Energy Industry (Oil & Gas)/decimal not what was promised

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Question
Hi David,
For an NPRI owner, if you are told that you will receive a certain decimal interest in oil production if you ratify a lease and you find out after ratifying that the decimal is substantially lower (like less than 1/2 of what was promised), can you void the ratification?  It seems to me it's common sense law that you could, but I just want to check with you.  The reason for wanting to void is that the smaller the decimal the more it makes sense to forgo pooled production and gamble that a subsequent well will be drill-site.  Thanks in advance!!!

Answer
Hello Joe.  Unless the person or company who made the representation as to the decimal interest of production made a knowingly false statement that was designed to cause you to execute the ratification (fraudulent inducement or fraudulent misrepresentation), I doubt that you could void the ratification, at least under Texas law. You should consult an attorney in your jurisdiction to see if your facts could meet the elements of fraudulent misrepresentation there, and whether the expense of bringing the claim would warrant doing so.  Unless the oil company is willing to voluntarily void the ratification, litigation might be your only option. These are tough cases to win.

Good luck and let me know if you have any other questions.  

Energy Industry (Oil & Gas)

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David B. McCall

Expertise

Questions regarding oil and gas exploration and production, the operation and management of oil and gas producing properties, and questions related to mineral ownership, title problems, and oil and gas leases.

Experience

I am Board Certified in Oil, Gas and Mineral Law in the state of Texas. I have more than 37 years of experience in the industry as both an in house attorney for major oil companies and as a partner in oil and gas firms. I am also a mineral owner and receive royalties from oil and gas production. I have extensive title examination experience, and have represented clients in many administrative and court proceedings.

Organizations
State Bar of Texas, Texas Bar Foundation, and Austin Bar Foundation.

Publications
Various state bar seminars on Oil and Gas matters.

Education/Credentials
I have a business degree in marketing from McMurry University, 1971, and a JD degree from Texas Tech University in 1974, where I graduated 17th in my class. Board Certified in Oil, Gas and Mineral Law in 1986.

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