CHAPTER 8 FEDERAL AND STATE UNIT RECORDS: THE LOCATION OF RELEVANT FILES, INFORMATION CONTAINED WITHIN THOSE FILES AND METHODS OF ACCESSING THAT UNIT INFORMATION

• Jurisdiction: United States

Mineral Title Examination
(Sep 2007)
CHAPTER 8
FEDERAL AND STATE UNIT RECORDS: THE LOCATION OF RELEVANT FILES, INFORMATION CONTAINED WITHIN THOSE FILES AND METHODS OF ACCESSING THAT UNIT INFORMATION
John S. Butcher, Esq.
Attorney
Butcher & Widlund, L.L.C.
Denver, Colorado

John S. Butcher has practiced law in Colorado since 1989, forming Butcher & Widlund, L.L.C. in 2001. Prior to practicing law he was District Land Manager for Hunt Energy Corporation and Land Manager for Hoppe, Kugler and Newberry, both in Denver, Colorado.

The United States Department of the Interior, Bureau of Land Management currently administers 804 active exploratory unit areas and 510 active secondary recovery unit areas covering in excess of 9.6 million acres in the lower forty-eight states. State agencies administer many more unit areas. Given those facts, it is likely that one concerned with mineral title examination will at some point in their career be exposed to the interaction of title examination and unit files. One may find reference to a unit area in the records filed with the Office of the Clerk and Recorder for a particular county, whether it is by the filing of the unit agreement with attachments or a declaration of unit area, but experience reveals that it is not uncommon that no evidence of the existence of an unit area is contained within those county records. When one is considering title to the oil and gas mineral estate, and the ownership of that estate includes the United States, one is under a duty of inquiry to examine relevant records maintained by the Bureau of Land Management, even in a pure notice state. See e.g., Page v. Fees-Krey, Inc., 617 P.2d 1188, 1194 (Colo. 1980).

Accordingly, in the course of mineral title examination, particularly in the Western United States, it is useful to have a working knowledge of the location of unit records and an understanding of the types of information contained in those files. For purposes of this exercise we will examine two major sources of unit records, the Bureau of Land Management, and state commissions and agencies.

I. FEDERAL UNIT AREAS

Federal units areas are completely different creatures from communitization agreements, and as such, are archived differently by the Bureau of Land Management. Inasmuch as oil and gas leases granted by the Bureau of Land Management do not include a pooling provision, one must obtain a communitization agreement approved by the Bureau of Land Management where a federal oil and gas lease is included in a pooled unit with either other federal oil and gas leases, leases granted by a state, or fee oil and gas leases. The Bureau of Land Management retains these types of agreements within the base file of affected federal oil and gas leases. Instruments related to unit areas are contained in separate files, and assigned an unique serial number by the Bureau of Land Management.

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Federal exploratory unit areas are voluntary units, and consist of two different types of unit areas, divided and undivided. The divided type unit provides that proceeds from production are distributed based on a proportionate interest within a participating area for each well, which participating areas may overlap at some point or merge. Participation in the drilling and completion expenses is determined under the unit operating agreement. A participating area is determined by the formula set forth in the unit agreement, and is subject to approval by the Authorized Officer. An undivided type of unit area provides that participation in operations and distribution of proceeds from production is based on a proportionate interest in the unit as a whole.

Accessing information regarding a unit area may be accomplished by review of the hard copy file maintained by the relevant State Office of the Bureau of Land Management, or review of on-line information through the LR2000 system. Among the hard copy records maintained by the State Offices of the Bureau of Land Management, are files associated with the creation and maintenance of each unit area.

A. Hard Copy Files

Within a hard copy file one should find:

• The unit agreement, with exhibits identifying the boundaries of the unit area, identification of the leases lying within the boundaries of the unit area, including a delineation of the leasehold, royalty and overriding royalty ownership interests under those leases at the date of submission of the unit agreement for approval, and a description of that portion of each lease lying within the unit boundaries;

• The unit operating agreement, with exhibits usual to operating agreements;

• Joinders to the unit agreement;

• Verification that all interested persons have been offered the opportunity to join the unit agreement;

• Relevant correspondence...