One question I believe everyone should clearly define is “what is the scope and purpose of the opinion I’m requesting / preparing / reviewing?” Opinions can be long or short, detailed or brief, can be written to deliver pristine title or marketable title, or can be long or short, limited in scope or quite thorough, and the requirements can be written comprehensively or in a way that will allow curative strategies to be wholly developed in-house. There is practically no end to the number of variations that can be developed. However, what follows is a description of the main categories of oil and gas title opinions that are typically encountered:
As title attorneys and landmen often see, people frequently fail to offer Wills for probate. Perhaps the existence of a Will is discovered in an affidavit of heirship, or a recital in a later instrument. Perhaps the reason the parties failed to offer the Will was they didn’t realize they needed to do so, or perhaps it was because the will could not be found. As we’ll discuss in this article, the discovery of an unprobated will requires landmen and title attorneys to perform a certain level of due diligence, and the reason the parties failed to offer the Will for probate will have a substantial effect. Read More »
Landmen and attorneys frequently find churches and other religious institutions within their chains of title, either as current or past holders of record title. These religious institutions are often conveyed valuable mineral or royalty interests, either through an unsevered estate, or more directly through a severed mineral or royalty interest. Therefore, it is crucial that landmen and attorneys understand the legal frameworks regarding church ownership of real property when engaging in leasing, conveyancing, or otherwise examining title.
Unfortunately, the applicable legal frameworks can be somewhat complex and confusing. This is likely due to the inherent conflict between constitutional law and property law. On one hand, the constitution requires that courts defer to the religious institutions, so as to refrain from becoming too entangled with the establishment or free exercise of religion. This means that courts must exercise certain levels of deference to religious institutions regarding their internal beliefs or rulings as to which branches, levels, parish or other type of sub-entity has the rights of ownership and authority over church property. However, on the other hand, courts must also rule on property disputes. This jurisprudencial battle is outside the scope of this article, but it should provide some direction in understanding goal behind the various frameworks that have developed for analyzing church property ownership and conveyancing disputes.
Generally, the topic can be divided into two subissues: (1) whether the status of the entity is such that, in the relevant time period, it could legally hold title to real property in its own name rather than a trustee, and (2) which persons or entities within the church organizational structure technically hold title to the real property. Understanding these issues, and the applicable legal frameworks, are crucial to effectively handling oil and gas title, leasing, and royalty payout.
I’ve had a few landmen ask me about the proper way to handle payments of bonus and royalties under oil and gas leases involving a life tenant. Judging by the guesses people have given, it may not be entirely common sense. The entire analysis changes even further if the Open Mines Doctrine applies. I suppose that’s one reason it’s always good to make sure you have an excellent title attorney preparing your title opinions and division orders!
The answer: Once a lease is granted by both the life tenant and the remaindermen, courts generally allocate funds between them as follows:
- Life Tenant: Delay Rentals, interest from Bonus Payments and Royalty Payments. (In Arkansas and Oklahoma, the Life Tenant gets the entire bonus)
- Remaindermen: The Bonus Payments and Royalty Payments, but only upon the life tenant’s death. (again, not in Arkansas or Oklahoma)
However, the Open Mines Doctrine is of key importance when dealing with an active lease, because the entire division of proceeds changes when this doctrine applies. The Cornell School of Law defines the Open Mines Doctrine as follows:
In property law, a doctrine that permits a tenant to commit voluntary waste on a piece of land by depleting it of natural resources when mining was previously done on the land and mines were currently open at the time the tenant took possession of the land. In this situation, a tenant is allowed to continue mining on the land, but can only continue to mine in the open mines already in existence and cannot open any new mines on the land.
The Open Mines Doctrine, while borrowed from the law of hard minerals, has been adopted in most oil-producing states. Under this doctrine, where it applies, courts generally allocate funds between the life tenant and remaindermen as follows:
- Life Tenant: Delay Rentals, all Bonus Payments and Royalty Payments.
So when does the Open Mines Doctrine apply? Generally, a “mine” (oil and gas lease) is “open” when the oil and gas lease exists when the life tenancy is created. Perhaps counter-intuitively, this may also include additional wells drilled under that lease. One important limitation is that the Open Mines Doctrine generally does not apply to future leases or top leases.
Issue: Horizontal Drilling Under a Cemetery
Is there any legal authority which would prohibit an operator from conducting horizontal drilling operations underneath a tract of land that has been dedicated to cemetery or burial purposes?
Once property is dedicated to cemetery or burial purposes, there are several resulting restrictions placed on the use of the owner of that tract of land, some of which may impact oil and gas production operations. No particular instrument or ceremony is required to dedicate a tract of land to cemetery purposes.  Damon v. State, 52 S.W.2d 368, 370 (Tex. Comm’n App. 1932, holding approved); Davis v. May, 135 S.W.3d 747, 749 (Tex. App.-San Antonio 2003, pet. denied). Actual use of land for burial purposes is a sufficient dedication.  Damon, 52 S.W.2d at 370; Op. Tex. Att’y Gen. JC-0235 (2000). The grantee of a burial lot in a deed of conveyance does not acquire a fee-simple title.  Oak Park Cemetery, Inc. v. Donaldson, 148 S.W.2d 994, 998 (Tex.Civ.App.—Galveston 1940, writ dism’d judgm’t cor.). However, property once dedicated to cemetery purposes and in use as a burial ground for the dead may not be sold either voluntarily or through judicial proceedings in such a manner as to interfere with the uses and purposes to which it has been dedicated and devoted.  State v. Forest Lawn Lot Owners Ass’n, 152 Tex. 41, 254 S.W.2d 87 (Tex. 1953); Davis, 135 S.W.3d at 749. Read More »
Footnotes [ + ]
|1.||↑||Damon v. State, 52 S.W.2d 368, 370 (Tex. Comm’n App. 1932, holding approved); Davis v. May, 135 S.W.3d 747, 749 (Tex. App.-San Antonio 2003, pet. denied).|
|2.||↑||Damon, 52 S.W.2d at 370; Op. Tex. Att’y Gen. JC-0235 (2000).|
|3.||↑||Oak Park Cemetery, Inc. v. Donaldson, 148 S.W.2d 994, 998 (Tex.Civ.App.—Galveston 1940, writ dism’d judgm’t cor.).|
|4.||↑||State v. Forest Lawn Lot Owners Ass’n, 152 Tex. 41, 254 S.W.2d 87 (Tex. 1953); Davis, 135 S.W.3d at 749.|