Title Issues
A few terms and issues that stump
seasoned title examiners
• Mineral Severance
• Minerals v Royalty
• Non-Participating
Royalty
• Unleased Interests
• Term
Conveyances
• Interest Conveyed
v Land Described
• Prior Reservations
Types of Ownership (Title)
Fee Simple Ownership: Usually this term is referred to as the “fee.” If an individual owns the surface
and the minerals, he owns the fee simple title. With this type of ownership, one has surface and mineral
rights, and the right to lease minerals and to receive bonus (rental and royalty derived from leasing minerals).
Surface Owner: A surface owner only owns the surface. It is also known as the “fee in the surface.” This
type of owner is not entitled to lease the mineral rights. However, the individual does have the right to intervene
in exploration and development matters if the surface is used.
Mineral Owner: The mineral owner owns the minerals aside from the surface. This term is typically called the
“mineral fee.” This type of owner has the right to remove minerals from the property. Unlike the surface
owner, the mineral owner can lease the minerals for oil and gas.
Undivided Mineral Owner: The mineral owner owns a “share” of the total mineral tract.
Royalty Owner: A royalty owner owns a portion of the oil or gas produced from the land. He does not have
the right to lease the minerals nor is he entitled to any bonus or consideration money. He is merely entitled to
his royalty if oil and gas is produced. This type of royalty is considered “perpetual,” because he owns the
royalty even if the lease expires.
Leasehold Owner: A leasehold owner is a person or company that has entered into a lease agreement with
the mineral owner. The leasehold owner owns the right to drill and develop the minerals in return for a royalty
paid to the mineral owner.
Overriding Royalty Interest: This interest is carved out of the Lessee's share (or leasehold) of the oil and
gas lease. An overriding royalty interest is typically expressed as either "1/8th of 8/8ths of the lessor's
interest....", or "the difference between 25% and existing leasehold burdens....." This interest is tied to the
Lessee and not the Lessor.
Payments out of Production: Similar to an overriding royalty interest, a production payment is carved out of
the production attributable to the working interest under a lease. However, it differs from the overriding royalty
because it terminates when a specified amount of money has been received out of production.
Two ways to Sever Minerals from the Surface
A surface owner can sell the surface and reserve all
or a part of the minerals.
Two ways to Sever Minerals from the Surface
Or, the surface owner can grant a mineral deed, severing all
or part of the minerals from his land
Mineral Ownership (“Participating
Royalty Interest”)
•Right to Develop Minerals
•Right to Execute a Lease
•Right to Collect Bonus
•Right to Collect Delay Rentals
•Right to Collect Royalties
Royalty Ownership
(“Non-Participating Royalty”)
•Right to Develop Minerals
•Right to Execute a Lease
•Right to Collect Bonus
•Right to Collect Delay Rentals
•Right to Collect Royalties
The deed includes the
words “in and under”
and that may be
produced
“1/24th of all of the oil,
gas and other minerals
produced, saved and
made available for
market”
Louis B. Mayer owns 80 acres – surface and minerals
In 1935 he executes four
deeds to his favorite
actors. The deed reads
“3.125% interest in and to
the oil, gas and other
minerals produced, saved
and made available for
market”
In 1936 he executes a deed
to his favorite director. The
deed reads “3.125% interest
in and to the oil, gas and
other minerals in and under
the described 80 acre tract.”
In 1937, the owners of the
mineral rights each executed
a lease and reserved a
3/16ths royalty.
Who executed the lease?
Introducing “The Players”
Leasehold Owner
Are the four
actors’ nonparticipating
royalty
carved solely
out of Louis
B. Mayer’s
royalty?
 Louis B Mayer
 Both Mayer & Thalberg
If Louis B Mayer sold 100% of his right, title
and interest in the 80-acre tract of land to
Irving Thalberg, would the royalty
interests that were conveyed to his four
favorite actors terminate?
 Yes
 No
How does an NPR Impact a Unit?
Lease 1
Roy: 25%
Lease 2
Roy:18.75%
Lease 3
Roy: 20%
Lease 4
Roy: 25%, subj to
1/8th NPR
Facts: Your company owns 4 leases comprising a 640
acre unit. One of those tracts is subject to an NPR
NonParticipating
Royalty
Interest
Owners must
ratify Lease
to be bound
by Pooling
Provision –
i.e.,
Proportionate
Reduction
Lessee, its successors and assigns, at its option, at any time and from time to time, and
without Lessor's joinder or further consent, is hereby given the right and power to pool the
land or any interests covered by this lease, or any portion thereof, as to oil, gas,
condensate or distillate, or any of them, or either of them, with any other land, interests,
lease or leases, or any of them, adjacent, adjoining or located in the immediate vicinity
of these lands, when in Lessee's judgment it is necessary or advisable to do so in order
efficiently to develop or operate said premises in compliance with the spacing rules of
the Railroad Commission of Texas or other lawful authority or when to do so, would, in
the judgment of the Lessee, promote the conservation of oil and gas on said premises,
such pooling to be into a well unit or units not exceeding forty (40) acres plus an acreage
tolerance of ten percent (10%) of forty (40) acres for oil, and not exceeding six-hundred-forty
(640) acres plus an acreage tolerance of ten percent (10%) of six-hundred-forty (640) acres for
gas, provided that should governmental authority having jurisdiction prescribe or permit the
creation of units larger than those specified, units may be created or enlarged to conform
substantially in size with those prescribed by governmental regulations. Lessee may pool the
acreage or interests above described, or any portion thereof, as above provided, as to oil or
gas in any one or more strata, and units so formed need not conform in size or area with the
unit or units into which the lease is pooled or combined as to any other stratum or strata, and
oil units need not conform as to area with gas units. The pooling in one or more instances
shall not exhaust the rights of the Lessee hereunder to pool the land above described, or any
portion thereof, into other units. Lessee shall execute in writing and file for record in the
county or counties where the land is situated an instrument designating and describing the
pooled acreage, which pooling and designation may be accomplished either before or after a
well or wells are drilled or completed on the unit. The entire acreage so pooled into a unit shall
be treated for all purposes, except the payment of royalties, overriding royalties or payments
out of production, as if it were included in this lease; and drilling or reworking operations
thereon, production of oil or gas, condensate or distillate therefrom, cessation of production
thereon, or the existence thereon of a shut-in gas well, shall be considered for all purposes,
except the payment of royalties, as if such operations were conducted, or such production or
cessation of production, or existence of a shut-in gas well were on the land above described,
whether or not the well or wells be located on the said lands. In lieu of the royalties, overriding
royalties or payments out of production, if any, elsewhere herein specified, Lessor shall receive
from a unit so formed only such portion of the royalty, overriding royalty or payment out of
production, if any, stipulated herein as the amount of the acreage (surface acres) above
described which is placed in the unit bears to the total acreage (surface acres) so pooled in the
particular unit involved.
POP QUIZ
Lease 1
Roy: 25%
Lease 3
Roy: 20%
Lease 2
Roy:18.75%
Lease 4
Roy: 25%, subj to
1/8th NPR
Prop Int x Tract Ac / Unit Acres x Royalty Rate
1 * 160 / 640 * 0.25 = 0.0625
How do we
divide the
royalty?
How does an Unleased Mineral Interest Impact a Unit?
Lease 1
Roy: 25%
Lease 2
Roy:18.75%
Lease 3
Roy: 20%
Unleased
The rule related to an “interest conveyed” v. “land described”
According to the
reservation language, did
Thomas reserve 25% of
his undivided 50%?
Yes _____
No _____
If this scenario is correct,
Thomas reserved 12.5%
or 40 mineral acres to
himself.
Or did he reserve 25% of
the entire 320-acre
mineral estate?
Yes _____
No _____
If the second scenario is
correct, Thomas reserved
a full 25% or 80 mineral
acres to himself.
What if Thomas changed the language slightly and phrased
his reservation like this….
According to the reservation language, did Thomas reserve 25% of the entire
mineral estate under the tract of land?
Yes _____ No _____
Or did Thomas reserve 25% of his undivided 50%?
Yes ______ No ______
Because the language limited the reservation to the land described and
conveyed, and since Thomas conveyed 50% of the land, he can only keep
25% of what he conveyed. He ends up with 12.5% or 40 mineral acres.
Prior Reservations
“The Duhig Rule”
The “Duhig” rule was established pursuant to the frequent
problem of people accidentally drafting deeds that attempted to
convey more property than they actually owned
If no mention is made in the new deed of any previous claims
on any part of the property, the grantee can read the new
deed as though it is completely correct without concern to
prior claims
The grantee may interpret the warranty deed on its
own; without regard to the prior reservation that is
not expressly stated in the deed.
The Duhig rule is applied only to “warranty” and “special
warranty” deeds in Alabama, Colorado, Louisiana,
Oklahoma, Mississippi, North Dakota, Texas and Wyoming
Prior Reservations
“The Duhig Rule”
Let’s assume you own all the surface and minerals in a property
You convey an undivided 50% of the minerals to a friend
You now own 100% of the surface and 50% of the
minerals
You now sell all your property, but you want to retain 25% of
the minerals
What does
the Grantor
intend?
What does
the Grantee
Interpret?
In 1895 Harriet Smith sold
to Ivan Tommy the 80-acre
tract of land and reserved
an undivided 25% interest
in and to all of the oil, gas
and other minerals in and
under said land.
Harriet Smith owns
Ivan Tommy owns
Ivan Tommy sold the 80
acres to Chester Russell in
1920 and reserved 25% of
all the oil, gas, minerals in
and under said land. There
was no mention of the
Harriet Smith Reservation
What percentage of
the mineral rights
does Chester
Russell own?
In 1925 Chester Russell sold
the 80 acres to Orville
Simpson and reserved an
undivided 12.5% mineral
interest in and to all of the oil,
gas and other minerals in and
under the land. He DID
mention the previous mineral
reservation.
What percentage of
the mineral rights
does Orville
Simpson own?
Orville Simpson sells the 80 acres
to Julia Owen and reserves an
undivided 12.5% mineral interest in
and to all of the oil, gas and other
minerals in and under said land.
He did NOT mention the previous
mineral reservation.
What percentage of the mineral rights
does Julia Owen own?
Over Conveyancing
“What if the Grantor Doesn’t Own as
Much as they Purport?”
Homer Sampson deeded
an undivided 50% interest
in an 80- acre tract to
Belinda Cruse.
Homer owns 50%
Belinda owns
50%
Over Conveyancing
“What if the Grantor Doesn’t Own as Much as they Purport?”
Homer owns 50%
Subsequently, Belinda deeded an undivided 50%
interest in the 80- acre tract to Krusty the Clown.
The deed says it is subject to previous reservations
and she reserved an undivided 50% interest in and
to all of the oil, gas and other minerals in and under
the described 80-acre tract.
Belinda owns 25%
Krusty owns 25%
Over Conveyancing
“What if the Grantor Doesn’t Own as Much as they Purport?”
Homer owns 50%
Belinda owns 25%
In 2010, Krusty the Clown deeded an undivided
50% interest in the 80- acre tract to Bart Sampson.
The deed cites it is expressly subject to previous
reservations and he reserved an undivided 25%
interest in and to all the oil, gas and other minerals
in and under the described 80-acre tract.
Remember, Krusty owns 25% at this
point. What does Bart think he is
receiving and what is he really
receiving?
Krusty owns 6.25%
Bart owns 18.75%
Over Conveyancing
“What if the Grantor Doesn’t Own as Much as they Purport?”
Belinda owns 25%
Krusty owns
6.25%
Bart owns 18.75%
In 2014, Homer Sampson deeded an
undivided 50% interest in the 80- acre tract to
the Gustafson twins, Sherri and Terri. Subject
to prior reservations, Homer reserves an
undivided 25% interest interest in and to all
the oil, gas and other minerals in and under
the described 80-acre tract.
Homer owns 25%
Sherri owns 12.5% and
Terri owns 12.5%
Over Conveyancing
“What if the Grantor Doesn’t Own as Much as they Purport?”
Bart owns 18.75%
Belinda owns 25%
Homer owns 25%
Krusty owns
6.25%
In 2015, Sherri and Terri (voted the most
adorable twins in the tri-county area)
deeded an undivided 50% interest in the
80-acre tract to Marge Sampson. Subject to
prior reservations, the twins reserved an
undivided 12.5% interest in and to all the
oil, gas and other minerals in and under the
described 80-acre tract.
Sherri owns 6.25% and
Terri owns 6.25%
Marge owns
12.5%
Pulling it All Together
Ratifications Signed
Unit Established by either Statutory, or
Voluntary Unit Agreement
Drilling Title Opinion Rendered
Drilling Title Cleared
Well is drilled and completed
Division Order Title Rendered
Producing Title Cleared
Owners Identified, Located and
input to Division or Interest System