on a defensible title or, worse case, have a full of partial title failure or (iii) if potentially winnable, recommend filing a trespass to try title lawsuit in an attempt to cure the outstanding title requirement(s). This article will identify and set out three (3) steps that might be encountered in the drilling of a vertical or horizontal well in Texas. It is within the context of these three (3) steps that the absolute necessity for obtaining a supplemental title opinion showing not only that all title requirements have been satisfied but also that the curative documents themselves do not cause the title to be less than marketable will be explored. The three (3) steps are:
utilizing a metes and bounds description. Blackacre appears to be fenced by a three strand barb-wire fence. It is unknown if the fenced area matches the metes and bounds description or if a survey of the lands would reflect that more/less of the leased acreage is actually fenced. O contracts for the drilling of the well. Only one thing left for O to do; obtain the original title opinion for drilling purposes. O does not know that the lands under fence comprise only 540 acres, not the 640 acres as called for in the patent and subsequent documents. One hundred acres of Blackacre lies outside of the fenced area.
Step One – Taking of the lease and the
Step Two
decision to drill
O obtains a run sheet (abstract of title) prepared by a landman purportedly setting forth all documents of record for Blackacre from sovereignty of the soil down to specific closing date. This run sheet is examined by the title attorney and a title opinion covering and pertaining to Blackacre is issued by the examining attorney. The title opinion shows a regular chain of title from sovereignty and calls for a survey of the lands under lease to see if the description conforms to the fence line as well an affidavit of use and occupancy from a disinterested person for the last thirty (30) years. This affidavit of use and occupancy is to address, among other items of interest, the existence of any fences, possession of the entire 640 acres and any potential adverse possession of Blackacre by third parties.
Step Two – Obtaining the original title
opinion
Step Three – Addressing outstanding title requirements
IF YOU GET NOTHING ELSE OUT OF THIS PAPER , remember that the Ownership Schedule set forth in an original or supplemental title opinion may not be relied on until all title requirements have been satisfied per the rendering attorney. Stated another way, if one or more title requirements is/are not satisfied, the Ownership Schedule may not be relied on. Further, if any title requirement remains unsatisfied (waived), unless the title attorney actually waived the satisfaction of same, the risk of title loss is on the client. Marketable title and the resultant ownership of the mineral estate (and surface estate, if addressed) is conditioned upon the satisfaction of all title requirements as called for in the pertinent Requirements Section of the original/supplemental title opinion.
Issue 1 : What is a title opinion?
There are two distinct and separately issued title opinions which are routinely utilized in the oil and gas industry. They are: (i) the Original Title Opinion issued for drilling purposes, being the first title opinion issued for Blackacre to confirm for O that all mineral owners appear to be leased (subject to the satisfaction of the enumerated title requirements) and (ii) The Supplemental Title Opinion, typically issued either for the updating of the mineral title ownership based on the curative materials furnished in connection with the Original Title Opinion and/or issued for division order
Step One
O, the operator, decides to acquire a lease on Blackacre and does so successfully (assuming O leased all of the current outstanding mineral interests in Blackacre). The lease calls for 640 acres
18
N at i onal A ssociation of D i v i s i on O rder A nalys t s
Made with FlippingBook. PDF to flipbook with ease