CHAPTER 7 COMMON ISSUES IN PREPARATION OF A TITLE OPINION

• Jurisdiction: United States

Mineral Title Examination
(Feb 2012)
CHAPTER 7
COMMON ISSUES IN PREPARATION OF A TITLE OPINION
Brian R. Bjella
Christopher D. Friez
Crowley Fleck PLLP
Bismarck, North Dakota

BRIAN R. BJELLA is a senior partner in the Bismarck, North Dakota, office of the law firm of Crowley Fleck PLLP. He received his law degree from the University of North Dakota in 1979. Prior to joining the firm, he served as an Assistant Attorney General for the State of North Dakota, representing the Board of University and School Lands in. supervision of the state's mineral interests. Brian is admitted to practice in the States of North Dakota and Montana. Brian's primary areas of practice are mineral law and public utilities law. He has extensive experience in preparation of mineral title opinions, siting of energy facilities, and litigation of contract and property law issues before state and federal courts. Brian has been very active in the Rocky Mountain Mineral Law Foundation. He is currently a member of the Board of Directors. He also serves as chair of the Long Range Planning Committee. He was on the program committee of the following Foundation special institutes: Mineral Title Examination III (1992); Oil & Natural Gas Pipelines (1995); The Electric Industry (1997); and Water Quality and Wetlands (2002). He served as co-chair of the landman's section for the 2006 annual institute and as co-chair of the oil and gas section for the 2011 annual institute. Brian has authored the following papers for Foundation institutes: "Removing the Operator Under the Joint Operating Agreement," (1999); "Management of Water and Water Quality in Coal Mining: A Legal Perspective" (2002); "Are Landmen Practicing Law? The Legal & Ethical Issues," (2003); and "Advanced Mineral Conveyancing and Title Issues," (2007).

CHRISTOPHER D. FRIEZ is a partner with Crowley Fleck PLLP in Bismarck, North Dakota. He practices in the firm's Energy, Environment and Natural Resources Department, with a primary focus on oil, gas, coal and other forms of energy. He has extensive experience in mineral title examination and has prepared numerous drilling and division order title opinions. He also practices in the areas of regulatory affairs, government relations, and real estate, while maintaining a busy probate practice. He serves on the Rocky Mountain Mineral Law Foundation Special Institutes and Membership Committees and is a member of the Landman's Association of North Dakota and American Association of Professional Landmen. Chris reports on recent developments in North Dakota oil and gas law for the Rocky Mountain Mineral Law Foundation Journal and the American Bar Association Year in Review Series. He has published a law review article on North Dakota oil and gas law along with various newsletter articles for trade publications. Chris has presented on the topic of North Dakota oil and gas at various seminars for the National Association of Division Order Analysts, State Bar Association of North Dakota, and others.

I. TITLE STANDARDS¹

Title standards are standards and criteria, adopted by an organization of lawyers such as the real property section of the state bar association, upon which real estate title can be evaluated to determine whether it is marketable or defective. All real estate lawyers, including oil and gas lawyers, should be familiar with the title standards of any state where they practice.

It appears there are 32 states which have some form of title standards.² Of these 32, it appears about 21 have updated their title standards within the last decade.³ The following table shows a summary of states with title standards and the dates those title standards were last revised.⁴

STATE	DATE LAST REVISED	COMMENTS
Arkansas	December 2000	No specific mineral title standards
Colorado	July 2010	No specific mineral title standards
Connecticut	December 2004
Florida	November 2003
Georgia	August 2005
Idaho	1946
Illinois	January 1977
Iowa	October 2005
Kansas	2005	Cover general issues related to real property, including mineral title; have been referred to and adopted by the KS Supreme Court
Louisiana	2001	No separate mineral title standards
Maine	February 2007
Massachusetts	November 2006
Michigan	2007 - 6th Edition published	Have been relied upon by MI appellate courts and regarded as authoritative; described as comprehensive and useful; specifically address mineral interests
Minnesota	June 2006
Missouri	May 1980
Montana	1955
Nebraska	January 2004
New Hampshire	July 2007
New Mexico	1950
New York	January 1976
North Dakota	December 2011	Appears to be the only state with separate, specific, comprehensive mineral title standards (Mineral Title Standards last updated in 1989)
Ohio	November 2003	Apply to surface
Oklahoma	Revised by bar committee and approved at annual bar convention	No separate oil and gas title standards; many oil and gas issues not addressed
Pennsylvania	One or more counties have adopted standards (limited to assessing what majority of local bar considers marketable for residential and commercial transactions)
Rhode Island	July 2003
South Dakota	June 2003	Codified in South Dakota code
Texas	Committee meets quarterly	Mineral title standards are included within Texas title standards
Utah	June 1964
Vermont	April 2003
Washington	September 1942
Wisconsin	February 1946
Wyoming	1970's to 1980	Not complete

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Title Standards generally represent the consensus of the lawyers drafting the standards and a majority of the lawyers who practice in the area of real property. They may be accepted as establishing a standard of care under which a title examiner should operate with a given fact situation. Although title standards generally do not have the force of law, courts have relied upon title standards when addressing matters involving title issues.⁵

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In the past, various states have enacted title standards into law.⁶ "In 1947, title standards in Nebraska were enacted into law by adoption of the Nebraska Marketable Title Act which made the existing standards the legal standard of marketable title."⁷ "Subsequently, the title standards were repealed and no longer have the force of law."⁸ "Reasons cited for the repeal of the legislation were that as legislation it was difficult to amend and keep the standards current; new standards proposed by the bar were given no recognition until enacted into law; and as legislation the standards lacked sufficient flexibility."⁹ To our knowledge, only one state, South Dakota, currently codifies its title standards in its state statutes.¹⁰ However, the introduction to the South Dakota title standards, codified in the South Dakota Codified Laws, Appendix to Chapter 43-30, provides:

The State Bar of South Dakota Title Standards are the work of the Real Property, Probate and Trust Section's Title Standards Committee. The Standards themselves are not the authority. Rather, they are in some sense a restatement of the law designed to aid the practitioner in determining the current status of practice in a particular area.

The Standards are based on existing South Dakota statutes and case law from South Dakota's courts and other relevant jurisdictions. The committee members' experience with the relevant authorities is crucial to drafting Standards.

The 2002 Standards are in part based on the Model Title Standards, existing South Dakota Title Standards and various Title Standards from other jurisdictions, predominantly North Dakota and Nebraska. The Title Standards Committee has discovered that to be most useful the Title Standards must keep pace with the ever-evolving landscape of the law. The ideal way to achieve this goal is through a standing Title Standards Committee charged with an on-going review of statutory and case law whose members are familiar with the dynamics of practice, enabling them to draft and revise Standards as necessary.

Most title standards relate to general real property issues without specific regard to mineral title issues. Although the title standards of some states may address mineral title issues, North Dakota appears to be the only state that has adopted separate and specific mineral title standards.¹¹ North Dakota's regular title standards contain a mineral section.¹² However, North

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Dakota's separate mineral title standards deal exclusively and comprehensively with title issues relating specifically to mineral interests.¹³ The introduction to the North Dakota Mineral Title Standards provides:

This volume of Mineral Title Standards of the State Bar Association of North Dakota has been prepared by the Mineral Title Standards Committee of the Section of Real Property, Probate and Trust Law. These standards are based on the relevant statutes of the State of North Dakota, decisions of the North Dakota Supreme Court (and courts of other jurisdictions deemed to be relevant to North Dakota) and the collective experience of the members of the Mineral Title Standards Committee. Mineral title standards continue to evolve as statutes change, cases are decided, and lawyers develop collective shared experience. These standards should be considered realistically; they should not be accepted as the final authority for a particular point. This volume should be used in conjunction with the North Dakota Title Standards. The work of the Mineral Title Standards Committee will continue over the years.¹⁴

The North Dakota Mineral Title Standards are comprehensive and include but are not limited to, discussion of the following issues: the nature of minerals; sovereign and private creation of mineral estates; ownership of minerals beneath railroads and highways; the mineral versus royalty distinction; third party reservations and reservation conflicts; the duhig rule of construction; term interests...