Newsletter

AFFIDAVIT OF NOTICE – BEING PUT ON NOTICE REGARDING AN OIL AND GAS LEASE

In our discussion on the first in a series of YouTube presentations called “Tip of the Day” we discussed making sure and being able to prove that you are being put on ‘Notice’ to protect yourself against taking a bad oil and gas lease. Below is an example of and Affidavit of Notice.

AFFIDAVIT OF NOTICE

State:
County:
Affiant: (Name and Address)
Affiant, being of sound mind, as of this ____ day of _______, 2011 hereby warrants and guarantees that the oil, gas, and other minerals found in the lands described herein below (hereinafter called “Minerals”), do in part or whole, belong to Affiant. Further, Affiant warrants and guarantees that Affiant has not, directly or indirectly; signed any oil and gas lease or any other document affecting said Minerals (hereinafter called “Lease”) within five years of the date of this Affidavit of Notice.  Further, Affiant warrants and guarantees that said Minerals are free and clear of any encumbrance, what so ever in kind, including, but not limited to, being held by production or any terms of any Lease affecting said Minerals. Further, Affiant warrants and guarantees that Affiant has not made any promises or agreements, either verbal or written, or is not under any obligation, what so ever, to sign an Oil and Gas Lease (or any other document) with anyone covering said Minerals mentioned herein, except (your company name).
Affiant: _____________________________________

 (Description of Lands – Include County and State)

Acknowledgment
STATE OF                             }
COUNTY OF                          }

                The foregoing instrument was acknowledged before me on the               day of                    , 2011 by ___________________________________ (Affiant).
                                                                                               
Notary Public

RAILROADS
‘RIGHT-OF-WAY’ VS. ‘OWNING UNDERLYING MINERALS’

Have you ever been running title on a tract of land and run across an old railroad ‘right-of-way’ and wondered whether or not they own the minerals with it?
The issue of whether a railroad owns minerals underlying their strips could be confusing. However, there are some general rules that can usually be followed to determine this:

1. If the railroad acquired its interest by a ‘deed’, and the deed does not limit the estate granted, but only specifies the purpose of the conveyance, the grant is of a ‘fee simple interest’ (whereby they own the minerals).
2. If the railroad acquired title by ‘eminent domain’, then in most cases the railroad acquired only an ‘easement’ (whereby they do not own the minerals).
3. However, if the railroad acquired title by ‘eminent domain’ proceedings under the authority of the laws of a state when it was a ‘territory’ prior to becoming a state, the acquisition could be either a ‘right-of-way’ or a ‘fee simple interest’, depending upon the language in the condemnation proceedings.
4. If title is acquired by a railroad under an Act of Congress, generally, the railroad may only own just a ‘right-of-way’. However, this is not always true. Many times, the railroad (or its successor) owns a fee simple title, even if it then abandons the railroad. An examiner will have to determine which railroad and which Congressional Act granted the rights.

So, if you have this dilemma where there is an old railroad ROW and the company is no longer and have abandoned the railroad tracks, ask your County Clerk or Register of Deeds to help you to determine if any of the above are applicable to the transaction.
Sometimes you will find that either the Court House or the Abstract Company does not have the answer. In that case, you can contact the State or the Bureau of Land Management and ask them if they have taken back the minerals or if they have any knowledge of whether or not the railroad actually ever owned the minerals. You can also be on the watch for future transactions (deeds) because they may include the minerals and those deeds are not from the railroad but fall into the regular chain of title from one mineral owner to the next.

July 2011

Question

Does the state you are working in require the Lessee to sign the oil and gas lease?  Why do oil and gas leases taken in Oklahoma for example, not have a place for the signature of the Lessee on them? And, are they really legal without the Lessee’s signature?  If so, can you explain how the oil and gas lease is considered legal without both the Lessor and Lessee’s signatures on the lease if the lease is considered a contract between two parties?

Answer

In some states, the oil and gas lease is viewed only as a contract or a formal written agreement between the mineral owner, known as the Lessor, who grants the right to explore for oil, natural gas, and other hydrocarbons for a specified period of time to a company or other entity, known as the Lessee, therefore requiring both parties’ signatures.  Other states view the oil and gas lease as both a contract and a “deed with the possibility of reverter” or a deed conveying a “fee simple determinable estate” with reservations and stipulations which serve as “contractual” obligations on the part of Lessee – and Grantees need not sign a conveyance.

These stipulations require ‘action’ on the part of the Lessee to make it take affect based on the obligations of the lease.  Even though the Lessee (Grantee) does not have to sign the lease in this case, depending upon the language in the lease, the Lessee would be liable for any terms and conditions in the lease that would bind the Lessee, even without a signature if the Lessee makes compensation to the Lessor.  In this case, the recording of the lease in the county records by the Lessee implies an acceptance of the lease or contract by the Lessee without the signature of the Lessee.

The Oil and Gas Lease grants to the Lessee certain “Mineral Rights”, which carry with it certain conditions which, if not met, causes the termination of the lease and may also attach certain express covenants and/or obligations to the Lessee, which in a normal Oil and Gas Lease are activated only if and when the Lessee exercised its rights.  A title attorney in the state you are working should be consulted prior to running title or performing leasehold reports to determine whether or not filed leases are valid without the signature of the Lessee.

June 2011