Oil and Gas Lawyer Blog
Two new opinions, one from the San Antonio Court of Appeals and one from the El Paso Court of Appeals, again tackle the task of construing mineral and royalty conveyances and reservations. A spate of these cases has arisen as a result of the recent shale plays, where lands never before productive have suddenly become valuable. As a result, muddy language in old deeds has to be clarified by the courts.
In Laborde Properties, L.P. v. U.S. Shale Energy II, LLC, the San Antonio Court of Appeals was required to construe the following mineral reservation in a 1951 deed:
There is reserved and excepted from this conveyance … an undivided one-half (1/2) interest in and to the Oil Royalty, Gas Royalty and Royalty in other Minerals in and under or that may be produced or mined from the above described premises, the same being equal to one-sixteenth (1/16) of the production.
The court held, first, that the reservation is not ambiguous, and second, that it reserved to the grantor a fixed 1/16 royalty interest and not a “floating” royalty equal to 1/2 of the royalty reserved in any oil and gas lease.
In Greer v. Shook, the El Paso Court of Appeals was called upon to construe the following language in a deed:
… the vendor is the owner of all of the royalty and that the grantee is purchasing one half (1/2) of the royalty [] one half (1/2) of the minerals, produced in and from wells or other operations situated on the specific tract of land described in this instrument.
Said land being now under an oil and gas lease executed in favor of John Ross, it is understood and agreed that this sale is made subject to the terms of said lease, but covers and includes one half (1/2) of all of the oil royalty, and gas rental or royalty due and to be paid under the terms of said lease.
It is understood and agreed that none of the money rentals which may be paid to extend the term within which a well may be begun under the terms of said lease is to be paid to the said Grantee and in [the] event that the above described lease for any reason becomes cancelled or forfeited, then and in that event an undivided one sixteenth (1/16) of the lease interest and all future rentals on said land for oil, gas and other mineral privileges shall be owned by said Grantee, he owning one sixteenth of all oil, gas and other minerals in and under said lands, together with no interest in all future rents.
The El Paso Court held that this deed reserved to the grantor 1/2 of the minerals and conveyed 1/2 of the minerals to the grantee. (Our firm represents the successors of the grantee in this case).
Recently the Texas Supreme Court attempted to clarify how these kinds of instruments should be construed in Hysaw v. Dawkins, 483 S.W.3d 1 (Tex 2016). The courts in Laborde and Greer both cited Hysaw in support of their conclusions.
Because no two instruments granting or reserving mineral or royalty interests will be identical, courts will continue to struggle with trying to ascertain the parties’ intent in these kinds of instruments.