CHAPTER 21 YOU PAID FOR THE TITLE OPINION, NOW WHAT DO YOU DO WITH IT: HANDLING TITLE CURATIVE

• Jurisdiction: United States

Mineral Title Examination
(Sep 2007)
CHAPTER 21
YOU PAID FOR THE TITLE OPINION, NOW WHAT DO YOU DO WITH IT: HANDLING TITLE CURATIVE
Susan J. Alfson
President
Alfson Energy Land Services, Inc.
Littleton, Colorado

Susan J. Alfson received her Juris Doctorate from the University of North Dakota, School of Law in 1978. She began her career in oil and gas as a landman working for Alfson Energy Company in 1972 and, following law school, as a landman with Energy Reserves Group, Inc. and Sabine Corporation both in Denver, Colorado. Her land experience includes leasing, curative, title preparation, Federal unit administration, joint operations negotiations and management, and other aspects of energy exploration and development including lease plays in oil, gas, potash and coal in the Rocky Mountain Region and oil exploration offshore California. Her teaching experience includes legal research and writing, contract drafting and contract negotiations.

While taking time away from the oil industry during the 1990s, Susan continued to develop expertise in negotiations, management and business operations in telecommunications, mining, and manufacturing ... including work in Asia, Mexico, Canada and Europe.

In 2004, Susan established Alfson Energy Land Services, Inc., a firm specializing in the mitigation of title risks related to oil and gas field development and corresponding projects for the benefit of oil and gas field operators. Located in Littleton, Colorado, Alfson Energy serves the Rocky Mountain Region.

Table of Contents

1. Introduction

2. Revisiting Some Basics

3. Help! The Rig is Standing by: Business Risks vs. Legal Requirements

4. When to Demote a Drillsite Requirement to a Division Order Requirement

5. Financial Risk Analysis: Determining What's Really at Stake

6. To Waive or Not to Waive, That is the Question (with Apologies to Shakespeare)

7. When a Curative Instrument Doesn't Cure: Revisiting Company Practices

8. In an Abundance of Caution: When the Title Attorney Leaves You Scratching Your Head

9. What do You Mean, I Could Lose my Job? The Importance of Understanding What the Title Attorney is Telling You

10. Best Practices

Addenda

1. Publications on Title Curative

2a. Pertinent State Statutes

2b. Internet Resources

2c. Top Producing Counties With On-line Access to Public Records

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. We make every effort to provide accurate and timely information; however, we make no assertions or guarantees that such information is accurate as of the date it is presented or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of their particular circumstances.

I. Introduction

Title curative is simply the process of correcting a deficiency in the title to real property. In the context of the oil and gas industry these deficiencies surface when:

• a landman's title memorandum uncovers a problem during leasing, or

• an oil and gas attorney identifies a deficiency or risk during examination of a land abstract in preparation for the drilling of a well or payment of production royalties.

Defects in the chain of title can be as straightforward as correcting the misspelling in the name of a party in interest, or as intricate as resolving discrepancies in ownership along a shifting river bank, or commissioning the probate of a deceased mineral owner's estate. Because to err is human, there is no limitation on the types or complexity of issues that arise during examination of chains of title. While some title issues lend themselves to ready solutions, others may require the involvement of legal counsel or resolution through court or administrative adjudication. Each curative requirement presents a potential risk to the operator of a drilling program. Some risks are minimal in their impact or remote in probability; others are sufficiently serious -- in both impact and probability -- to delay the drilling of a well until the matter is resolved.

There have been a number of papers published previously on title curative, some general and others specific to certain jurisdictions. All of these have something of value to offer to the landman or legal practitioner charged with responsibility for curative. An addendum has been included at the end of this paper listing a number of these articles and where they can be found. There are also addenda containing information on statutes applicable to curative matters by state, links to helpful Internet sites, and information on whether counties in various oil-producing western states have public records that can be searched on the Internet.

The purpose of this paper is to: (a) provide practical approaches to evaluating requirements that need to be addressed while managing available time; and (b) address issues that create particular and serious challenges during the curative process, that tax the ability of the landman, title attorney and others to complete curative requirements timely and successfully. Some of these issues involve policies or practices within the operating company, itself.

II. Revisiting some basics.

In almost all circumstances involving curative the enemy is time. There has likely been an appeal made by others in this forum to provide the title attorney with as much time as possible to adequately prepare the title opinion. On the other side of the equation, drilling programs involve too much money to allow title issues to be resolved while a rig is standing by. Aggressive drilling schedules mean that pressure is brought to bear on landmen by their management and

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engineering departments. Often there is insufficient time remaining for the landman to manage the curative requirements, once the title opinion is complete. Unfortunately, this scenario can be a prescription for costly errors.

Whether drillsite, division order or combined, the title opinion needs to be thoroughly reviewed by the landman when it's received from the title attorney. The next step should involve the creation of some type of project plan from which the landman can manage all curative activities from that point forward.

At a minimum, the project plan should contain a brief summary of all title requirements, a priority rating of each requirement, a required due date (if there's not a date certain, then a projected date for completion), and an actual completion date for each requirement. It's also helpful to have an area to track work status and enter comments. If there are several people involved in completing curative work, the project plan should also contain a data field indicating who has responsibility for completing each task.

Figure 1 on the following page shows a portion of a sample project plan developed for managing curative requirements.

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Drillsite	Div Ord	??	??	Due	Target	Actual
Review Title Opinion and Create Project Plan	7/20/05	7/20/05
Materials Examined did not include a complete set of records for those
1	√	instruments filed of record in County, State affecting the Captioned Lands.	Advisory Only
Operator has agreed to assume the business risk of that limitation.
(a) There is a communitization agreement for production of gas and
2	1	associated hydrocarbons from the Captioned Lands and the XXX Formation	9/30/05	7/30/05	8/2/05
from the XYZ Well. Ensure that the State Oil and Gas Conservation
Commission has approved that infill drilling
Req. 2: (b) File an Affidavit it in County to provide notice of an extension by
production for the following oil and gas leases:
Lease A-- From United Sates, Dept. of Interior, BLM to _____;
3	3	not recorded; dated April 1, 1978; primary term 10 years
Lease B-- From United States Dept. of Interior BLM to _____;	2/15/06	11/1/05	11/21/05
recorded Book ___, Page ___, Reception # ___; dated May 1, 9999;
primary term 10 years
The Materials Examined did not indicate a patent of any of the Captioned
4	Lands granted by the U.S.A. The title examination conducted by ____	Advisory Only
indicated that the surface estate was owned by the U.S.A.
statutory law requires the proceeds from production to be paid to the entitled
5	persons no later than six months after the end of the month of which the	Advisory Only
production was first sold.
(a) Conduct a visual inspection of Captioned Lands and identify any
easements or rights-of-way over, under or through the Captioned Lands.
6	1	(b) Obtain an affidavit from a disinterested third party with know ledge	9/1/05	9/1/05	8/27/05
regarding the persons in possession of the surface. If one other than U.S. is
in possession, inform title attorney for modification of T.O.
File an original or certified copy of the following assignments in County:
7	2	Assignment A.7--From ____ to ____; dated November 30, 1993
Assignment A.8--From ____ to ____; dated August 31, 1996	11/1/05	8/15/05	9/15/05
Req. 7: File original or certified copies of the following assignments with BLM
State Office in file for Lease #COC-00000:
7	3	Assignment B.1--From ___ and ____ to ________;
recorded Book ___ 1, Page ___, reception # ___; dated October 22, 1990
Assignment B. 2--From ____ to _____; recorded Book ___,	11/1/05	8/15/05	9/15/05
Page ___, Reception # ____; Dated May 4, 1994
Added: provide field office with a list of easements, rights of way and other	9/1/05	8/15/05	8/21/05
8	1	surface encumbrances affecting the subject property
9	3	Added: Obtain

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