“royalty” . . . cannot be considered constructionally clarifying and should be omitted by the draftsman or, if used, ignored. 6
and determine who the new working interest owners are. 7
Admittedly, this is not a very satisfying answer. For starters, it is very rare indeed (maybe approaching unicorn status) that I have ever seen an Oklahoma practitioner set out double-ownership ( i . e ., a tract working interest ownership and separate individual lease-by-lease ownership) in a title opinion. This does not mean it never happens—it just means that anytime I have seen this in an Oklahoma title opinion it was written by a Texas trained lawyer.
Therefore, while “Landowner’s Royalty” might be a familiar term in Texas, its use in Oklahoma could lead to confusion due to the state’s often highly fractionalized and severed mineral estate interests. Here, the term does not necessarily reflect the traditional understanding from Texas where mineral rights are inherently tied to land ownership. In Oklahoma, where mineral rights are more often than not distinct and severed from surface rights, using “Landowner’s Royalty” without clarification may not accurately convey the intended meaning. To avoid this ambiguity, it would be more appropriate to adopt terms like “Mineral Owner Royalty” or simply omit the modifier—and just use “Royalty”—as is the norm in Oklahoma title opinions.
The Yale article describes working interest and leasehold interest as follows:
Working interest is the operating interest under an oil and gas lease. A leasehold interest, in contrast, is the oil and gas leaseholder’s possessory estate in land, and may be either operating or non-operating. Leasehold interests may ripen, therefore, into working interests but they do not necessarily start out that way. Citing, 8 Patrick H. Martin & Bruce M. Kramer , Williams & Meyers , O il and G as L aw 155 (LexisNexis 2014) and 22 B lack ’ s L aw D ictionary 416 (3rd pocket ed. 2006). 8
Working Interest (WI) vs. Leasehold
2.
The Texas Form title opinion in the Yale article distinguishes between working interest ownership and individual leasehold ownership. For example, the Form has ownership tables for the working interest—that is an aggregate of all the oil and gas leases for a particular tract of land. Additionally, the Form has a separate ownership table for each individual oil and gas lease—which always adds to 100% for each lease notwithstanding that the associated working interest in the tract for such lease may be less the 100%.
However, it is submitted that the Yale definition is in real-world practice a distinction without any practical difference—the terms are synonymous. 9
In fact, Oklahoma’s spacing and pooling statute
The question and answer presented in the Yale piece was:
6 Id . Professor Hemingway seems to be reinforcing the old saying “omit needless words”; as made famous from William Strunk, Jr. & E.B. White, The Elements of Style p. 23 (4th ed. 1999) (1935) (“ Omit needless words. Vigorous writing is concise. A sentence should contain no unnecessary words, a paragraph no unnecessary sentences, for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts. This requires not that the writer make all sentences short, or avoid all detail and treat subjects only in outline, but that every word tell.”) 9 See , Patrick H. Martin & Bruce M. Kramer, Williams & Meyers , Manual of Oil & Gas Terms 550 (2006) (citing Miller v. Schwartz , 354 N.W. 2d 685 (N.D. 1984), citing this Manual for the proposition that “it appears that the term ‘working interest,’ as commonly used in the oil industry, is generally synonymous with the term ‘leasehold interest.’”) 7 Yale at p. 14. 8 Yale at p. 14.
Why would leasehold information be of interest to a client since costs and revenues are allocated on a working interest, and not [on an individual] lease basis? The reason is that unit boundaries change all the time. Having [individual] leasehold [ownership] as well as [tract] working interest information allows a client to quickly deal with unit changes
10
N at i onal A ssociation of D i v i s i on O rder A nalys t s
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