A. Any delay in determining any person legally entitled to an interest in the proceeds from production shall not affect payments to all other persons entitled to payments. In instances where payments cannot be made within the time period provided in Section 70-10-3 NMSA 1978, the payor shall create a suspense account on his books for such interest or may interplead the suspended funds into court.
B. The person entitled to payment from the suspended funds shall be entitled to interest on the suspended funds from the date payment is due under Section 70-10-3 NMSA 1978. The interest awarded shall be the discount rate charged by the federal reserve bank of Dallas to member banks plus one and one-half percent on the date payment is due. Payment of principal and interest on the suspended funds shall be made to all persons legally entitled to the funds within thirty days from the date that the persons are determined to be entitled to the suspended funds by a final legal determination.
History: 1978 Comp., § 70-10-4, enacted by Laws 1991, ch. 235, § 3.
ANNOTATIONS
Repeals and reenactments. — Laws 1991, ch. 235, § 3 repealed former 70-10-4 NMSA 1978, as enacted by Laws 1985, ch. 55, § 4, relating to interest on late payments, and enacted a new section, effective June 14, 1991.
Contractual provision denying payment of interest is unenforceable. — This section of the Oil and Gas Proceeds Payments Act supports a strong public policy that entitles payees to receive interest on the oil and gas production proceeds that are held in suspense for a period longer than six months, and this statutory provision cannot be contracted away. First Baptist Church of Roswell v. Yates Petroleum Corp., 2015-NMSC-004, rev’g 2012-NMCA-064, 281 P.3d 1235.
Where interest owners in oil and gas leases signed form division orders which allowed petroleum company to withhold payment of oil and gas royalties pending the resolution of title issues, and when company eventually disburses royalties, to pay the proceeds without interest, the contractual waiver of interest in the division order violated the strong public policy designed to equalize the bargaining power between parties in oil and gas transactions and was not enforceable. First Baptist Church of Roswell v. Yates Petroleum Corp., 2015-NMSC-004, rev’g 2012-NMCA-064, 281 P.3d 1235.
Contractual waiver of interest is valid. — Contractual agreements in division orders to waive compensatory interest on delayed payments of oil and gas proceeds are valid and enforceable. First Baptist Church of Roswell v. Yates Petroleum Corp., 2012-NMCA-064, 281 P.3d 1235, cert. granted, 2012-NMCERT-006.
Where owners of mineral rights in an oil and gas well, which was placed in production in 2002, signed division orders which provided that when there was a question of title, the owners would provide the payor with evidence of title acceptable to the payor and cure any defects of title and that in the event of a failure to furnish evidence of marketable title, the payor was authorized to withhold payments without interest until the claim was settled; the division order listed the title requirements to entitle the owners to proceeds from the well and specifically requested that the owners provide a copy of the trust document that established their interests in the well; the owners failed to provide the trust document; in 2006, the operator placed the owners on pay status despite their failure to provide the trust document; and pursuant to the division order, the operator refused to pay interest, the contractual waiver of interest in the division order did not violate New Mexico public policy and was valid and enforceable. First Baptist Church of Roswell v. Yates Petroleum Corp., 2012-NMCA-064, 281 P.3d 1235, cert. granted, 2012-NMCERT-006.
Interest owners are entitled to interest on funds that are rightfully owed to them. — Where Appellants, several living trusts that held royalty interests on oil and gas leases (Trusts), brought a putative class action in state court against Defendant, the owner and operator of natural gas wells on the leases, claiming that Defendant had not timely paid royalties or interest on the leases, as required by the New Mexico Oil and Gas Proceeds Payments Act, the district court erred in granting Defendant’s motion for summary judgment, because Subsection B of this section clearly reflects the legislature’s intent to mandate that interest owners who are legally entitled to proceeds, but who are not paid on time, shall receive interest on funds that are rightfully owed to them. Anderson Living Trust v. Energen Resources Corp., 886 F.3d 826 (10th Cir. 2018).