2019 Q3

About the Authors:

The Court did not mince words in dispensing with the Grantor’s heirs’ arguments, stating that because there is no binding precedent, it was “free to decide if the Rule should apply” in this context.  It summarily dismissed the Grantor’s heirs’ “quibble” that the deeds created an exception as opposed to a reservation or the “legal fiction” of a grant and re-grant theory.  The Court further rejected the Grantor’s heirs’ plea for a “remorseless” application of the Rule. Instead, the Court looked to the underlying purpose of the Rule, which is to avoid fettering real property with future interests dependent upon unduly remote contingencies.  It also underscored the fact that the Rule originally developed to prevent the practice of tying up family properties for generations. The Court ultimately concluded that in the arena of term oil and gas interests, the Rule amounts to a “nonsensical act of legal formalism.”  Applying the Rule would result in the Grantor’s Heirs holding the mineral interests in the real estate in perpetuity, ironically frustrating alienability and the basic premise of the Rule.  The key takeaway from Jason Oil Co., LLC v. Littler is that where a grantor creates a defeasible term- plus-production mineral interest by exception, leaving a future interest in an ascertainable grantee, the future interest in minerals is exempt from the Rule. Kansas has joined the growing number of states that are tempering the rule against perpetuities and declining to apply it in the context of term oil and gas interests.  This is a comforting trend for practitioners as many leases, deeds and assignments are built around the core concept of a primary term of years and a secondary term lasting “as long thereafter as oil and gas are produced in paying quantities.”  It is also noteworthy that, in reaching its decision, the Court found particularly persuasive the recent Texas case of ConocoPhillips Co. v. Koopman, 547 S.W.3d 858 (Tex. 2018), which holds that the common law rule against perpetuities did not invalidate a future interest in a term NPRI, even though the grantees’ springing executory interest technically violated the Rule, because the future interest was certain to vest and did not interfere with the Rule’s purpose.

Eli Kiefaber Eli Kiefaber is a partner with Kiefaber & Oliva LLP.  Eli focuses his practice on oil and gas matters, including acquisition and divestiture of oil and gas assets, title opinions, joint

operating agreements, federal leases, pooling and unitization issues. Eli is licensed to practice law in Texas, Oklahoma, Colorado and Ohio, is a regular speaker on issues relating to the development of unconventional shale plays and has given a variety of presentations regarding legal issues relating to oil and gas development.  Eli earned his B.A from Kenyon College and his J.D., with honors, from Marquette University Law School.

Zachary Oliva Zachary Oliva is a partner with Kiefaber & Oliva LLP.  Zack focuses his practice on energy and corporate law.  He regularly

assists clients in the drafting of oil and gas title opinions, purchase and sale agreements and contract interpretation.  Additionally, he assists clients with the negotiation, drafting and review of business formations, contracts and service agreements.  Zack earned his B.A. from The Ohio State University and his J.D. from Capital University Law School.  He is licensed to practice in New Mexico, Ohio and Texas.

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