention to what you have.”

The unclaimed accounts have swelled in recent years because of a boom in leasing activity and oil and gas production from new wells. Oklahoma now produces more oil and natural gas every month than it has in at any point in the preceding 19 years, according to the U.S. Energy Information Administration.

The boom is largely attributable to the advent of horizontal drilling technology, which has opened the door to drilling in shale formations where traditional vertical drilling was not considered feasible.

State officials say among the reasons most royalty owners never claim their payments is that they have no previous experience with the oil and gas industry or don't know they have mineral interests. Nevertheless, the state must hold their money indefinitely.

The treasurer's office says one of its entries dates back to 1974. If the owner ever steps forward, he or she will receive a whopping $7.44. The state began keeping track of mineral owners in 1967.

Even when owners do file claims to retrieve payments, they end up with less money than they were originally owed. The state charges a 10 percent fee when the money is first deposited from force pooling leases. The money also diminishes in value over time due to inflation. Owners get none of the interest or investment returns.

The state is required by law to publish a list of the newest names of mineral owners who can't be located twice a year.

The treasurer's office maintains an online database, searchable by name, listing all unclaimed deposits and whether they are worth less or more than $100. It also sets up booths every year at the state fairs in Oklahoma City and Tulsa, where people can check the database.

The state stores the money in two accounts.

When oil and gas companies make payments owed to missing mineral owners in force pooling agreements, they deposit it with the Oklahoma Corporation Commission's Mineral Owners Escrow Account. The deposits remain in that account for five years. Then they are transferred to the state treasurer's Unclaimed Property Fund, from which the state can borrow.

The Unclaimed Property Fund also receives other direct mineral-rights payments from oil and gas companies. Typically, in these cases, the companies have lost track of mineral owners who had already struck a deal with the company.

Almost every year, the state borrows from the fund, which also includes money from abandoned bank accounts, unclaimed paychecks, stocks, utility deposits and other sources.

During each of the last four years, the treasurer's office has made $10 million of the deposits available for appropriation by the Legislature. The Legislature has also dipped into the fund periodically to plug budget gaps. During the last two years, those allocations totaled $42 million.

Between the two accounts, if every person owed funds stepped forward at the same time to claim their share, the state would be obligated to pay out about $350 million, said Tim Allen, spokesman for the treasurer's office. That is more than two and a half times the available cash. About $105 million of that belongs to mineral-rights owners.

Ultimately, it's up to mineral owners to make sure county records are up to date and to determine whether they have unclaimed property in state accounts.

Keeping track of mineral owners has been a problem for as long as there has been oil and gas activity in the state, said Dean Martin, owner of Oklahoma Mineral Owners Registry, a for-profit firm that charges royalty owners a $35 annual fee to list their name in a mineral-rights owner database. The database can be searched for free by oil and gas companies.

Back in the 1910s and 1920s, people would trade mineral rights like they would donkeys and horses, said Martin.

“A lot of people accumulated mineral rights back then, and they forgot they had them and they die. The next generation doesn't know they have it and they move to California or Washington and they forget about Oklahoma,” Martin said.

“Now the oil company comes along and starts drilling. They don't know about it and the money will sit in the state literally forever.”