Investigating the Mineral Estate

To create a comprehensive estate plan, both the estate planner and the client must have a full understanding of the assets to be distributed. Mineral assets can pose special challenges in this regard because they are often poorly documented and misunderstood.  This post will provide some initial guidance regarding how to determine the nature and extent of any mineral interest.

Families frequently have some notion about the ownership of minerals underlying their property, but this information is often the subject of rumor and half-truth. Someone’s uncle may have heard that some patriarch, way back, severed the minerals and sold them off in a tough season. Someone else may have heard just the opposite, that some matriarch, way back, in a fit of wisdom, purchased the mineral rights before anyone realized how valuable they would be. Definitive resolution of mineral ownership can only come from the history of recorded title documents. The most readily available source of information about that history is the title search report provided in connection with obtaining title insurance. Unfortunately, while that report can provide some initial information about the property, it is very unlikely to include significant information on mineral title. Title companies routinely exempt mineral ownership from these reports. To trace mineral title, clients and landowners generally need to look beyond family history and the title search report.

The best place to begin is with the documentation already available to the landowner. Any communications from oil and gas development companies, prospective royalty or mineral interest purchasers, payment records, or tax notices related to the mineral estate should be collected and reviewed for relevant information. In particular, if there are producing oil and gas wells on the land, the mineral owner should have received documents referred to as division orders.  Division orders can provide a wealth of information regarding the type of mineral interest involved and its approximate value. In addition, if there are producing oil and gas wells on the land or other mineral development facilities, state agencies may have information about the leasing of the mineral estate.

As noted above, a conclusive understanding of mineral ownership can only come from the title records. These title records begin with the deed obtained at the time of purchase. If the current owner has not kept a copy of the deed and does not know who the predecessor in title was, the county assessor’s office can sometimes provide access to copies of deeds for the immediate predecessors in title. If that line of inquiry fails, county records can be used to trace the chain of title. In Texas, Colorado, and North Dakota, the county clerk and recorder’s office maintains grantor-grantee indices which use the names of parties to document title transactions. The current landowner’s immediate predecessor, or grantor, will be a grantee in the next step of the chain. Moving backward through the index, all the conveyances impacting the property can be identified. Such searches, however, can become extremely complex. Moreover, title examination of the instruments requires specialized legal expertise. If the nature and extent of the mineral estate is not clear from the information immediately available to the landowner, we recommend that you contact an attorney.

photo courtesy of Trent Erwin at Unsplash.com

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