Escheatment Explained: Protecting Revenue and Reducing Risk in Oil & Gas

Escheatment (unclaimed property) compliance can seem like a daunting challenge for operators, family offices, and others in the oil and gas industry. There are no shortcuts, and understanding how the requirements apply to you is the most important step to ensure you are operating within reporting guidelines.

Make compliance one less thing to worry about. Learn how to navigate escheatment requirements specific to the oil and gas industry and keep your organization audit-ready.

What counts as Unclaimed property in the oil and gas world?

Unclaimed property can vary by what exactly it is, but simply it is any funds owed to someone else that have not been claimed within a set period of time. This time period, or “dormancy” period, does vary from state to state. The most common types of escheat we see are uncashed checks, customer and/or vendor credits, and revenue suspense balances.

Here are a few common reasons why property might go unclaimed:

·  Owner cannot be located:  Incorrect or outdated contact information, such as mailing addresses, means that payments are hitting a dead end.

·  Title issues: Ownership disputes or incomplete property transfer documentation can prevent funds from being disbursed.

·  Estate complications: When a mineral owner passes away, heirs may be unaware of their rights, or the estate may not yet be properly transferred.

·  Uncashed checks: Royalty payments that are issued but never deposited can end up in suspense.

·  Acquisitions: During mergers or acquisitions, unresolved suspense balances from the previous operator can create compliance challenges for the new one.

‍

WHAT ARE THE CONCERNS?

Whatever the reasons, if you are holding unpaid revenue must be handed over to the proper state’s Unclaimed Property Division.

Unclaimed property compliance for oil and gas companies can be an especially complex process due to various industry-specific nuances. Exclusive property types, such as mineral interest proceeds and royalty payments, title disputes, and resource-intensive state requirements, all contribute to the uniqueness of the industry and its unclaimed property challenges. To complicate it further, every state has different regulations regarding the allowable dormancy period, triggering balance, and “current balance” application.

All states share a very serious attitude toward unclaimed property, and these audits are quite common in the oil and gas industry. Penalties for noncompliance rarely equal the actual unclaimed value. States will extrapolate for themselves what amount they feel is due them.

‍

HOW CAN PETROLEDGER HELP YOU?

Our Unclaimed Property professionals have decades of experience handling oil and gas escheatment needs. We can analyze your books for unpaid revenue that meets the relevant state’s escheatment laws, ensuring your finances stand up to audit. Additionally, we can discover which state(s) have a valid claim to these funds.

We'll walk you through the current (and ever-changing) guidelines for submitting this revenue to the state. We will work with you to ensure you are filing the proper escheatment documentation to mitigate inadvertent noncompliance.

The maxim, “You don’t know what you don’t know,” is very applicable to escheatment law. Ask our team how to be sure you are safeguarding your operation from the fallout of noncompliance.

‍

Want to learn more about PetroLedger's insights in Oil and Gas? Check out our blog or contact us today!

‍