CHAPTER 2 EXAMINATION OF TITLE TO FEE LANDS

• Jurisdiction: United States

Mineral Title Examination II
(Apr 1982)
CHAPTER 2
EXAMINATION OF TITLE TO FEE LANDS
Phillip Wm. Lear
and Robert P. Hill
Vancott, Bagley, Cornwall & McCarthy
Salt Lake City, Utah

TABLE OF CONTENTS

SYNOPSIS
PAGE

INTRODUCTION

I. PURPOSES OF TITLE EXAMINATIONS

Acquisition

Exploration

Production and Distribution

Financing

Types of Reports and Opinions

Take-Off Reports

Title Memoranda

Status Reports

Drilling Title Opinions

Division Order Title Opinions

Security (Financing) Opinions

II. TYPES OF FEE TITLE EXAMINATIONS

Record (Direct or Stand-up) Examinations

Office Examination (Abstracts-of-Title)

Selecting the Type of Title Examination

III. DIRECT RECORD EXAMINATION

State Office, Bureau of Land Management Records

State Lands Records

Indian Records

Conservation Commission Records

Records of the County Recorder

Ownership Plats

Tract (Abstract) Index

Grantor/Grantee Index

Other Indices

Mortgagor/Mortgagee

Chattel Mortgage

Index to Maps, Plats, and Subdivisions

Index to Powers of Attorney

Mining Claim Indices

Transcripts of Judgments

Executions and Attachments

Additional Indices

Reception Book

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Records of the County Clerk/Court Clerk

Judgment Docket

Civil Register

Probate Register

Limited Partnership Filings

Records of the County Treasurer

Records of the County Planning and Zoning Commission

Miscellaneous Records

Area and District BLM Office

Area and District Offices of Minerals Management Service

Records of the Secretary of State

Federal Court Records

Records of the State Tax Commission

IV. OFFICE EXAMINATION (ABSTRACTS OF TITLE)

Ordering Original Abstracts

Ordering Supplemental Abstracts

Additional Considerations

CONCLUSION

TABLES

Table I-A: Bureau of Land Management State Offices

Table I-B: Minerals Management Services Offices 2-41A

Table I-C: State Agencies Responsible for Administration of State Lands 2-42

Table I-D: State Agencies Responsible for Administration of Oil and Gas 2-43A

Table I-E: State Agencies Responsible for Administration of Mining 2-43B

Table II: Indices Maintained by County Recorder

Table III: Taxes which May Affect Mineral Properties

Table IV: Miscellaneous Liens

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INTRODUCTION

A general overview of mineral title examinations in the "fee" lands context was presented at the Rocky Mountain Mineral Law Foundation Special Institute on Mineral Title Examination in November, 1977.¹ That paper serves as a springboard for this presentation.

This paper constitutes a nuts and bolts treatment of "fee" title examinations — a procedural "how to." It is intended to serve as a ready reference for title examiners conducting the actual examination, as well as for the corporate legal counsel or landman in scoping and defining the type of examination needed. It covers such topics as (1) the purpose of title examinations, (2) types of title reports and opinions, (3) types of record examinations, (4) scoping the project, (5) repositories to be examined, (6) conducting a records check in the case of a "direct" or "stand-up" examination, and (7) pitfalls to avoid in ordering the abstract when conducting the "office" examination.

Inasmuch as many title examiners perform their services on an extra-territorial or regional basis, tables have been provided setting forth lists of offices and agencies where the records may be found; indices required by statute to be maintained by county recorders; tax, judgment, mechanics', materialmens', and other liens for each of the twelve Rocky Mountain states surveyed,² with statutory references and applicable limitations periods. It is not within the scope of this paper to address substantive legal issues such as spousal rights, the "Duhig" doctrine, improper acknowledgments or ministerial errors in recording; or to treat property concepts, such as construction of deeds and conveyances, which are common subject matter in law school real property courses, except as those substantive legal issues bear on the procedural aspects of examining title.

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For purposes of this paper, the term "fee" or "fee lands" will be used in a loose and general fashion to refer to lands owned by private parties, as opposed to lands owned and administered by political subdivisions or agencies of the state or federal government. "Fee" might also be used in its more precise context to define the quantum and nature of ownership of either the surface or the mineral estate, or both.³ Throughout this paper the reader must be conscious of the context in which the word is used in order to understand its intended application.

I. PURPOSES OF TITLE EXAMINATION

Typically, the purpose of the specific project defines the nature of the title examination. There are four primary purposes for which title examinations are required. The first involves the acquisition of the surface or mineral fee or patented or unpatented mining claim, or the taking or purchasing of a lease. This will be referred to throughout this paper as the "acquisition phase."

A second purpose for which a title examination is required is preliminary to conducting the exploration or drilling phase of a project. If the natural resources developer has acquired the mineral estates in fee, whether conditional or restricted, this second-stage title examination may not be necessary. However, if the developer owns only a leasehold interest, license, or profit a' prendre, this examination may be most critical. A discussion of its necessity is detailed hereinafter in the context of title opinions and reports. This second-stage examination is referred to hereinafter as the "exploration phase."

The third purpose for title examination involves the "production and distribution phase." This examination is most often found in the context of oil and gas operations, but is also conveniently used by hard rock, coal, and other mineral developers who own leasehold estates or have questions regarding transfers of title during the interim between the acquisition of the mineral fee and the distribution of proceeds. The importance of a title examination at this third-stage cannot be over-stressed inasmuch as the proceeds of production are the end-goal of the entire project. Errors in distribution of proceeds will reap the whirlwind for an unsuspecting operator or purchaser of production.

Finally, the fourth stage of a natural resources development project at which a title examination is required, which we refer to as the "financing phase,"

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involves the examination of title for purposes of mortgaging mineral properties or assigning current and future production as collateral for new exploration or development monies.

The underlying purpose of a title examination molds the form of the resulting report or opinion in which the examiner's conclusions on title are memorialized. Nevertheless, reports and opinion letters come in all shapes and sizes and vary from location to location and from title examiner to title examiner. Some of the most basic formats include the "Take-Off Report," the "Title Memorandum," the "Status Report," the "Acquisition Title Opinion," the "Drilling Title Opinion," the "Division Order Title Opinion," and the "Security" or "Financing Opinion." Each of the foregoing has a specific and distinct purpose among the genre of reports and opinions. It is important that the corporate counsel or landman properly and clearly communicates the type of report or opinion letter desired or the reason for which title examination is required so that the examiner may accurately determine the scope of his examination and fashion the desired product. A brief description of each of the foregoing reports and opinion letters is meaningful here to define the procedural aspects of the title examination in each instance. A more detailed discussion of chaining title and fashioning title opinions is contained in a separate paper to be delivered at this Institute.⁴

A. Take-Off Reports.

The "Take-Off Report" is typically used at the acquisition phase of a natural resources project to establish apparent mineral ownership for fee lease plays. This is the least thorough of all title examinations. For fee or private lands, the examination consists of determining possible ownership from the recorder's ownership plat and then examining the tract index (in those states which have statutorily mandated tract indices) in order to determine who has granted the most recent mineral leases. The examiner then proceeds backward in the tract index to find the conveyance which purports to vest the mineral title in the apparent lessor. Where no tract index is maintained by the recorder, the title examiner must proceed from the ownership plat backward in the grantee/grantor index to determine who has given the most recent mineral lease and to identify the conveyance which purports to vest the mineral title in the apparent lessor.

A Take-Off Report is frequently generated by the landman. It can take the form of a written report identifying apparent mineral ownership by tract, or it can take the format of a standard Bureau of Land Management use plat or other map shaded or otherwise marked to denote mineral ownership.

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B. Title Memoranda.

A "Title Memorandum" may also be used at the acquisition phase of a project. In addition to reciting apparent mineral and surface ownership, it may reflect material conveyances, reservations, exceptions, unreleased leases, and encumbrances. It is more thorough than the Take-Off Report, but less thorough than the formal status report or title opinion. It is most often prepared by an abstractor or landman, but may also occasionally be prepared by an attorney. Such Title Memoranda are commonly used in North and South Dakota, Wyoming, and Montana.

C. Status Reports.

A "Status Report" (as defined for the purpose of this presentation) sets forth the status of the lands as reflected by the title records of...