SECTION 165:10-27-9. Designated payor for royalty distributions

(a)   For royalty distributions, the well operator shall serve as payor for all proceeds of production, absent appointment of a substitute payor and/or election of a working interest owner to distribute royalties attributable to that working interest owner's sales.

(b)   A substitute payor may be appointed by Commission order or by the owners owning a majority in interest of the working interest in the well. A substitute payor so appointed shall assume the rights and duties of the well operator concerning assessment of fees, royalty record maintenance and disbursement of royalties. A surety bond of $50,000 shall be required if the substitute payor is not a working interest owner, a first purchaser of production from the well, a bank or a trust company. Such bond shall be posted with the Surety Department of the Conservation Division before receipt of sales proceeds by the substitute payor. Any such bond shall be drafted so as to compensate royalty owners if the substitute payor defaults on his disbursement obligation.

(c)   A producing owner may elect to distribute royalties from his sales subject to the following conditions:

(1)   the producing owner shall provide 60 days written notice to the operator before starting or stopping the alternative procedure;

(2)   the producing owner shall assume liability for its errors;

(3)   the producing owner shall report payment information to the well operator within 30 days after each disbursement;

(4)   the producing owner cannot re-start the alternative procedure within 12 months after terminating it.

(d)   For good cause shown, the Commission may cancel a producing owner's election to separately distribute royalty. Cancellation shall occur only by order after application, notice and hearing.

[Source: Added at 10 Ok Reg 2601, eff 6-25-93]