CHAPTER 1 TITLE OPINIONS: TYPES, BASIS, FORMAT, AND INTENDED AUDIENCE
| Jurisdiction | United States |
TITLE OPINIONS: TYPES, BASIS, FORMAT, AND INTENDED AUDIENCE
Poulson, Odell & Peterson, LLC
Denver, CO
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PAUL UPSONS is a Member of Poulson, Odell & Peterson, LLC in Denver, Colorado. He has been with the firm since 2001, specializing in title examination and the preparation of oil and gas title opinions covering fee, state, and federal lands in Colorado, North Dakota, and Wyoming. He obtained a B.A. from the University of Denver in 1991, and a J.D. from the University of Denver College of Law in 1994. Mr. Upsons has given presentations on real property and mineral law issues to various organizations, including the presentation of papers at the 2007 and 2015 Rocky Mountain Mineral Law Foundation Special Institutes on Mineral Title Examination. He has published various articles and papers, and he is the updating author of the chapter on Bonds in "The Law of Federal Oil and Gas Leases."
After examining the instruments that affect the lands under examination, the title attorney must prepare a title opinion. This paper describes the evolution of title opinions, the intended audience of title opinions, the basis of title opinions, and the different types of title opinions. It also includes an outline of a drilling and division order title opinion.
I. THE EVOLUTION OF TITLE OPINIONS
The length and complexity of drilling and division order title opinions have generally increased with the passage of time. Comparing a hypothetical title opinion from 1960 with a present-day title opinion illustrates why. In 1960, the surface and mineral estates of Blackacre may have still been owned by the original patentee, or by the patentees' children. If the mineral estate of Blackacre was subject to existing oil and gas leases, those leases may have been recently executed, with a relatively short history of assignments to consider. Due to the paucity of instruments and issues to discuss, the 1960 title opinion would have been fairly straightforward and short. If one fast forwards 55 years to the present, much has changed. The patentees' children have probably conveyed their interests to various grantees, who have then conveyed fractions of those interests to other grantees. Now, instead of four mineral owners per tract, there may be fifteen or more per tract. Some mineral owners may have died, with no recorded information as to the identities of their heirs or devisees. Over the last 55 years, some of the "classic" title issues have probably arisen in the chain of title. A Duhig issue may exist, if a party reserved a fractional mineral interest when there was a previous reservation of a fractional mineral interest in the prior chain of title. A stranger to the title issue may exist, if a spouse who owned no record mineral interest in the subject lands co-executed a deed that contains a mineral reservation. If oil and leases were taken in the 1970's or the 1980's, and if those leases were held by production, there is probably a long chain of assignments of leasehold interests, and questions regarding the interpretation of some of those assignments. If top leases of older leases were taken, there may be questions as to which leases are presently effective. There may also be a question as to whether an overriding royalty interest in a bottom lease burdens a top lease under an "extensions and renewals" clause in the instrument that created the overriding royalty interest. Because these types of title issues (and potentially many more) can multiply with the passage of time, the present-day title opinion covering Blackacre is probably considerably longer and more complex than the 1960 title opinion.
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The number of separately-owned tracts within the lands covered by a title opinion can also affect the length and complexity of the opinion. In North Dakota, for example, a title opinion will commonly cover a 1,280-acre drilling unit. Those 1,280 acres may have been transferred into private ownership from the United States in eight separate patents. If four of the patentees separately conveyed the east and west halves of their respective quarter sections to other parties, those eight separately-owned tracts became twelve. If the subject lands contain a residential subdivision, and if the minerals in each subdivided tract were conveyed along with the surface, then one 80-acre tract could become twenty or more separately-owned tracts. Additional tracts can also be created if assignments of leasehold interests are limited to just part of the leased lands. If the lands under examination consist of thirty separately-owned tracts, the title opinion is essentially a combination of thirty separate title opinions in one, with a combined division of production for the entire 1,280 acres. Having a multitude of separately-owned tracts within the lands covered by a title opinion can increase the complexity and length of a title opinion, as well as the time required to prepare the opinion.
Advances in word processing technology have also played a role in the increasing length of title opinions. Older typewritten opinions were fairly labor-intensive to prepare, so those opinions were understandably more succinct. The advantages offered by today's word processing technology, including the ability to create title opinion templates and to cut and paste large amounts of information, make it easier for today's title examiner to include more detail in a title opinion.
II. THE INTENDED AUDIENCE OF A TITLE OPINION
The intended audience of a title opinion depends on the type of title opinion that is being provided. The audience for an acquisition title opinion is typically either a prospective purchaser of an oil and gas leasehold interest, or the prospective purchaser of a mineral interest. The audience for a security or financing opinion is typically a lender. The audience for a drilling title opinion or a division order title opinion is an oil and gas exploration company, which consists of several sub-categories of audiences. Division order analysts use the ownership section of a title opinion to determine which parties to pay, and which interests to place in suspense. The legal department of an oil and gas exploration company is interested in the title examiner's discussion of how the resolution of outstanding legal issues will impact ownership and title security. The legal department is also interested in the title examiner's assessment of the risk of taking no curative action, and its assessment of the relative risks associated with pursuing alternative curative actions that promise different levels of title security. The landman of an oil and gas exploration company is another important member of the audience. The landman will evaluate the title issues discussed in the title opinion, and coordinate the curative action that the title opinion requires. The title opinion should provide enough information to allow the landman to assess the seriousness of a title issue, and the relative
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importance of the interest at...
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