PART 8 of A WHITE PAPER GUIDE TO HB724 [button icon=”” size=”medium” backgroundcolor=”#337ebf” color=”#ffffff” target=”_blank” link=”https://thevoiceofchange.securehost.work/product/white-paper-supplement-7/”]Download[/button]
SUPPLEMENT # 7 hashtag #whitepaperhb724
UNCLAIMED MINERAL PROCEEDS COMMISSION IN ITS HISTORICAL MISSION
BY MR. GEORGE FARIAS
TOPIC: FINAL RECOMMENDATIONS AND CLARIFICATION OF MISREPRESENTATIONS DURING COMMISSION HEARINGS – WHICH FUNDS BELONG TO THE SPANISH LAND GRANT HEIRS?
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|Dec 16, 2014|
DATED DECEMBER 11, 2014
Several persons testifying before the commission have recommended the establishment of a trust fund for mineral proceeds emanating from unclaimed wells located in private ancestral land grants. In fact, such a trust fund should have been established automatically by the State of Texas September 1, 1980 when the fifty oil and gas company plaintiffs, suing the state, later agreed to abide by the provisions of the 1985 Texas Property Code/Unclaimed Property Act in a settlement document referred to popularly as the Getty Agreement. Instead, after depositing those funds in the Texas General Revenue Fund, the state has conveniently spent this stream of revenue for thirty-three years, in violation of its fiduciary responsibility. Mineral proceeds from unclaimed wells authorized in state district court receivership hearings, whose owners have never been found, I refer to as Type 2 Funds.
These funds are not to be confused with what I refer to as Type I mineral funds. This is the trust fund managed by the Unclaimed Property Division of the Texas State Comptroller’s office. In reality these unclaimed minerals are royalty check payments previously being paid to title holders who had contracts with oil and gas companies but abandoned their payments. These come back to the state with a name in most cases designating the name of title holder/contractee. These are not the funds claimed by heirs of the Spanish and Mexican land grants approved by declaratory judgments. This category of adjudicated heirs, except for a handful of persons, have absolutely no legal claim on these monies. Continued reference to these Type 1 funds in commission hearings are distracting, confuse the real issues, and are a waste of time.
The benefits of a trust fund for Type 2 minerals accrue to all citizens. After unclaimed well proceeds are deposited in the General Revenue Fund, they should be segregated into a separate accounting category and the monies invested for the highest yield of earnings. The State of Texas, by law, is entitled to the interest generated by the fund but not the principal. The fund balance, for many reasons, will increase far beyond any claims to be paid in the future. If the state experiences a shortfall during its budget sessions and funds are available to prevent cuts in essential services, the state can borrow excess proceeds from the trust fund. Therefore I propose:
Recommendation A. That the comptroller begin establishing the Unclaimed Mineral Type 2 Trust Fund as of September 1, 2014, the start of the current fiscal year. After deposits go into the General Revenue fund they should be segregated into a separate financial account and invested in high yield secure investments.
White Paper Supplement # 7
December 11, 2014
Furthermore that the interest earnings from trust be allocated to the comptroller’s office to manage the trust, a simple matter, but also to provide them enforcement staff to begin holding petroleum companies accountable for their obligations to the state.
Calculations by the HEIRS group indicate that sufficient funds would be available to pay initial claims from these funds. There have been discussions about an appropriation by the state for payments to heirs but that is neither necessary nor practical. The State of Texas just needs to stop misappropriating private unclaimed mineral funds. If anyone doubts that adjudicated persons via declaratory judgments are valid legal heirs one must ask JudgeDavid Peeples and the other judges why they signed over 110 of those court documents. If anyone pleads ignorance about unclaimed wells and receivership hearings I refer them to an article in the Internet “Mineral Receiverships: The Cure for Missing Mineral Owners,” by Thomas J. Ciarlone Jr. Landman, May/June 2012. Mr. Ciarlone is an attorney with Burleson LLP. A copy of this article, found on the Internet, has been made available to HB724 Commission Chairman Lance K. Bruun.
In my Heirs Brochure I mention that our type of claim was a new phenomenon, for which the state was unprepared to respond. About five years ago our attorney, Mrs. Eileen McKenzie Fowler, explained our type of claims to a comptroller’s representative and they were rejected. In Supplement # 6 I explain in more detail that our claims represent a group of heirs filing claim on a group of unclaimed well mineral production. The state has never paid this type of claim, thereby the confusion. We do not fit the criteria for Type I funds and individuals wells cannot be connected to our heirs. We are breaking new ground but this is not a problem. First the state should acknowledge that adjudicated land grant heirs are the rightful owners of unclaimed well production and secondly, Mrs. Fowler’s formula for distribution of funds should be accepted because it is a legal formula following the laws of distribution and descent.
Texas has had lax and permissive controls over funds owed by oil and gas companies. The 1985 Property Law and Getty agreement were put on the shelf and forgotten with officials admitting having no knowledge of what is owed by the oil and gas companies. Article 10 of the Getty Oil Compromise Settlement Agreement states, “It is understood and agreed that this agreement shall be governed by, construed and enforced in accordance with, and subject to, the laws of the State of Texas.”
Recommendation B. That a delegation of state officials meet with the Texas Oil and Gas Association Board of Directors to review the 1985 Property Law and the
the Compromise Settlement Agreement and inform them that they agreed to abide by the law and that it is the responsibility of the state to enforce those laws as a non-negotiable duty of the state and specifically that The 1985 Texas Property Code/Unclaimed Property Act Chapter 75, Subchapter H, Enforcement, ten provisions which have never been enforced, will start to be strictly enforced.
White Paper Supplement # 7
December 11, 2014
The Texas Oil and Gas Association is located on 13th street, in the shadow of the capitol building. and is about a 5-10 minute walk over there.
The eleventh hour is here to produce a report to the State officials and the legislature by January 1, 2014. It does not appear possible that a credible and honorable report can be produced at this time since the major provision of HB724 have not been addressed. Section 3 of HB724 states that the final report must include:
(1) The amount of unclaimed original land grant mineral proceeds delivered to the comptroller that remain unclaimed on December 1,2014.
(2) Recommendations for efficient and effective procedures under which the state may be required to:
(A) Determine the amount of the proceeds;
(B) Notify the owners of the proceeds; and
(C) Distribute the proceeds to the owners;
(3) proposed legislation necessary to implement the recommendations made in the final report.
The legislature is not talking about Type I funds. Those are known to the penny at any given time. Legislators are looking to the commission for identification of Type 2 funds. To assist the commission, I have asked Commissioner Whitney Blanton by letter dated October 28, 2014 to forward to the Comptroller’s Open Record Division a request to provide me the total amount of unclaimed mineral proceeds deposited statewide, from all unclaimed wells in Texas, into the General Revenue Fund from September 1, 1980 through August 31, 2013. As of the date of this supplement I have not received an accurate acceptable amount. Therefore I propose:
Recommendation C- That an executive committee of the HB724 Commission begin to meet with a committee of HB724 legislative sponsors to conform to the mandates of HB724 with the participation of Mrs. Eileen McKenzie Fowler and the HEIRS Committee so that the task will be completed by June 1, 2014 which is also the deadline imposed by the HEIRS Committee to bring a final resolution to the roadblock of our legitimate claims.
The Laissez-faire attitude of the state toward enforcing the law against the oil and gas companies needs to be professionally reviewed and therefore I propose:
Recommendation D- That the newly elected comptroller engage the services of an independent professional accounting firm to conduct a review of the State Comptroller’s Internal control system, the method by which the State of Texas protects its assets and insures it collects all revenues due for the benefit of all citizens.
White Paper Supplement # 7
December 11, 2014
It should be noted that the staff of the Unclaimed Property Division have effectively managed Type I funds as presented to the HB724 Commission. I understand that the comptroller’s office has made good progress during the current administration, but a comprehensive system of accountability is lacking. I propose that the Unclaimed Property Division also manage the Type 2 Funds Trust so that both funds are transparent and subjected to the same strict controls.
While the HB724 commission has not been diligent in addressing the mandate of HB724, by not doing any independent investigative work, and with a loss of valuable time, there is a positive note. For the first time in history the land grant heirs and descendants have had the opportunity to present their case for the public record. This is significant and cannot help but move our cause forward. Another positive is that the 2014 hearings have energized our base and have provided the heirs support from other quarters.
I personally recognize and appreciate the time, cost, and effort that HB724 Commissioners have put into a seemingly complex issue but It is far from complicated. The heirs simply seek to recover their legal property, a right afforded all Texas citizens. While there is time, I am hopeful that serious mediation during the coming legislative session will be fruitful.
Finally, the anxiety of title holders of land and minerals in Texas can be out to rest, because adjudicated heirs cannot in any way, under the law, Infringe upon their legal rights.
As I concluded in my previous testimony in April, if the State of Texas adopts good business practices and follows the law, all parties benefit in a win-win situation.
Author George Farías blogged and used by permission Please note: these are Mr. Farias' personal presentations to the HB724 commission as a descendant/heir and do not reflect the opinions of anyone else. They are a matter of public record.
December 11, 2014
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