I'm new to the web site. Can anyone assist with the interpretation of the following reservation language in a Tarrant County, Texas (Barnett Shale), deed? In this case the Seller only owned 50% of the minerals at the time of this conveyance:
"(EXPRESSLY EXCEPTING AND RESERVING to the SELLER, and its successors and assigns, however, all oil, gas and mineral interests in, to and under said PROPERTY and one-half (1/2) of the usual one-eighth (1/8) royalty interest thereunder)"
It appears clear to me that the "buyer" does not acquire any minerals the conveyance. Half of the minerals and associated royalties have previously been reserved by a prior owner. How much royalty does the seller and buyer own. To further confuse (me, at least), I think the seller entered into a 3/16's lease afterwards. (I just assume this because all the other leases in the unit are 3/16ths, but there is only a Lease Memo filed of record, so its just a guess).
The two options I see are that either the seller retains 1/16 and the buyer retains the other 2 of the 3/16ths, or the Seller retains 1/16 of the 3/16ths and the buyer retains 15/16ths of the 3/16ths royalty. But then its not the "usual 1/8th" lease, either. Interesting stuff, but I'm confused. Thanks for any assistance.
Larry,
Assuming you are the buyer, contact the seller and ask for an amendment to the deed that strikes the words "or the usual one-eighth (1/8)". Your lawyer can help you with the form of the deed amendment. I recommend that you do it sooner rather than later. A good Division Order Attorney will require an agreement if production is attained later anyway. You can beat them to the punch and have cleaned it up at nominal cost. If production in attained first and a large value can be placed on the dispute, everyone will suffer except trial lawyers. Perhaps you can get the lawyer who drafted the deed to fix the ambiguity.
Wow, this is very confusing. At first glance, my opinion is that Seller retains 50% minerals and 1/16 absolute royalty, and Buyer obtains any lease royalties above 1/16, as the royalties pertain to the 1/2 interest, not to all royalties paid since there is a prior mineral reservation. So if the lease were for 1/16 royalty, then the Buyer would get no royalties whatsoever, if the lease specified 1/8 royalty then you each would get 1/16, if the lease specified 1/4 royalty then Seller would retain 1/16 and you would be entitled to 3/16, etc. In my opinion, Seller does not retain "1/16 OF the 3/16ths" because the royalty reservation did not say 1/2 of the usual 1/8 OF royalties or OR lease royalties, it said 1/2 of 1/8 royalty interest. So I believe that it is "Option A" as presented in your last paragraph.
Having said that, I introduce you to the concept of the Duhig Rule. You say that "Half of the minerals and associated royalties have previously been reserved by a prior owner" (let's call him "A"). So "A" sells to "B" and reserves 1/2 minerals. Fine. Now, "B" sells to "C" (you), and makes the reservation referenced above. There is case law in Texas that says, basically, that in a Warranty Deed when "B" sells to "C" and does not make reference in some way to the mineral reservation by "A" in the prior deed, then "B's" interest must be adjusted to make "C" whole. From reading this reservation only, and not knowing about the prior reservation, "C" thinks he is getting no minerals and any lease royalties above 1/16 FOR THE ENTIRE MINERAL INTEREST, not just the 50% interest that "B" has to offer. Therefore, I would argue that "C" could very well end up with ALL of "B's" royalties, not just the royalties above 1/16 pertaining to the 50% interest. Bottom line, this is a question for a good oil-and-gas attorney.
I agree with Pete Wrench and Gary is probably too nice to say, don't sign anything that has or/of the usual 1/8th royalty, because it's not necessarily the usual anymore.