Energy Industry (Oil & Gas)/Mineral Co-Tenancy after Partition

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QUESTION: In Texas, what happens if a lease is made by one co-tenant on an undivided mineral interest and then another un-leased co-tenant demands partitioning?  In the process, the land and mineral interest is partitioned (with the oil company being drawn into the partition suit) and the minerals end up no longer undivided but partitioned with the land.  The oil company issues a waiver of ingress and egress across the un-leased mineral owner's land, but, nothing other than that.  The existing lease allows the leased part of the land to be pooled. None of the land will be part of the drill-site or borehole. A partition deed is prepared by all of the surface/mineral owners and the land is divided with each owner ending up with the minerals attached to their partitioned amount of land.  Does the oil company get to include just the tract of land partitioned to the owner that leased (before the land was partioned) or can the not very reputable oil company pull in the unleased owners even though their land and minerals have been partitioned prior to drilling but after the mineral lease was in place?  (Please consider Rule of Capture and also detriment to the other co-tenants being subject to a lease they had no chance to negotiate...would they have recourse against the leasing co-tenant for "waste" or damages?)

ANSWER: Hello Rose.  I can only answer from a Texas perspective, but in this situation the oil company, if it joined in the partition deed, would have a lease only on that portion of the acreage that was allotted to its lessor and the oil company in the partition.  The other tact allocated to the non-leasing owners would still be un-leased.   As far as I can tell, the oil company should have no obligation to the un-leased owners, and the un-leased owners would have no recourse, under Texas law, against the former leasing co-tenants for damages or waste.  I would advise you to consult with a lawyer in your state to see if my opinion is consistent with the law in your state.

Good luck and let me know if you have any questions.

---------- FOLLOW-UP ----------

QUESTION: Mr. McCall,
I need to know if your answer will stay the same given these facts:  I am in Texas.  A non-leasing owner filed a partition suit drawing in the other co-tenants and the oil company.  The land was partitioned through mediation that the oil company participated in.  However, only the co-owners signed a partition deed dividing the land with no reservations for minerals (they did not stay undivided).  The only thing the oil company did was sign a waiver of ingress and egress saying that it would not go on the non-leased owners property; other than that, it did not "join in the partition deed" but the amount of acres that it has leased only corresponds to the one owner that did lease.  (But, at the time the owner signed the lease, it was for an undivided interest.)  Given these extra facts, do you think part of my land can be claimed under his lease without being in a pooled unit? (Remember, it will not be part of the drill site or bore hole.)  To pool it in with the leased land-owner, would the RRC have to certify it as part of a pooled unit first?

Thanks again.
~Rose in Rockdale, Texas

ANSWER: Hello Rose.  Thanks for the additional facts.  To start with the basics here, the lessor of a mineral estate retains a non-possessory reversionary interest in the minerals, which is called a possibility of reverter. The execution of an oil gas and mineral lease simultaneously divests the grantor (lessor) of the right to use, possess, use or dispose of the oil and gas in the leased land, and vests those rights in the lessee. In Texas, a lessee has a real property interest in land and can compel a partition, but the owners of a non-possessory interest may neither demand or defeat a partition.  A lessor of minerals is not a joint owner of the mineral estate with his or her un-leased co-tenants, and cannot effectively partition the oil and gas estate without the joinder of the lessee, either in the partition suit or in a partition deed.

Where does this leave us?  I don't believe that the partition deed between the lessor of the minerals and the un-leased minerals was effective to partition the mineral estate of the property.  To make the partition effective the oil company would have had to join in the partition deed, and it did not.  Technically, the original oil, gas and mineral lease still covers the entire property notwithstanding the purported partition.   Yes, the lease would still cover the leased minerals in both tracts described in the partition, and both tracts could be pooled in this instance.  The Railroad Commission would not have to certify the pooling for it to become effective, and generally is not involved in voluntary pooled units.  The oil company would be bound, however, by its waiver of ingress and egress on part of the property, but that property would still be covered by the lease and any pooling designation that described  both tracts.

To make the partition effective as to the mineral estate, it needs to be re-done with the oil company  being made a party to the partition agreement.  I hope I have answered your question, and let me know if I can be of further assistance.  Good luck!

---------- FOLLOW-UP ----------

QUESTION: Mr. McCall:
I so much hate to bother you again but you missed part of the facts.  The second sentence to my follow-up question says: A non-leasing owner filed a partition suit drawing in the other co-tenants AND THE OIL COMPANY.  The land was partitioned through mediation that THE OIL COMPANY PARTICIPATED IN.  You answer: "To make the partition effective as to the mineral estate, it needs to be re-done with the oil company  being made a party to the partition agreement."  Please re-answer taking into consideration that the oil company did participate but executed its lease prior to partition and only on part of the property and that the minerals went to each property owner according to the acreage that was partitioned to them.  So, what I mainly want to know is:  Given that the company was part of the partition process, does the lease remain undivided or follow the acreage that was partitioned to the lessor?

There are three documents:  The Mediated Settlement Agreement signed by the oil company (but not a recordable document) and the Partition Deed (that divides the minerals with each owner's surface) and the Waiver of Ingress and Egress (both recorded).  I understand that the oil company has to join in the partition suit with the lessor and you further explain the lessor "cannot effectively partition the oil and gas estate without the joinder of the lessee, either in the partition suit or in a partition deed" but the oil company cannot sign the deed, can they, because their interest is subject to reversion, right?  (Both times you answered you make reference to the oil company joining in the Partition DEED...I don't understand that.) The MSA actually called for the oil company to amend their lease but all they provided was the Waiver of Ingress and Egress which was recorded with the deed that only the landowners signed.  Given that the company was part of the partition process, does the lease remain undivided or follow the acreage that was partitioned to the lessor?

Thank you so very much for answering.

Rose

Answer
Rose, the oil company has to join in the partiton deed as to the mineral estate.  The leased co-tenant is not a mineral owner for partition purposes and they do not have the ability to partition the mineral estate with the unleased owners during the term of the lease.  The fact that the oil company was made a party to the partition suit is not helpful unless the court had entered a partition judgment that was binding on the oil company.  Given that the case was settled at mediation, and by the execution of a vuluntary partition deed or agreement, unless the oil company joined in the partition deed the mineral estate has not been partitioned as to the oil company.  The mineral estate remains undivided in my opinion.

I hope this clarifies the matter.  Good luck and let me know if you have any further questions.  

Energy Industry (Oil & Gas)

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David B. McCall

Expertise

Questions regarding oil and gas exploration and production, the operation and management of oil and gas producing properties, and questions related to mineral ownership, title problems, and oil and gas leases.

Experience

I am Board Certified in Oil, Gas and Mineral Law in the state of Texas. I have more than 37 years of experience in the industry as both an in house attorney for major oil companies and as a partner in oil and gas firms. I am also a mineral owner and receive royalties from oil and gas production. I have extensive title examination experience, and have represented clients in many administrative and court proceedings.

Organizations
State Bar of Texas, Texas Bar Foundation, and Austin Bar Foundation.

Publications
Various state bar seminars on Oil and Gas matters.

Education/Credentials
I have a business degree in marketing from McMurry University, 1971, and a JD degree from Texas Tech University in 1974, where I graduated 17th in my class. Board Certified in Oil, Gas and Mineral Law in 1986.

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