6Nov

Life Tenants and the the Open Mines Doctrine

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:

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.

 

5Nov

Drilling Insight: Horizontal Drilling Under a Cemetery

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?

Discussion:

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.  [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). Actual use of land for burial purposes is a sufficient dedication. [2] 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. [3] 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. [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. Read More »

Footnotes   [ + ]

© Copyright 2014, Austin W. Brister. All Rights Reserved. DISCLAIMER: The information in this article is for general information purposes only. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided in this article.
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