I am working to dissolve a family trust that contains mineral rights and leases in Ward County, Texas. I am the trustee and I am trying to pin down legal descriptions of the rights in order to provide accurate transfers to the members of the trust.
I have a trust lawyer in my state, an oil and gas lawyer on standby in Pecos, Texas and I have hired a landman to help with researching titles.
The landman has asked me to contact the operating companies, where I have leases, and ask the operating companies the following questions.
What type of interest? Mineral, non-participating?
How much of that interest is owned by the Trust? Decimal mineral interest, NMA?
Under which tract or property does that interest cover?
Here are some of my questions.
For selling or transferring rights, what does a minimum legal description entail?
Would the general land description with the percentage Royalty Interest be adequate? Wouldn’t the operating company be the final arbitrator of the title?
Would it be better if I want to purchase all the rights, to have an overall deed on all possible family rights in Ward County rather than specific individual descriptions?
(I recently came across several wells/leases that should be leased in the trust but are not)
The legal description in a deed is the gross acreage, such as “Northeast One-quarter (NE/4) of Section 3, containing 160 acres, more or less.” Even if the trust only owns 1/10 of the minerals (which would be 16 net mineral acres - NMA. The deed will only transfer the fractional interest of the trust. If there are multiple beneficiaries, then they would each be named and their fractional share of the asset listed, adding to 100%. E.g. John at 1/6; Mary at 2/6; and Sue at 3/6. This is their fractional share of the trust net minerals, not their fractional share of the entire 160 acres. This ensures that if you think that the trust owns 16 NMA and it turns out that the trust owned 20 NMA, then the deed still assigned 100% of the trust minerals. If you have leases, whether executed by the trust or the prior owners, then the leases would describe the gross acreage covered in a tract or section. Each lease or a memorandum of lease would be recorded in deed records. Is your landman researching the title backwards from the deeds into the trust? Good idea to ask operators about the title, but keep in mind that you may not get rapid responses and that sometimes they are incorrect. And no oil company is ever the final arbiter of your title! The landman would only use that information as one part of his run sheet of title which should list the deed history. Ward County deed records are online and you research at https://ward.tx.publicsearch.us/
For selling or transferring rights, what would a minimum description be?
Would the general lease unit description with lease number, the percentage Royalty Interest and recent royalty payments be adequate?
One always gets letters wanting to buy but I feel that these are broadcast letters and not necessarily a specific interest in my holdings.
How would one go about getting realistic quotes?
Any recommendations?
In Texas, the operating companies own a fee simple determinable in the mineral estate. The fee simple determinable is a present possessory interest that terminates naturally at the happening of a prescribed event. It will end when oil and gas is no longer being produced in paying quantities or by other conditions that can occur when a lease is not held by production.
At the termination of the fee simple determinable, the mineral interest automatically reverts back to the mineral owner (presumably, the Trust in your situation). No action is required on the part of the reversionary interest owner. So you need to determine how the minerals were identified when they were originally transferred into the Trust and hopefully it was more than a mere reference to a lease number.
I agree with TennisDaze in using a gross acreage description and any references to the deed books and page numbers of the recorded transfers into the Trust. The leases may have these descriptions. This is more than the general lease unit description with lease number. With the Trust owning the possibility of reverter in the mineral estate you can see why the most complete legal description of the minerals owned is needed when transferring the interests out of the Trust.
There is a case in Texas where “minerals” were sold for non-payment of taxes. The purchasers’ at the tax sale only received title to the production royalties and did not get the reverter with the sale. The court reasoned only severed minerals under the lease was taxable and could be sold by the sheriff. The reversionary interest was not taxable and thus not part of the sale. When the leases ended, the original owners who failed to pay the taxes got their mineral interests back through the reverter. Using only the reference to the lease, and not the complete mineral estate, might create a parallel situation that transfers only the production while sending the minerals back to the Trust if the lease terminates.
So for the following description, there is no reference to a deed in Ward County.
So even with my Royalty Interest percentage in this lease and a lease with that description, I would still need some reference to a deed to specifically/legally show my interest.
Is this correct?
132.72 acres more or less, Tract One, 30.67 acres more or less, 1.0 acre in the J.T.Adams Survey and 29.67acres in the W.TKenney Survey Tract Two, 40 acres more or less located in the J. T. Adams Survey, Tract Three, 40 acres more or less located Water Rights Tract No.13, Section174 Block 34,H&TC Ry Co.Survey,Tract Four 22.05 acres more or less located Southeast Boundary line of Section 74 and the Northwest boundary line Section 39 Block 33, H&TC Ry Co.Survey