Mineral Ownership Title Issues Bruce M. Kramer McGinnis, Lochridge & Kilgore, LLP 1111 Louisiana, Suite 4500 Houston, Texas 77002 (713) 615 8502 bkramer@mcginnislaw.com HBA Oil & Gas Section Meeting October 23, 2012 October 23, 2012 1
GENERAL PRINCIPLES Oil and gas development begets title and conveyancing litigation North Dakota Within past 2 years North Dakota Supreme Court has issued more than 5 opinions dealing with the Duhig Rule 2
GENERAL PRINCIPLES Texas The role of canons of construction First principle Should not replace common sense Bruce M. Kramer, The Sispyhean Task of Interpreting Mineral Deeds and Leases: An Encyclopedia of Canons of Construction, 24 Tex. Tech L.Rev. 1 (1993) Listing of multiple/conflicting canons of construction Use in ambiguous/unambiguous documents 3
Real Covenants, Plat Approvals and Implied Reservations Farm & Ranch Investors, Ltd. v. Titan Operating, LLC 369 S.W.3d 679 4
Farm & Ranch (Cont) 1994 Dedication Plat filed of record/surface subdivision Real covenant prohibiting use of surface for oil and gas operations Unified surface/mineral estate 5
Farm & Ranch (Cont) 1994 1999 Deeds No express reservation of mineral estate by grantor/owner Deeds subject to mineral reservations of record 6
Farm & Ranch (Cont) Issue Who owns the mineral estate? Grantor Subject to language reserves mineral estate in deeds Grantee No express reservation of mineral estate in deed Dedication/plat filing did not act as a reservation 7
Farm & Ranch (Cont) Canons of construction Unambiguous document Greatest estate canon Warranty deed conveys all the grantor owns Can t reserve an interest one already owns in plat/dedication 8
Farm & Ranch (Cont) No implied reservations Subject to clause cannot, by itself, reserve the mineral estate Subject to clause acts as limitation on warranty Grantees own the mineral estate 9
Fraction of Versus Fractional Royalty Coghill v. Griffith 358 S.W.3d 834 10
Coghill (Cont) Deed Language One eighth interest in and to all the royalty One eighth of all royalties paid under said lease One eighth of usual one eight royalty provided in future leases Future leases shall provide for at least a one eighth royalty Grantor shall own a free royalty of 1/64th 11
Coghill (Cont) 1953 Lease 1/8 th royalty 1976 & 1981 Leases 3/16 th royalty Division orders 1/8 th of 3/16 th or 3/128 th Grantee revokes division order Claims grantor only entitled to a fixed 1/64 th or 2/128 th share 12
Coghill (Cont) TEN!!! Canons of Construction cited Common sense Harmonizing Inconsistent signals from the 5 different descriptions of the reserved royalty Two/three grant cases Can t harmonize existing lease and future lease clauses 13
Coghill (Cont) Future lease clause language appears to control Fixed fractional royalty language merely sets minimum does not create a fractional royalty Compare with Garza v. Prolithic Energy, 195 S.W.3d 137 (Tex.App. San Antonio 2006); Range Resources v. Bradshaw, 266 S.W.3d 490 (Tex.App. Ft. Worth 2008) 14
Adverse Possession/Inconsistent Surveys Conley v. Comstock Oil & Gas, LP 356 S.W.3d 755 15
Conley (Cont) Plaintiffs claim title to minerals based on Escobeda Survey Defendants claim title under two principal theories: 1. Doctrine of presumed lost deed; 2. Adverse possession 16
Conley (Cont) Native American Tribe cannot be sued in trespass to try title action without waiver of immunity 17
Conley (Cont) Doctrine of Presumed Lost Deed Independent of adverse possession Magee v. Paul, 221 S.W. 254 (1920) Inconsistent with human behavior for owner to allow stranger to occupy/use surface and/or mineral estate for many years Seemingly overlaps with AP doctrine Common law/equity 18
Conley Adverse Possession Three and Five Year Statutes of Limitation Pooled unit Partial inclusion of claimed land AP only applies to that portion of land that has been pooled Ten Year Statute Applicable to entire tract Deed description controls 19
Overriding Royalty Extension and Renewal Clause SM Energy Co. v. W. H. Sutton 2012 WL 1864352 (Tex. App. San Antonio) 20
SM Energy (Cont) 40,000 acre Briscoe Ranch lease Total and partial surrender provision ORRI created in assignment of lease Lease assignments have extension or renewal clauses One year period after lease termination Lessee surrenders 22,000 acres Former lessee re leases one year and one day after surrender 21
SM Energy (Cont) Trial Court As long as any portion of original lease is in existence, ORRI continues Rule Against Perpetuities argument fell, not unexpectedly on deaf ears Binding on non parties; springing executory interest; lease of surrendered acreage could occur 100 years from lease assignment 22
SM Energy (Cont) Court of Appeals ORRI carved out of lease only lasts so long as lease is in existence Fain & McGaha v. Biesel, 331 S.W.2d 346 (Tex.Civ.App. Ft. Worth 1960) controls Lease provides for partial surrender Surrendered portion of lease has terminated New lease beyond one year period not impacted by ORRI 23
Over conveyancing Hunsaker v. Brown Distributing Co., 373 S.W.3d 153 (Tex.App. San Antonio 2012) 24
Hunsaker (Cont) Grantor owns ¼ of minerals Warranty deed Granting clause refers to attached Exhibit A Exhibit A describes granted interest as 1/2 of all oil, gas and minerals. now owned by Grantor : Grant is made subject to prior reservations in Exhibit A 25
Hunsaker (Cont) Grantor asserts he transferred ½ of ¼ or 1/8 th of the minerals Grantee asserts he received ¼ of the minerals Court does not apply Duhig Granting clause defines scope of interest granted now owned clearly limits interest granted to ½ of ¼ 26
Hunsaker (Cont) Canons of construction Four corners/harmonizing Labels do not control Whole document 27
Hunsaker (Cont) Key language = now owned Granting clause did not describe that which was to be granted as 100% of Blackacre but merely ½ of ¼ now owned subject to description in Exhibit A Exhibit A clearly shows grantor only owned ¼ of minerals 28