§ 15-74-604 - Failure to pay royalties. - Arkansas Statutes

15-74-604. Failure to pay royalties.

(a) An obligation arises under an oil and gas lease to pay or to deliver oil or gas royalties to the mineral owner or his or her assignee or to deliver oil or gas to a purchaser to the credit of the mineral owner or his or her assignee, and willful breach by the owner of the right to drill and produce of the obligation may authorize, among other relief, cancellation of the lease where determined, by the court, that the equities of the case warrant cancellation.

(b) In the event the operator under an oil or gas lease fails to pay oil or gas royalties to the mineral owner or his or her assignee within one hundred eighty (180) days after oil or gas produced under the lease is marketed, the unpaid royalties shall bear interest thereafter at the rate of twelve percent (12%) per annum until paid. Provided, that the operator may remit annually to a person entitled to royalties the aggregate of up to twelve (12) months of monthly royalties where the aggregate amount owed is one hundred dollars ($100) or less. This subchapter shall not apply when mineral owners or their assignees elect to take their proportionate share of production in kind or in the event of unmarketability of title which would affect substantially the making of the royalty payments.

(c) A prior first lien is created to the extent of any unpaid royalty, together with any interest or penalty thereon, granted or reserved in any valid instrument to secure the owner of the royalty interest, his or her heirs, devisees, successors, or assigns.

(d) When payment has not been made upon any natural gas production within the time limits specified in 15-74-601, the first purchaser shall, upon suit being filed, suspend all royalty payments the subject of the litigation due under the lease interest to the owner of the right to drill and produce, provided that the first purchaser is made a party to the suit, and thereafter shall pay the amounts due all such royalty interests, as the amounts become due, into the registry of the court in which the suit is pending and the first purchaser shall be relieved of all further burdens or obligations therefor.