National Association of Division Order Analysts October November December 2021
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Volume MMXXI • No 4
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Contents Feature
Articles
Legal Updates Vermillion FC v 1776 Energy..................................................13 Concho Resources et al v Ellison..............................................15 OERB News...............................................................................17 Unclaimed Property North Dakota, Ohio. ...............................................................18 Managing Unclaimed Property in Energy Sector....................19 Products Made from Oil and Natural Gas................................22 Conservation Tips......................................................................27 National Niche...........................................................................28
NADOA 2021 Officers President
Lewis Box, CDOA 1st Vice President Michele Lawton 2nd Vice Presiden t
Treasurer Michelle Harris-Fairclough, CDOA
Corresponding Secretary Vicki Danielson, CDOA Recording Secretary
In This
The NADOA News Magazine is a quarterly publication of the National Association of Division
Issue
Order Analysts P O Box 1656 Palm Harbor, FL 34682
President’s Corner. ............................................................. 1 Decimal Points................................................................... 2 Division Order $al............................................................. 3 Certification....................................................................... 3 New CDOA system – Submitting Credits.......................5-8 Cob Webs............................................................................ 4 2021 Corporate Donors.................................................9-11 2022 Corporate Sponsorship. ........................................... 12 Ellis Rudy Memorial Scholarship...................................... 13 New Members................................................................... 21 Counterpart Connection................................................... 23 2021 NADOA Board & Committee Chairs....................... 30 Calendar of Events. .......................................................... 31
Subscription: By membership to NADOA, at $75.00 per year.
News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company Ronae@KFOC.net 918.491.4319 Associate Editor Cheryl Hampton champton@limerockresources.com
Graphic Design, Paul Beach
On the Cover: Marriott Harbor Beach Oceanfront
All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited. Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.
President’s
Corner
Lewis Box, CDOA 2021 NADOA President
Wow! What a year we’ve had. Oil is above $80 and Natural Gas is around $5 - our industry is thriving! We are just around the corner from Thanksgiving & Christmas. I know you’ve all already played Mariah Carey’s “All I Want for Christmas” song at least once. If not, now is the time!
As an organization we have a lot on the road map for the future. The board is in the early planning stages of hosting joint regional seminars with our local associations in Denver, Dallas/Fort Worth, Houston, Oklahoma City/Tulsa, and Midland. Ideally, we would have one seminar per quarter to reach our members who aren’t able to attend Institute. As a board, we are also exploring other opportunities to expand access to continuing education. Stay tuned for more in the coming year. As a friendly reminder, we are in the process of revamping our website for NADOA. We recently learned about the ability to download the Wild Apricot app to smart phones and easily access most of the key functions such as Member Directory and registration for events. If you want handy access to all this information from the NADOA website, please search for “Wild Apricot” in your phone’s app store and download it! There are two apps; one that says Member and one that says Admin. You’ll want the Member version. It has been an absolute pleasure to serve as President of this invaluable organization and I can’t wait to see what Michele Lawton and next year’s board have on deck.
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NADOA
Decimal Points
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Remember to keep your NADOA directory information updated. Due to all the changes taking place in our industry and the world, it is more important than ever to maintain professional contacts and receive the educational benefits of membership in NADOA. 2022 NADOA Article Deadlines If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm. February 11.................................. First Quarter May 13..................................... Second Quarter July 8........................... Special Institute Edition August 12................................... Third Quarter November 11............................ Fourth Quarter NADOA online Job Bank has new postings. Visit http://www.nadoa.wildapricot.org/page-662233
CAPDOA
OPEN
DADOA OPEN DALWORTH Lewis Box, CDOA
lbox@comstockresources.com
HADOA
Emily Sheffield esheffield@kolawllp.com Angie Coady, CDOA acoady@vessoil.com
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Zachary P. Oliva zoliva@kolawllp.com
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OPEN
“Success is waking up in the morning, whoever you are, wherever you are, however old or young, and bounding out of bed because there’s something out there you love to do, that you believe in, that you’re good at – something that’s bigger than you are, and you can hardly wait to get at it again today.” Whit Hobbs
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N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s
CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published: NADOA Certification Committee P O Box 1656 Palm Harbor, FL 34682 If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.
CANDIDATES FOR RECERTIFICATION Jennifer Oden – Lubbock, TX Anne Patton – Denver, CO EX T EX Division Order Services, LLC 4865Ward Road, Suite 200 Wheat Ridge, CO 80033 303-463-8799 303-463-8808 extexllc.com Fax Division Orders, Revenue Distribution, 1099’s Dennis Pade Boyd Sanstra Chris Pennels President Vice President Vice President • Fact-filled pamphlets and books • Royalty management seminars • Royalty owner helpline • Web site education resources
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NADOA – Webinar information and registration links will be posted on the website ( www.nadoa.org ). Links to recorded webinars are available to NADOA members by using the Webinar link in the Members Only section on the homepage. Steptoe & Johnson PLLC – Visit: https://www.steptoe-johnson.com and click on News for information. The Steptoe webcasts are recorded. To access previously recorded webcasts, go to Steptoe-Johnson.com and enter Webcasts in the search feature. Kiefaber & Oliva LLP – Visit www.kolawllp.com/events for information.
Educational webinars can be approved for 1 (one) CDOA
certification point. NADOA webinars, Steptoe & Johnson PLLC webcasts and Kiefaber & Oliva LLP webinars are pre- approved. Please check the certification page to determine if other webinars are pre-approved or need to be submitted for approval to the NADOA Certification Committee. Contact Sherry Werth for approvals (srw6886@gmail. com). Certification points should only be applied for after completing the event. If you are unable to attend an event due to unforeseen circumstances, it is an ethics violation to apply for the credit.
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Certification Credit instructions Welcome to the new CDOA system for logging all your CDOA credits! Please see the below steps if you need assistance. HELPFUL TIPS • While logging recent credits into the portal, please double-check that all your personal information is correct on the MY ACCOUNT tab.
• If you have any trouble entering credits or resetting your password, please select the TROUBLESHOOTING. This tab will create a ticket that will be sent directly to the CDOA committee's email address for assistance. If you are still having trouble with the portal, please email us directly cdoa@nadoa.org for further assistance.
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***Helpful hint*** In the field “Choose from existing list” you can search the pre-approved credits by typing in the organization that the credit is from and it will pull up all of the credits associated with your search. Example: If you are looking for a DADOA Luncheon/Seminar, you can type “DADOA” in the search bar and all of the credits with DADOA in the Credit Title will pull up.
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Many thanks to our generous 2021 Corporate Donors
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NADOA 2022 ANNUAL EDUCATIONAL INSTITUTE Marriott Rivercenter – San Antonio, Texas October 26-28, 2022 2022 CORPORATE SPONSORSHIP__DONATION FORM.pdf
SPONSOR DONATION FORM Thank you for your sponsorship. Your donations help with the cost of our speakers, hospitality functions, conference publications, including a compilation of our speakers’ presentations, as well as to cover general fund- administrative costs. We have attached suggested contribution levels. However, please keep in mind that these are suggestions – all contributions will be recognized. This financial support helps reduce the costs to all attendees and allows NADOA to present a professional, quality educational event . If you would like to apply your sponsorship to a specific category, you may indicate that preference below.
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To assure that your name will be published in the NADOA Institute Brochure, please return your donation, along with this form to NADOA no later than May 15, 2022. Corporate sponsorships received after this date will be published in subsequent publications. PLEASE RETURN THE FORM AND CONTRIBUTION TO: NADOA PO BOX 1656 Palm Harbor FL 34682 For questions, please contact: Vicki Danielson Melissa Fontana Corporate Donations Co-Chair Corporate Donations Co-Chair vdanielson@att.net Melissa@iberiamansys.com 713-417-7330 713-629-4490 Ext 115
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Ellis Rudy Memorial Scholarship
In 2021 there were 8 recipients of scholarship assistance to attend the NADOA Institute in Fort Lauderdale, FL.
The Ellis Rudy Memorial Scholarship will be available next year for individuals looking for assistance to attend the 2022 Annual Institute in San Antonio, TX at the Marriott Rivercenter.
Details to follow in the first quarter NADOA magazine of 2022.
Legal
Updates Articles are not intended to be and should not be relied upon as legal advice or to establish any kind of an attorney-client relationship with the author.
Texas
Vermillion FC, LLC v. 1776 Energy Partners
In Vermillion FC, LLC v. 1776 Energy Partners, the Court of Appeals of San Antonio determined the extent to which a retained acreage clause in an oil and gas lease was modified by a “notwithstanding the above” reference to “governmental authority.” Specifically, under the terms of the lease the parties agreed to abide by the applicable field rules for designating how much acreage would be retained. The Eagleville (Eagle Ford-1) Field Rules in turn incorporated by reference portions of Statewide Rule 86, which allows for additional “tolerance” acreage to be retained. In essence, the dispute in this case was whether 1776 Energy Partners (“1776”) was entitled to retain 40 acres around the horizontal Byrd Ranch No 1H Well, as argued by Vermillion FC, LLC (“Vermillion”), or 320 acres around said Well, as argued by 1776. For the reasons discussed below, the Court found that both parties were wrong and remanded the case to the trial court for an award of damages consistent with this finding. Vermillion originally entered into an oil and gas lease with 1776 in 2010, leasing 1,100 acres in Zavala County. 1776 commenced operations on a horizontal well in 2011 which began producing in paying quantities by August of that year. The lease established a three-year primary term and that it would continue in effect after continuous development only as to acreage designated as
part of a particular “well tract,” as defined in the lease. Under the first retained acreage provision set forth in the lease, 1776 would arguably only have been able to retain 40 acres surrounding the Byrd Ranch No 1H Well. However, a subsequent clause stated that “notwithstanding the above, in the event any governmental authority having jurisdiction should hereafter establish a density or spacing pattern of a different number of acres around oil and/or gas wells for full allowable purposes than the number of acres specified above, then lessee may only retain around each oil well and each gas well such number of acres as necessary to allow maximum production.” 1776 invoked this “notwithstanding the above” clause to designate 320 acres. As a result of the foregoing, the parties spent several years disputing whether 1776 breached the contract by retaining excess acreage and by untimely filing a partial release of non-released acreage. Vermillion filed suit in 2016 and moved for summary judgement, arguing that 1776 was only entitled to retain said 40 acres. The trail court ultimately ruled in favor of 1776 on all issues, and Vermillion appealed. In resolving the portions of this case of most interest to oil and gas practitioners, the court of appeals first gave effect to the “notwithstanding the above” portion of the retained acreage clause. It noted that such
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t
a “notwithstanding” clause “contemplates the possibility that other parts of the provision may conflict with it, and they agree that this paragraph must be given effect.” The court then went on to analyze 1776’s well tract designation in light of the retained acreage provision. The Railroad Commission of Texas (“RRC”) promulgates spacing rules between wells to prevent waste; this spacing is dependent on operators assigning certain acreage to wells in a proration unit. A proration unit is the acreage assigned to a well in order to allocate production allowables to that well. Essentially, a production allowable is the maximum number of hydrocarbons that a well may produce from a particular well tract. Here, the “notwithstanding” clause incorporated by reference the Eagleville (Eagle Ford-1) Field Rules, which establish that proration units shall consist of 80 acres, but that additional acreage may be assigned to each horizontal drainhole well in accordance with Statewide Rule 86. Thus, the field rules set forth a “baseline” acreage and incorporate by reference Statewide Rule 86 which allows tolerance acreage to be assigned based on horizontal drainhole displacement. Rule 86 defines a “horizontal drainhole” as that portion of the wellbore drilled in the correlative interval between the penetration point and terminus and “horizontal drainhole displacement” as the calculated horizontal displacement of the horizontal drainhole from the first take point to the last take point. Rule 86 also includes an assignments charts that specifies additional amounts of tolerance acreage that may be assigned based on said horizontal drainhole displacement. 1776’s Byrd Ranch No 1H Well was found to have a horizontal drainhole displacement of 3,962 feet, entitling them to an additional 200 acres. Thus, the Court found that 1776 could retain a total of 280 acres, and not the 320 they originally claimed. This case first provides a reminder of the deference a court will give to “notwithstanding” language in a lease. It also provides an excellent demonstration of the multi- tiered analysis that must often take place with regard to retained acreage provisions (in this case three distinct
steps). First, 1776 had to analyze which retained acreage provision was operative. It then had to consult the field rules to determine the default proration acreage size and the available amount of tolerance acreage. However, the analysis did not stop there, as 1776 then had to look to Rule 86 to determine the exact amount of tolerance acreage it could assign. Tellingly, neither party brought to the lawsuit a correct interpretation of the provision, at least per the San Antonio Court of Appeals. It turned out that the correct amount of acreage was not 40 acres, 80 acres or even 320 acres, but instead was 280 acres. As always, when faced with a convoluted retained acreage provision, we encourage you to seek the advice of counsel familiar with these issues to avoid finding yourself in a lengthy and expensive dispute such as Vermillion FC, LLC v. 1776 Energy Partners. CONTACT If you have any questions regarding this case law update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:
Brad Gibbs Partner bgibbs@kolawllp.com
Eli Kiefaber Partner rkiefaber@kolawllp.com
Emily Sheffield Attorney, Houston esheffield@kolawllp.com
Zachary Oliva Partner zoliva@kolawllp.com
___________________________________________________________________________________________ www.kolawllp.com The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2021 Kiefaber & Oliva LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker St., Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: One East Livingston Avenue, Suite B, Columbus, Ohio 43215, 614-349-4525.
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DID YOU REALLY CONVEY ANYTHING BY YOUR DEED? OR A BRIEF LOOK AT Concho Resources, Inc. et al v. Ellison, 627 S.W.3d 226 (Tex. 2021) (“Ellison”)
CAVEAT: This article examines only one part of a Texas Supreme Court case. The following analysis is not to be construed as a review of all of the issues raised in the case and addressed by the Court. This article was written to alert attorneys, landmen, bankers, executors, trustees – parties who regularly prepare and/or execute deeds to third parties to effectuate a variety of purposes, of the potential devasting effect of the above identified case. Part of the Ellison case brings into question whether an instrument is or is not a conveyance when it: (i) identifies the grantor and grantee; (ii) contains an accurate property description and (iii) is signed by at least the grantor. At issue in this case was a document styled “Boundary Stipulation of Ownership of Mineral Interest” (“Boundary Stipulation”) which contained the following words: “ This Stipulation shall be deemed to contain adequate words of grant and conveyance as are necessary and proper to transfer and vest the ownership of the mineral estate in the lands in each of the Parties in the amounts and proportions set out above …” The mineral owners under two adjacent tracts of land were attempting to change the ownership of the mineral estate under both tracts by establishing a boundary line DIFFERENT from that found in the initial conveyancing instrument(s) as well as conveying each to the other sufficient mineral interests in the lands at issue to effectuate the purposes of the instrument and vest title to the mineral estate in the respective mineral owners. Significantly, the mineral ownership was made retroactive to a date corresponding to the date of Ellison’s oil, gas and mineral lease. Ellison was not a party to the Boundary Stipulation. The Court determined that the Boundary Stipulation, with an identified grantor/grantee, signed by both parties and containing an accurate property description was not a conveyance as will be further elaborated on below. (Ultimately, the Texas Supreme Court held that Ellison was
precluded from asserting her clearly vested and proved title. In fact, the Court asserted that actual title considerations were immaterial to the opinion in a trespass to try title case. The opposing oil companies actually conceded Ellison’s title had been conclusively proved and were not disputing that fact.) This ruling casts enormous doubt on what is a legal conveyance and, when the ruling is examined in light of the tens of thousands of prior general warranty deeds, executor’s deeds, trustee’s deeds, stipulations of interest etc. containing similar grant language as that used in the Ellison case, whether these past documents were or were not legal conveyances. There is one simple issue that was raised by the foregoing language: Were the words of grant coupled with the identification of grantor and grantee and execution of the Boundary Stipulation by both parties sufficient to initially constitute the instrument in legal effect a conveyance? (Correction deed analysis will not be a part of this article. However, it should be pointed
out that further analysis of the Court’s opinion would yield additional problems such as the fact that the Boundary Stipulation instrument was not only a correction deed
but it was also a VOID correction deed. Such a legal conclusion would have alone forced the Court to affirm the Appeals Court decision awarding title to the lands at issue to Ellison. This article, however, will stop in its analysis of the opinion to focus on the question of what are title attorneys to look at in each instrument in a chain of title – the label/title/style of the instrument or what the verbiage in the instrument actually accomplishes.) In the Court’s first opinion it was stated: “ We need not reach Concho’s alternative argument that the
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Interest was in law and in fact a purported deed of conveyance which retroactively attempted to adjust the mineral ownership of the lands at issue. More significantly, if the Boundary Stipulation was not a conveyance, are any other documents, issued prior to this opinion OR after this opinion, which instruments contain identifiable grantor(s)/ grantee(s), are signed by the grantor or both grantor and grantee and contain identifiable words of grant such as those used in this case to be considered conveyances? Does the label/title/ style of the document attributed to the instrument by its drafter control over the express words utilized in the instrument? That is, are trustee’s deeds, executor’s deeds, stipulation of interest documents (all containing words of grant) and any and all other deeds which address specific issues (such as distribution of estate/trust assets or the specific location of a boundary) to be treated as conveyances or mere contracts? According to this case, at best unknown. There is not a reader of this article that should have ever had a question regarding whether the instrument made the basis of this article and containing the quoted granting language was or was not a conveyance. All such instruments were conveyances until now . How are drafters of deeds as well as title examiners to interpret this case? It certainly is not limited to the specific instrument before the court. That instrument contains specific words of grant and should have been found to be a conveyance. It was not! So, going forward, how is this opinion to be applied. The general rule is that this decision of the Court is to be applied retroactively Sanchez v. Schindler, 651 S.W.2d 249, (Tex. 1983). That is, each and every instrument which is somewhat in the form of Boundary Stipulation, albeit containing a different label/title/style must be interpreted in light of this decision. This case does not cause mere confusion in deed interpretation. It upends all known principles of law and puts each and every instrument, whether addressing boundary line location or merely distributing lands as required by a will, trust etc. into question. The author cannot even speculate on the effect of this case nor can any industry group afford to wait for the Court to decide the limits of its decision. Has this Court once again refused to declare sacrosanct long in
boundary stipulation was effective as a conveyance. ” (fn 15) In the Court’s second opinion, it was stated, in addition to the above foregoing statement found in footnote 15 in the first opinion: “… That is, we do not hold that the stipulation constituted a conveyance or that the stipulation, in and of itself, affects nonparties to the agreement.” (new fn 15) (See Caution below) As indicated by the lead counsel, Mr. Bob Baxter, in his petition to the Court and by the author in his amicus submitted in the case, and here, the above quoted words are, as a matter of law, words of grant . Harlan v. Vetter, 732 S.W.2d 390 (Tex.App. — 1987). These words of grant, combined with the rest of the Boundary Stipulation document (including the retroactive date), make the Boundary Stipulation a purported conveyance as a matter of law . Smith v. Williams , 779 S.W.2d 479 (Tex.App. — 1989). The failure of the Court to find that the Boundary Stipulation was, as a matter of law, a purported conveyance exposes one of the fatal flaws in the opinion. The Smith case contains the same argument made by Concho et al and the Court in its opinion – that the document by and between the mineral owners was a boundary stipulation only and not a conveyance. Such sophistry! The Court has previously and clearly stated that the label/title/style of an instrument is NOT controlling in determining the classification of the instrument (See Alford v. Krum , 671 S.W.2d 870 (Tex.1984)). Rather, it is not what the parties meant to say but rather the meaning of what was actually stated in the instrument. In the Smith case, it was argued that since the style of the document was “Transfer of Lien” that the instrument could not be a conveyance of the grantor’s mineral estate. The Court held the opposite – the document being unambiguous, it resulted in a conveyance of all of grantor’s interest in and to the lands at issue REGARDLESS of the label/title/style given the instrument. Based on the actual wording of the Boundary Stipulation, above quoted, coupled with the Texas property rules governing conveyances, the Boundary Stipulation was a purported conveyance. This conclusion should have likewise been reached by the Court BUT WAS NOT. That is, since: (i) there were identified grantors and grantees; (ii) the instrument was signed by both the grantor(s) and grantee(s) and (iii) there were sufficient words of grant, that therefore the instrument labeled Boundary Stipulation of Ownership of Mineral
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place rules of property regarding what is and is not a valid deed in order to be able to reach a “just” conclusion? BEWARE! CAUTION: There are actually four (4) different opinions (with perhaps a fifth to follow) which have been issued by the Texas Supreme Court/ Westlaw. There is: (i) the first opinion, found on the Court’s website; (ii) a second opinion, also found on its website, represented to be the identical and final opinion, having the same date as the original opinion but differing from the first opinion in several significant particulars and (iii) the third opinion, found in Westlaw at 627 S.W.3d 226, containing the changes found in the body of the second opinion but containing the footnotes found in the first opinion and (iv) a fourth opinion, also found at 627 S.W.3d 226, which has the changes made in the body of the second opinion and the correct footnotes, also as found in the second opinion. However, neither Westlaw published case lists the amicus briefs authored and filed in favor of Ellison (12); only those (3) filed in favor of Concho et al. OERB NEWS The people of Oklahoma Oil & Natural Gas have sponsored energy education workshops this fall in Enid, McAlester, and Blanchard. A fourth workshop has been scheduled for November 6 in Bixby. So far in 2021, the workshops have provided 152 teachers with $72,000 worth of classroom supplies. The curricula provide Oklahoma-based, real-world applications to supplement existing lesson plans, including science, technology, engineering, and math (STEM) concepts to teachers of kindergarten through 12th grade classes. The grounds of the Oklahoma State Capitol were the latest site of voluntary efforts from the people of Oklahoma Oil & Natural Gas. For 79 years, a historic oil and natural gas artifact has been located near the south steps of the Oklahoma State Capitol as an illustration of the heritage of oil and natural gas industry in Oklahoma, which has
To restate where the published cases are, as of the fourth opinion (second Westlaw opinion), all of the changes and footnotes found in the second Court opinion are now present in the second published Westlaw opinion ( fourth opinion). However, none of the amicus briefs submitted in favor of Ellison are identified. Only the amicus briefs in favor of Concho et al are identified in the second published Westlaw opinion ( fourth opinion). Who is writing all of these opinions? Who is approving them? Where is the approval to change the opinions? Why were the opinions changed? Which opinion should be relied on? Unknown.
© Terry E. Hogwood 2021 Website – terryehogwoodattorney.com E-Mail – terrye.hogwood@gmail.com
This article was prepared by Terry E. Hogwood for use by his clients and prospective clients as a reference tool only. Any comments and/or legal conclusions contained in this article are solely those of the author and reliance thereon by any reader of this article is at the reader’s sole risk.
driven our economy for more than 100 years. The artifact includes equipment associated with Phillips Petroleum’s Capitol Site #1 well (nicknamed the Petunia #1) that was completed in 1942. The well produced more than 1.5 million barrels of oil and 1.6 billion cubic feet of natural gas before being plugged in 1986 and was donated as a historical artifact to the Oklahoma Historical Society. After nearly 8 decades next to the historic oil derrick on the grounds of the Oklahoma State Capitol, three oil storage tanks have been removed so the space can be repurposed by the state. The tanks were removed courtesy of the Oklahoma Energy Resources Board and Phillips 66. The work was completed at no cost to taxpayers and through voluntary funding from the people of Oklahoma Oil & Natural Gas and an additional contribution from Phillips 66.
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The 24th Annual Oklahoma Oil & Natural Gas Expo was a success. Presented by OERB and SOER, more than 2,000 attendees and nearly 200 exhibitors experienced this event. The 25th Oklahoma Oil & Natural Gas Expo will be held at the Bennet Event Center of the Oklahoma City Fairgrounds on October 13, 2022. Marathon Oil launched the “Unconventional Thinking in Teaching” program in April of 2021 as part of the company’s investment in building stronger communities through education. The program awards grants to innovative teachers in the areas where Marathon Oil operates. Fourteen teachers were Unclaimed Property Although the deadline of November 1, 2021 is past, the following states have made changes in their reporting requirements:
selected as winners in the program’s pilot year: five winners from Oklahoma, five from Texas, two from New Mexico, and two from North Dakota. Each winner is to receive a $2,500 grant from Marathon Oil to support the purchase of classroom resources, such as books, activity and lab materials, technology, or personal professional development. Source: OERB October 2021 Newsletter. To learn more about OERB, sign up for their mailing list, register for events, and see videos of OERB activities, visit www.oerb.com.
Ohio
North Dakota
As a reminder, Chapter 169 of the Ohio Revised Code requires all businesses operating in Ohio or holding funds due to Ohio residents to file an Annual Report of Unclaimed Funds with the Division of Unclaimed Funds. The unclaimed funds reporting process and items of information a holder is expected to provide continue to evolve in the Unclaimed Funds Law administrative rules. Please be aware of the following when preparing for an unclaimed funds reporting deadline. Due Diligence Conducting due diligence is an important, final step that holders are required to complete prior to reporting unclaimed funds to the Division of Unclaimed Funds. Below are the key points to remember about this process.
Earlier this year, the North Dakota Legislature passed a version of the Revised Uniform Unclaimed Property Act (RUUPA) which will be in effect for this year’s re- porting period. https://unclaimedproperty.nd.gov/app/ ucp-law. To assist our holders with the changes, we have created several resources you may find useful, and placed them on our website: https://unclaimedproperty.nd.gov/app/ holder-manuals . To ease the transition to the new law, we have added a short instructional webinar, as well as provided an updated Holder Reporting Manual and instructions to assist you in creating and submitting reports electronically. In addition to the resources provided on our website, our knowledgeable staff is ready to assist with any further questions. Please feel free to contact us at: unclaimed@nd.gov or 701-328-2800.
1. Companies are required to send an OUF-8 Notice of Unclaimed Funds, or a similar notice that meets
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the statutory requirements in Ohio Revised Code Section 169.03(E), to the last-known address of the owner or beneficiary of dormant accounts; 2. For dormant accounts with a balance of at least $50 and less than $1,000 the OUF-8 Notice of Unclaimed Funds must be sent via first-class mail. 3. For dormant accounts with a value of $1,000 or more the OUF-8 Notice of Unclaimed Funds must be sent by certified mail, return receipt requested. 4. The company is authorized to charge each account subject to the mailing up to $20 to reimburse themselves for the certified mail cost. Include a self- addressed, stamped, return envelope.
5. The company must allow a minimum of 30 days for the owner or beneficiary to respond to the OUF-8 Notice prior to reporting the funds to the Division as unclaimed funds. 6. Accounts with a balance of $50 or more with mail returned for bad address, and those whose owner or beneficiary does not respond, are reportable to the Division as unclaimed funds. 7. An OUF-8 Notice of Unclaimed Funds mailing is not required to be sent to owners of dormant accounts valued at less than $50.00. However, please note, accounts with valued at less than $50.00 are still reportable unclaimed funds as an aggregate total.
Managing Unclaimed Property in Energy Sector By Jinu Thomas, Paola Narez and Gary Joseph
Sovos’ Consulting and Compliance teams closely monitor legislation changes and work to provide timely updates to clients and the industries in which they operate. The unclaimed property landscape has undergone significant changes over the past couple years. From states such as Colorado adopting current to pay provisions (“CTP”), to Texas requiring consolidation of unclaimed property reports, holders must stay vigilant to maintain compliance. Speaking of dynamic and drastic changes to unclaimed property state laws, Delaware has been notably busy this year. Delaware enacted Senate Bills 103 and 104 this past summer, which impacted a wide range of topics that include, but are not limited to:
● Third party auditor payment structure transition from contingent fee to hourly basis ● Prohibition of joint audits with Delaware ● Extending the response period for a Holder to accept the Delaware Voluntary Disclosure Agreement (“DE VDA”) invitation by entering the program from 60 to 90 days after delivery of the invitation ● While some are favorable, there are changes that raise concern and require subject-matter expertise to properly manage. One of these changes is the request for verification or compliance review notices. The following success stories demonstrate how Sovos has fielded and assisted clients in the energy sector to respond to these notices. Example #1: DE Verification Notice A mid-sized, vertically integrated energy company received a Verified Report notice from the Delaware Department of Finance, demanding a copy of the company’s complete entity list associated with its 2019 filing, as well as its unclaimed property
● Due diligence during examinations ● The state’s authority to determine the completeness and accuracy of reports by way of verification and compliance engagements
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policies and procedures within 30 days. The company had undergone significant personnel turnover, including individuals who were familiar with the unclaimed property process. Per the notice, if the holder did not adequately respond to the request, they would be subject to state enforcement remedies such as penalties and interest and/or involuntary review. The company engaged the Sovos team shortly after receiving the notice. After conferring with various subject matter experts for exposure areas unique to the company, Sovos was able to compile the policies and procedures and document them to demonstrate the company’s controls effectively limited exposure. Shortly after submitting the policies and procedures to Delaware, the company received notification that the verification was concluded and no further action was needed. Example #2: DE Compliance Review Notice A mid-sized, upstream energy company received a Compliance Review notice from the Delaware Department of Finance, demanding the supporting documentation for its 2020 filing. The supporting documentation request included, but was not limited to, documents such as trial balance, outstanding check registers, aging reports, policies and procedures and other documents that would normally be requested for an audit. The state requested the data be provided for years 2015 through 2020 within 30 days. The company engaged Sovos to assist in this matter. Sovos reduced the number of documents that needed to be provided to the state and submitted the documents essential for the review. Audit Landscape The energy sector is constantly evolving, and with so many nuances and accounting applications that are unique to this industry, unclaimed property compliance sits as one of the primary topics of discussion amongst those that work in this space. Division order analysts, land administrators and other personnel with unclaimed property or escheat responsibilities can attest to the importance of obtaining and maintaining compliance with state laws. Those who have never filed an unclaimed
property report, as well as those who have not consistently complied with the laws, can find themselves on the receiving end of substantial penalty and interest assessments when attempting to come into compliance. Historically, we have seen Colorado, Delaware, New Mexico, North Dakota, Oklahoma, and Texas being the most aggressive states participating in the energy (i.e., oil and gas) audits. No matter if you are upstream, midstream or downstream, there is a need to comply with each state’s unclaimed property laws. As states continue the initiative of expanding holder education and compliance, more and more companies are being audited by third-party audit firms authorized by the states. A few of the more active audit firms targeting this industry are Discovery Audit Services (“DAS”), Innovative Advocates Group (“IAG”) and Treasury Services Group (“TSG”). Audit firms take different approaches about how they conduct their review. Some auditors focus on specific property types while others generally include all property types specific to the industry. Sovos’ consulting team has a track record of successfully supporting many companies across a variety of industries throughout the audit process. During the first half of 2021 alone, Sovos successfully helped several clients close audits in less than two years, which reduced multi-million dollar audit findings to an immaterial fraction of the initial discovery, and negotiated the abatement of penalty and interest with states that have not historically done so. Here are some examples of how our team assisted clients in the reduction of audit timelines and, more importantly, reduced material liabilities: Example #1: A Sovos consultant spoke with a holder at a conference following an audit support presentation. The holder had recently been notified of an audit and was attempting to manage the audit internally without assistance due to constrained budgets and assumption that the audit would be simple and low effort. After some general discussion and high-level guidance
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regarding audit best practices, our consultant advised the holder to reach out to us if they ever found themselves in an uncomfortable or vulnerable situation during the examination. Years passed, and the holder eventually reached out to Sovos after receipt of audit findings exceeding $15,000,000 . Due to the aggressive timelines and seemingly impossible remediation efforts, the holder felt it had done everything reasonably possible and exhausted all options to reduce the liability. Once engaged, Sovos conducted a thorough review of the participating state(s) and scheduled properties. In a span of five months , Sovos reduced the potential liability by over $14,000,000. What the holder thought would be a never-ending audit quickly finished after engaging the Sovos team. Example #2: A third-party audit firm representing multiple states notified a holder of an unclaimed property audit. After Sovos conducted a thorough assessment, which included reviewing policies and procedures, performing a risk assessment and developing a mitigation plan, Sovos assisted the holder with gathering, reviewing and providing the information applicable to the participating states to the auditor. Sovos also helped respond to the auditor’s questions and inquiries and participated in all audit-related discussions. The preliminary schedule of findings included nearly $3,000,000 in presumptive unclaimed property. However, after applying rigorous mitigation strategies on the schedule of items provided by the auditor, the initial amount was reduced to less than $200,000 . Conclusion Unclaimed property compliance in the energy sector will continue to present its challenges to the holder community due to its volatile nature. It is important that you develop strategies to potentially reduce unclaimed property exposure, ensure policies and procedures are in place to track potential unclaimed property and comply with the applicable state reporting requirements. Sovos Compliance, among many other things, can help respond to a state or auditor’s request, expedite the audit timeline, simplify the process, educate personnel regarding unclaimed property
obligations, limit organizational disruption, minimize the assessment and potential penalties and interest, and ensure the best experience for the unclaimed property owners. Take Action Learn how Sovos Unclaimed Property Consulting solutions can help you meet your compliance needs.
Talk to an expert .
NADOA Welcomes The Following New Members:
Jeff Rose
Tarryn Colson
Legacy Reserves
Independent
Melody Henry
Laura Hoten
Independent
Independent
RaNae Dawn Porter Independent
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Products made from Oil and Natural Gas In her keynote at the 2021 NADOA Institute, Alyce Hoge referenced the often unacknowledged influence that fossil fuels play in all of our everyday lives. How equipped and ready are any of us to get along without hydrocarbons?
lures, Floor wax, Food preservatives, Footballs, Fuel tanks, Glue, Glycerin, Golf bags, Golf balls, Guitar strings, Hair coloring, Hair curlers, Hand lotion, Hearing aids, Heart valves, House paint, Hula hoops, Ice buckets, Ice chests, Ice cube trays, Ink, Insect repellent, Insecticides, Insulation, iPad/iPhone, Kayaks, Laptops, Life jackets, Light- weight aircraft, Lipstick, Loudspeakers, Lubricants, Luggage, Model cars, Mops, Motorcycle helmets, Movie film, Nail polish, Noise insulation, Nylon rope, Oil filters, Packaging, Paint brushes, Paint rollers, Pajamas, Panty hose, Parachutes, Perfumes, Permanent press, Petroleum jelly, Pharmaceuticals, Pillow filling, Plastic toys, Plastics, Plywood adhesive, Propane, Purses, Putty, Refrigerants, Refrigerator linings, Roller skate wheels, Roofing, Rubber cement, Rubbing alcohol, Safety glasses, Shampoo, Shaving cream, Shoe polish, Shoes/ sandals, Shower curtains, Skateboards, Skis, Soap dishes, Soft contact lenses, Solar panels, Solvents, Spacesuits, Sports car bodies, Sunglasses, Surf boards, Swimming pools, Synthetic rubber, Telephones, Tennis rackets, Tents, Tires, Tool boxes, Tool racks, Toothbrushes, Toothpaste, Transparent tape, Trash bags, Truck and automobile parts, Tubing, TV cabinets, Umbrellas, Unbreakable dishes, Upholstery, Vaporizers, Vinyl flooring, Vitamin capsules, Water pipes, Wind turbine blades, Yarn Source U.S. Department of Energy https://www. energy.gov/sites/prod/files
When you think about oil, there is probably one thing that immediately comes to mind: motor oil for your car or lawn mower. When you hear about natural gas, you may think about heating your home, cooking, or even electric power generation. But, there are many other uses for these hydrocarbons than what meets the eye. Petrochemicals derived from oil and natural gas make the manufacturing of over 6,000 everyday products and high-tech devices possible. Major petrochemicals—including ethylene, propylene, acetylene, benzene, and toluene, as well as natural gas constituents like methane, propane, and ethane—are the feedstock chemicals for the production of many of the items we use and depend on every day. Modern life relies on the availability of these products that are made in the United States and across the globe. We zero in on some of these common household and commercial products below. The list may surprise you! Adhesive, Air mattresses, Ammonia, Antifreeze, Antihistamines, Antiseptics, Artificial limbs, Artificial turf, Asphalt, Aspirin, Awnings, Backpacks, Balloons, Ballpoint pens, Bandages, Beach umbrellas, Boats, Cameras, Candies and gum, Candles, Car battery cases, Car enamel, Cassettes, Caulking, CDs/ computer disks, Cell phones, Clothesline, Clothing, Coffee makers, Cold cream, Combs, Computer keyboards, Computer monitors, Cortisone, Crayons, Credit cards, Curtains, Dashboards, Denture adhesives, Dentures, Deodorant, Detergent, Dice, Dishwashing liquid, Dog collars, Drinking cups, Dyes, Electric blankets, Electrical tape, Enamel, Epoxy paint, Eyeglasses, Fan belts, Faucet washers, Fertilizers, Fishing boots, Fishing
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