Issues Involving Conveyances + Reservations of Mineral Interests
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Margeaux Kimbrough presented "Issues Involving Conveyances + Reservations of Mineral Interests" on December 3, 2015, at the "Ultimate Guide to Oil and Gas Title Law" hosted by the National Business Institute. Presentation topics included requirements for satisfying conveyances and reservations, types of interest, complicated pitfalls and mineral vs. royalty distinction.
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Issues Involving Conveyances + Reservations of Mineral Interests
- 1. z Issues Involving Conveyances + Reservations of Mineral Interests presented by Margeaux Kimbrough December 3, 2015
- 2. z Discussion TOPICS Requirements for satisfying conveyances and reservations Voluntary vs. involuntary conveyances Types of interests typically conveyed or reserved Pitfalls in complicated conveyances and reservations Mineral vs. royalty distinction Fractional royalty vs. fraction of royalty Joint ownership
- 3. z History of Mineral Severances cujus est solum, ejus est usque ad coelom Ownership
- 5. z An act by which it is intended to create one or more property interests What is a Conveyance? Giving an interest away
- 6. z A method by which an interest is reserved from a grant What is a Reservation? Keeping an interest
- 7. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 8. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 9. z
- 11. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 12. z …Grant, Bargain, Sell + Convey…
- 13. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 14. z …Grant, Bargain, Sell + Convey… Located in Section 28, Range 4 of Newport Township, Washington County, Ohio, being 26.74 acres of land, more or less, and bounded substantially as follows…
- 15. z Best Practices
- 16. z Best Practices Section1 Township2 Range3 Tract4 Acreage5 County6 State7 Metes + Bounds8 Tax Parcel ID #9 And…
- 17. z
- 18. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 20. z Satisfying Conveyances + Reservations Writing Granting Language Adequate Description Designation of Parties Proper Execution
- 23. z Can be general or limited
- 24. z General Warranty Deed Grantor covenants: + Lawful ownership in fee simple + Free from encumbrance + Right to convey + Defense of title
- 25. z Limited Warranty Deed Only warrants claims made by, or throughunder, the grantor/warrantor
- 26. z Quitclaim Deeds No covenants or warranties of title “as-is”
- 27. z Oil + Gas Leases fee simple determinable or license
- 28. z Transfers the rights of a grantor to a grantee Assignments Oil and gas leases
- 29. z
- 31. z Foreclosure Tax Sale Bankruptcy Lien
- 33. z
- 35. z The Fee Simple Absolute Tree
- 36. z
- 38. z Ownership Before Severance Blackacre X owns Blackacre in fee simple – from the heavens to the center of the earth
- 39. z Ownership After Severance Blackacre X retains ownership in the surface and the airspace above Blackacre Y owns the minerals underlying Blackacre
- 41. z
- 46. z Other Types of Interests
- 48. z Transferring Fractional Interests 1/2 + 1/3 = Blue
- 49. z Conveyance 1 Moe is the fee simple owner of Blueacre Farm. By virtue of a general warranty deed, Moe conveys to his brother Larry, “Blueacre Farm and an undivided 1/2 interest in the minerals underlying Blueacre Farm,” and to his brother Shemp, “an undivided1/2 interest in the minerals underlying Blueacre Farm.”
- 50. z Conveyance 2 Larry conveys to Curly, by quitclaim deed, “an undivided ¼ interest in the minerals underlying Blueacre.”
- 52. z 1/4 of the 1/2 undivided mineral interest he (Larry) received from Moe (in such case Larry would retain 3/8 of the whole mineral interest and Curly would receive 1/8 of the whole mineral interest) 1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly with 1/4 of the whole mineral interest OR
- 53. z 100% Mineral Interest Underlying Blueacre Farm Moe’s Interest Curly’s Larry’s Moe’s Interest Curly’s Larry’s
- 54. z POLL
- 55. z A) 1/4 of the 1/2 undivided mineral interest he (Larry) received from Moe (in such case Larry would retain 3/8 of the whole mineral interest and Curly would receive 1/8 of the whole mineral interest) B) 1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly with 1/4 of the whole mineral interest OR
- 56. z Moe’s Interest Curly’s Larry’s Greatest Possible Estate Rule 1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly with 1/4 of the whole mineral interest
- 57. z Moe’s Interest Curly’s Larry’s Literal Interpretation Rule 1/4 of the whole mineral interest, vesting Larry with1/4 of the whole mineral interest and Curly with 1/4 of the whole mineral interest
- 58. z Grantor purports to convey a larger fractional interest than what he owns What is an Overconveyance? Moe
- 59. z Conveyance 1 Comic Book Guy conveys the comic book store to Millhouse and reserves unto himself an undivided 1/2 mineral interest Comic Book Guy Millhouse
- 60. z Conveyance 2 Bart Millhouse Conveyance 2 Subsequently, Millhouse conveys the comic book store to Bart by general warranty deed, reserving unto himself an undivided 1/2 mineral interest
- 61. z Grantor W.J. Duhig 1/2 Miller-Link Lumber ? Grantor 1/2 The Duhig Rule ? Peavy-Moore Lumber
- 62. z Grantor W.J. Duhig 1/2 Miller-Link Lumber ? Grantor 1/2 The Duhig Rule 1/2 Peavy-Moore Lumber
- 63. z Result Applying the Duhig Rule
- 64. z Conveyance 1 Comic Book Guy Millhouse Conveyance 2 Bart Millhouse
- 65. z Remember Does not apply in all states Does not apply to quitclaim deeds May not apply when grantee has actual notice of prior outstanding interest May not apply to oil + gas leases
- 69. z Rights Associated with Mineral Interests Reasonable use of the surface Receipt of profits Receipt of benefits of production Obligation to pay costs Receipt of bonus payments, delay rentals and royalties Right to transfer, search, develop and produce Ability to seek partition
- 71. z Receipt of benefits from production Rights Associated with Royalty Interests
- 72. z How to Tell the Difference Look for language that describes the rights being conveyed “right to enter upon the lands” “right to prospect for oil + gas” “right to remove oil + gas”
- 73. z Mineral Interest “in and under” Royalty Interest “removed from the ground” Key Words
- 74. z “in the event that said premises or any part thereof shall at any time hereafter be operated for oil or gas or both, there and in that case the royalty oil which may be produced and saved from said premises and the rents and royalties that may be derived from gas wells drilled thereon shall be owned and distributed as follows…” Example
- 75. z POLL
- 76. z “in the event that said premises or any part thereof shall at any time hereafter be operated for oil or gas or both, there and in that case the royalty oil which may be produced and saved from said premises and the rents and royalties that may be derived from gas wells drilled thereon shall be owned and distributed as follows…” A) Mineral interest OR B) Royalty interest Example
- 77. z “Moe, grantor…doth hereby Grant, Bargain, Sell and Convey to the said Larry… the following described real estate…reserving to the Grantor, his heirs, executors, administrators and assigns for a period of 20 years from the date of this instrument, the minerals underlying the real estate, including the right to enter upon the above described lands and to prospect for, drill, produce and remove oil and gas removable by wells including the right to receive rents and royalties during said 20 year period from oil and gas leases…” Example
- 78. z POLL
- 79. z “Moe, grantor…doth hereby Grant, Bargain, Sell and Convey to the said Larry… the following described real estate…reserving to the Grantor, his heirs, executors, administrators and assigns for a period of 20 years from the date of this instrument, the minerals underlying the real estate, including the right to enter upon the above described lands and to prospect for, drill, produce and remove oil and gas removable by wells including the right to receive rents and royalties during said 20 year period from oil and gas leases…” A) Mineral interest OR B) Royalty interest Example
- 80. z Fractional Royalty vs. Fraction of Royalty
- 81. z Fixed royalty Owner is entitled to the stated fraction of gross production, unaffected by the royalty reserved in the lease an undivided ¼ royalty interest Fractional Royalty Share of Production Total Production
- 82. z Language that creates a fractional royalty an undivided ¼ royalty interest Fractional Royalty Share of Production Total Production “A fee royalty of 1/32 of the oil and gas” “One-half of the one-eighth royalty interest” “1% royalty of all the oil + gas produced and saved”
- 83. z Owner is entitled to a fraction of the royalty retained by the lessor Fraction of Royalty Total Production an undivided ¼ royalty in all royalties received from any oil and gas produced on the premises 1/8 royalty
- 84. z Fraction of Royalty Total Production an undivided ¼ royalty in all royalties received from any oil and gas produced on the premises 1/8 royalty Language that creates a fraction of royalty “1/16 of all oil royalty” “An undivided one-half interest in and to all of the royalty” “One-half of one-eighth of the oil, gas and other mineral royalty that may be produced”
- 85. z Concurrent Successive Spouses Business Entities Types of Joint Ownership
- 86. z Two or more persons own fractional, undivided interests in the whole Joint Tenants Concurrent Ownership Tenancy by the Entirety Tenants in Common Moe + Larry Moe + Martha (husband/wife) Moe Larry
- 88. z Life Tenants Timeline of Ownership Death of Crazy Cat Lady BobCrazy Cat Lady
- 89. z Term Ownership Timeline of Ownership End of 20 Years LarryMoe 20 Years
- 90. z POLL
- 91. z Reserving unto the grantors, their heirs, executors, administrators, and assigns, for the period ending February 1, 2016, coal; also oil, gas and all other minerals removable by wells. Interpretation 1 + Interest in coal is reserved until February 1, 2016 + Interest in oil, gas and other minerals is reserved in perpetuity Interpretation 2 + Interest in coal is reserved until February 1, 2016 + Interest in oil, gas and other minerals is reserved until February 1, 2016
- 93. z Thank You! Margeaux Kimbrough Kegler Brown Hill + Ritter mkimbrough@keglerbrown.com keglerbrown.com/kimbrough 614.462.5437 @MargeauxEsq linkedin.com/in/mkimbrough