TITLE ISSUES ENCOUNTERED IN NEW MEXICO PRESENTED BY: D. BRADLEY GIBBS
Enchanting Isses We re Covering Today Federal and Conty Recording Record Title vs. Operating Rights State Recording and Leasing Isses New Mexico Qirks and Pitfalls
General NM Notes Oil and gas jrisprdence similar enogh to Texas to be dangeros Like Texas No dormant mineral act No marketable title act Commnity Property Unlike Texas No title standards Complsory pooling sed reglarly Srface Owners Protection Act (SOPA)
Varios Bodies of Law Federal Brea of Land Management (BLM) leasing federal lands Office of Natral Resorce Revene (ONRR) royalty payments Interior Board of Land Appeals (IBLA) administrative/reglatory hearings Unless specifically otlined in the stattes and regs, apply state sbstantive law Mineral Leasing Act of 1920 (MLA - Amended)
Varios Bodies of Law (Cont.) State Lands State Land Office (SLO) leasing state lands Oil Conservation Division (OCD) reglates oil and gas prodction Royalty Management Division (RMD) processes oil and gas royalty revene Fee Lands NM State Law Indian Lands BLM, Brea of Indian Affairs (BIA)
Federal - Recording INSTRUMENTS EVIDENCING CHANGES IN OWNERSHIP OF FEDERAL LEASES
Where? WHERE DO INSTRUMENTS AFFECTING FEDERAL LEASES NEED TO BE FILED?
BLM The federal lease records are maintained by U.S. Department of the Interior Brea of Land Management New Mexico State Office Santa Fe, New Mexico Records regarding operations, well completions, prodction, nitization and commnitization are maintained in the BLM Field Offices (i.e. Las Crces or Carlsbad Field Offices)
Examples If yo want to file an assignment of record title BLM Santa Fe Office If yo want to know whether a lease located within the bondaries of a nit has actally been committed to the nit in Lea Conty Carlsbad Field Office
Conty Clerk Conty records are maintained by the Office of the Conty Clerk in the conty where the property is located. Certain instrments are also filed in the records of the district clerk, probate clerk and in the tax records (if any portion is patented fee lands)
Why? WHY DO WE HAVE TO FILE IN BOTH THE FEDERAL AND COUNTY RECORDS, AND WHY DO WE NEED TO OBTAIN ABSTRACTS REGARDING BOTH?
Why? - Conty Records There is no federal statte providing that the BLM records, either in Washington, D.C. or in the state offices, are actal or constrctive notice to persons acqiring interests in federal oil and gas leases. In order to protect yor interest from third party bona fide prchasers for vale withot notice. Often assignments will be lengthy and assign nmeros interests and leases. The BLM has limited manpower and simply does not have the time to interpret a 400 page assignment, so they shold be recorded in the conty.
Conty Records (Cont.) Why do we need to examine abstracts of title covering the conty records? Often assignments are not recorded with the BLM Liens, easements and other encmbrances are not recorded with the BLM Also shold inclde a search of the records of the district clerk, probate clerk and the tax records (if any portion is patented fee lands)
Why? - Federal Records 43 CFR 3106.4-1: Each transfer of record title or of operating rights (sblease) shall be filed with the proper BLM office on a crrent form approved by the Director or exact reprodctions of the front and back of sch form The rights of any sch assignee shall not be recognized by the BLM ntil sch assignment has been approved by an athorized officer thereof.
What? WHICH INSTRUMENTS SHOULD BE RECORDED IN BOTH THE COUNTY AND FEDERAL RECORDS?
What Needs to Be Recorded with the BLM An Overview Assignments of Record Title Interest Transfers of Operating Rights (Sblease) Overriding Royalty Assignments Mass Transfers Name Changes or Mergers Probate Materials Divorce Decrees 43 CFR 3106.1 throgh 3106.8-3
Record Title v. Operating Rights Record Title Primary ownership of an interest in an oil and gas lease that incldes the obligation to pay rentals, and the rights to assign and relinqish the lease. Operating Rights/Working Interest The interest or contractal obligation created ot of the lease (sch as a sblease) athorizing the holder of that right to enter the leased lands to condct drilling and related operations, inclding prodction. Operating rights may or may not be transferred throgh an operating agreement, however, all transfers of operating rights on Federal leases mst be filed and approved on the official assignment form.
Assignments of Record Title Interest
Assignments of Record Title Interest (Cont.) Operating Rights Not Severed: a record title assignment will convey both operating rights and record title interest. Therefore, it is not necessary to file both a record title assignment and an operating rights transfer when conveying all the interest in a lease. Operating Rights Severed: an operating rights transfer mst be filed.
Partial Assignments Created when an assignor conveys 100% record title interest in a portion of the lands in the lease. Partial assignments segregate the lease into two separate leases. The segregated portion of the lease creates a new lease and is assigned a new lease nmber. Releases and discharges the assignor from all obligations thereafter accring with respect to the assigned lands. Sch lease contines for the primary term of the original lease... 30 USCS 187a
Assignments of Operating Rights
Assignments of Operating Rights (Cont.) Same recording formalities as an Assignment of Record Title Interest Operating Rights transfers mst identify the lease formation depths either by zone, formation, or deposit. It is not necessary to file separate operating rights transfers when conveying interest in several sections of land. One transfer can convey varios interest percentages at varios depths. 43 CFR 3106.1
Overriding Royalty Assignments Overriding royalty interests may be filed by either an Assignment of Record Title (Form 3000-3) or a Transfer of Operating Rights (Sblease) (Form 3000-3a) Only one originally exected copy is reqired to be filed. Overriding royalty assignments are not adjdicated and no formal approval is given. Note on ORRIs in NM mst ratify pooling (nlike Texas)
Name Change or Mergers q q For the BLM to recognize a name change or merger, the following mst be sbmitted: (1) A list of serial nmbers of all leases, pending assignments and nit and commnitization agreements; (2) A copy of the Secretary of State's certificate of name change or merger; (3) A copy of the amendment of the Articles of Incorporation... If one company bys ot the interests of another company, and it is not a merger or name change, record title assignments and/or transfer of operating rights mst be filed. 43 CFR 3106.8-2 and 8-3
Heirs/Devisees of an Estate To recognize the transfer of interests to heirs/devisees of an estate, the following evidence mst be sbmitted: If the estate has been probated: (1) A certified copy of the will and/or decree of distribtion; (2) A qalification statement as to citizenship and acreage holdings in federal oil and gas leases signed by each heir; and (3) A death certificate for the decedent (4) Will mst be probated within three years (5) Foreign wills reqire ancillary probate
Heirs/Devisees of an Estate (Cont.) If the estate has not been probated (intestacy): (1) A qalification statement as to citizenship and acreage holdings in federal oil and gas leases signed by each heir; (2) Evidence of the athority of the exector or administrator to act on behalf of the estate; and (3) Evidence that the heirs or devisees are the only heirs or devisees of the deceased (i.e. an Affidavit of Heirship) (4) A death certificate for the decedent
Heirs/Devisees of an Estate (Cont.) If there is no will and probate proceedings are not reqired (i.e. small estates), the following mst be sbmitted: (1) A statement signed by the heirs that they are the only heirs of the deceased; and (2) A qalification statement as to citizenship and acreage. 43 CFR 3106.8-1
More on Intestacy In NM All commnity property to srviving spose. N.M. Stat. 45-2-102(B) Separate Property (decedent had spose bt no heirs) All to srviving spose. N.M. Stat. 45-2- 102(A) Separate Property (decedent had spose and heirs) Srviving spose gets ¼ of SP. Heirs get remaining ¾. N.M. Stat. 45-2-102(A) Separate Property (no spose or heirs) - First to parents. If no parents then to parents descendants by representation, etc. Depends on degree of consanginity. N.M. Stat. 45-2-103
Historic Intestacy Matters! Before Jne 12, 1959 - wife received her 1/2 of CP and 1/4 of hsbands 1/2 (5/8ths). Remaining 3/8ths to children. From Jne 12, 1959 to Jly 1, 1973, wife got all commnity property with no need for probate.
Closing Thoghts on Intestacy Intestate estate mst be administered for marketable title. Shold not se affidavits of heirship in New Mexico, bt they are sometimes relied on anyway. Yo can generally rely on a Deed of Distribtion (nless distribtion is improper ) whether testate or intestate. N.M. Stat. 45-3-908. Best practice, review the probate or administration against the distribtion deed, and make sre the estate has been formally closed. Third parties dealing with the distribtee can rely on deed of distribtion. N.M. Stat. 45-3-901
Commnity v. Separate Property Property Presmption that property acqired dring marriage is commnity property. Separate Property: Acqired before marriage After divorce decree entered By gift, devise or descent Designated as sch by written agreement between the sposes (transmtation) N.M. Stat. Ann. 40-3-8
Conveyance of Commnity Property Both sposes mst join in the transfer of commnity property. N.M. Stat. 40-3-13(A). An attempted conveyance by one spose is VOID. However, nder N.M. Stat. 40-3-13(B), a void instrment may be ratified by the non-joining spose. Best practice is to get both sposes to join the ratification. If it is before Jne 18, 1993 (the date of the statte) the ratification mst be joined by both sposes AND contain words of present grant. Note that in Texas failre of a spose to join makes an instrment VOIDABLE (i.e. binding on the parties thereto, bt able to challenged). The absoltely void rle is specific to New Mexico and cases a lot of problems for those nfamiliar with NM law.
State Recording and Leasing Isses NEW MEXICO
New Mexico State Land Office In 1912, when New Mexico became a state, the United States granted them certain lands in each township. State owns Sections 2, 16, 32 and 36 in every township for the pblic schools and insane asylms. In some instances these sections were already patented to individals, so the state elected alternative sections, many in Lea Conty. Reslt - State of New Mexico owns for sqare miles in each township SLO is responsible for leasing State of New Mexico s 13 million mineral acres. Administers state lands on behalf of the State Land Trst for the benefit of schools, hospitals, etc.
Recording Generally New Mexico is a Notice Jrisdiction recording imparts constrctive notice to the world of the existence and contents of the instrments so recorded from the time of recording. N.M. Stat. Ann 14-9-2 Unrecorded docments are NOT effective against good faith prchasers withot knowledge of doc s existence
Undivided Interests and Joint Ownership Like federal oil and gas leases, record title of state leases can be severed from operating rights Record Title = primary ownership and right to relinqish Only two entities can own operating rights at any given time (very restrictive) Own as tenants in common Operating Rights = athorize holder to enter the land and condct operations
Record Title Recording Assignments of record title mst be filed with the commissioner for approval within 100 days after exection. NMAC 19.2.100.40 Rn, SLO Rle 1, Section 1.033, 12/13/2002. If an assignment of record title is filed after that time, the parties mst show extreme hardship There is no reqirement that assignments of record title be recorded in the conty records.
Recording Smmary Assignments of Record Title mst be filed for approval with the SLO, and no more than two parties can own record title at any given time. Miscellaneos Instrments can be filed in the state or conty records, bt do not have to be filed in both. Therefore, when determining leasehold ownership in a state oil and gas lease, it is necessary to obtain abstracts of conty and state records There is no reqirement that a state oil and gas lease be recorded in the conty records. BEST PRACTICE: File all Miscellaneos Instrments in the conty records, and file a cortesy copy with SLO. This ensres a clean, nbroken and crrent chain of title will be reflected in both the conty and state records. This can be contrasted with federal recording reqirements - federal records are not deemed to impart constrctive notice. Therefore, all instrments affecting a federal leasehold interest shold be filed in both the federal and conty records.
Qestions? www.kolawllp.com D. Bradley Gibbs: bgibbs@kolawllp.com 281-407-2637