2023 Q2

to the original client who paid for the title opinion and to whomever else the rendering attorney (with the client’s permission) will allow to utilize and rely upon same. In a multiple lessee situation or unit situation, where there are multiple working interest owners, it is not unusual for the operator of the lease/unit to specifically request that the examining attorney state that the rendered title opinion was written for all of the named working interest owners in the lease/unit and therefore may be relied upon by each working interest owner (presumably because each working interest owner is paying its prorata share of the title attorney’s legal costs). Stated another way, the possession of a title opinion will not necessarily entitle the possessor of same to rely on its statement of ownership (backed by the malpractice insurance of the rendering attorney) unless the rendering attorney has granted his/her permission to the possessory party to use and rely on same. A word about assignees . Depending on when a title opinion (original or supplemental) is secured, the operator of the well may not know, at that time, who its partner(s) will be. It has been the author’s experience that the operator will ask that itself, its successors and/or assigns be allowed to utilize and rely on the title opinion with the concomitant right to go against the rendering attorney should the opinion (and the resultant title) be wrong, thus causing the wrong party(ies) to have been leased. Usually, such a request is in reality more of a demand if the examining attorney wants to do the title work for the client. Unfortunately, depending on how long and how many assignees later are relying on the opinion, the immediate payday may, over time, be less important than limiting who and for how long reliance on the title opinion may last. For example, O asks its examining attorney to specifically allow all of O’s assignees, and their heirs, successors and assigns be entitled to rely on the examining attorney’s opinion. The examining attorney has a variety of choices, some of which include: (i) refusing O’s request, probably insuring that it will not get to do the title opinion or (ii) limiting its responsibility to the assignees of O only, not their heirs, successors and assigns or (iii) limiting reliance to the immediate addressee and

those additional persons seeking to rely on the title opinion which the examining attorney specifically allowed (in writing) to rely upon its opinion. Usually, this third alternative comes into play if and only if the third party pays additional consideration to the examining attorney. The author has personally had remote assignees (five or more generations from the original operator) from as early as the late 1970’s call and inquire about his title opinion such assignee possesses (usually from lease files that went with producing wells sold at an auction) seeking to determine if unsatisfied title requirements can be waived. That opinion was issued almost 45 years ago! Luckily, the company calling was not an addressee of the title opinion nor had the author granted it the right to rely on the opinion. Does this mean that a subsequent purchaser of an oil and gas lease(s) may not use a title opinion found in the files delivered by the Seller as a starting point to update title? With the caveat that, should title to the examined lands fail in whole or in part, the subsequent purchaser may not rely on any part of the “found” title opinion to the detriment of the examining attorney, it is simply another risk decision for the client company to decide to use that title opinion as a starting point in the updating of the title to the newly acquired lease(s).

(Editor’s note: Part Two of this article will appear in the Third Quarter issue of the NADOA News Magazine.)

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

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