2023 Q3

leasehold estate was good as against the world. Is this kind of assurance expensive? No, not where the litigation was un-opposed. Where opposed, the rationale was that the litigation would have taken place anyway but only after the drilling of a successful well. Was the litigation time consuming? No, not unless opposed. It did require advanced contingency planning and the rendering of title opinions well in advance of a well’s spud date (at least 6 months). However, the term “business risk” had little meaning where a judgment confirming the marketable title to the oil and gas mineral estate in the client company’s lessor(s) was confirmed via judicial decision. At some point in time in the 1970’s, oil and gas companies dropped the TTT Lawsuit as a method of title assurance and turned to management title risk decisions to speed up the title opinion process. There is no doubt that such a decision process allows the client company to delay title examination until the last moment with whatever resultant title examination cost savings may occur where a title opinion is rendered but not needed. Thus, apparently a balancing decision has been made; sacrificing a marketable title for a cost savings in un-used title opinions. Given that hundreds of thousands of dollars have already been committed and spent in the development of an oil and gas prospect, and that several million dollars up to $10M or $15M will be spent in drilling and equipping same, the potential loss of $5000-$10000 per un-used opinion is a very small loss compared to a full or partial title failure. How much is it worth to know, with absolute certainty, that the correct party has been leased and that no past ancient title problems can come back, after the discovery of oil and gas, to haunt the client company? Be assured, ancient title problems are still being litigated today. Lawsuits which no one thought could or would ever see the light of day are, when large deposits of oil and/or gas are found, being brought and, at the least, subjecting the client company to uncertainty in its title and, in some cases, loss of lease(s) and revenue.

In general, all curative actions taken by the client company in response to an outstanding title requirement require the obtaining of information and review of same by the examining attorney. The information obtained is subject to being challenged by any interested party and is not conclusive nor binding on any third party without judicial intervention. Even with the delivery of the called for information (based on facts outside of the record title), the examining attorney cannot render a final supplemental title opinion which recites that marketable title is vested in the parties enumerated in the ownership section of the title opinion. That is, as long as the factual information remains outside of the record title as well as judicially un-confirmed, there still remains a risk of litigation based on: 1) a reasonable chance that a third party could raise an issue concerning the validity of the title to the estate against the apparent owner or 2) the quality of the parol evidence necessary to remove any doubt as to the validity and/or sufficiency of the owner’s title could be contested or 3) the presumption of fact which, in the event of a suit contesting title, would probably become an issue of fact to be decided by a jury would still remain or 4) the record discloses outstanding interests in other parties that could reasonably subject the owner to litigation or compel such owner to resort to parol evidence to defend the title against the outstanding claims. In Texas, the only judicial method of confirming marketable title in and to a tract of land, where there are outstanding title problems that potentially render the title un-marketable, is to utilize the trespass to try title statute ( Property Code §22.001 et seq (Vernon 1985)).

N at i onal A ssociation of D i v i s i on O rder A nalys t s

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