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New Oil & Gas Scam in Texas Curtailed by New Law

picspree-1121808-300x202Texas has been, unfortunately, home to a number of oil and gas scams over the years. One of the most common is the company who wants to buy your mineral interests and who has you sign a deed before they pay you. Once they have a signed deed in hand, they then decide that your minerals are worth much less than what they originally offered, and they send you a check for a fraction of the purchase price they originally offered.

A more recent scam is the use of “oil and gas royalty leases”. The document the scammers ask you to sign is designed to look like an oil and gas lease and it is actually worded as if it were an oil and gas lease. For example, they often call the purchase price a “bonus”. In fact, the document is a deed for your nonparticipating royalties. Of course, nonparticipating royalty owners cannot sign leases, as a matter of law, but many people do not know this.

I have heard that the scammers in one case admitted that their so-called royalty lease was purposely designed as a lease instead of as a deed because people were afraid to sign deeds but would more readily sign leases.

This is, of course, pure fraud, designed to deceive unsuspecting royalty owners. The Texas legislature recently passed HB 3838 which was signed into law by Governor Abbott on June 10, 2019. The bill went into effect on September 19, 2019. The new law can be found in the Texas Property Code Section 5.152. Among other things, the new law requires that any “oil and gas royalty lease” must contain the following language, in 14 point type, at the top of the first page of the document, and similar language must appear at the top of each subsequent page and immediately above the signature of the person conveying the interest:


If the requirements of Section 5.152 are not met, then the document is completely void.

If you have been tricked into signing one of these fraudulent deeds, even if it was before the new law went into effect, contact an oil and gas attorney at your earliest convenience. You will need to take action to remove the deed if it has been filed in the deed records because it will probably constitute a cloud on your title to your minerals or royalties and can cause you enormous future headaches. A person who has conveyed a royalty or mineral interest that is void under this section of the Property Code can sue the purchaser to remove the conveyance as a cloud on title and recover any royalties or bonuses paid to the purchaser, court costs and attorneys fees. Even without the application of the new law, there are remedies available to you under the Texas Deceptive Trade Practices Act and other statutes. The Texas statutes of limitations to cure the situation if you have been scammed are quite short, so don’t delay.

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