GUIDELINES FOR LANDMEN IN CONDUCTING RECORDS SEARCHES AND PREPARING REPORTS FOR ATTORNEYS (or WHAT DOES THE CLIENT WANT?)

• Jurisdiction: United States

Land and Permitting
(Jan 1994)
CHAPTER 10A
GUIDELINES FOR LANDMEN IN CONDUCTING RECORDS SEARCHES AND PREPARING REPORTS FOR ATTORNEYS (or WHAT DOES THE CLIENT WANT?)
Thomas C. McKee
Clanahan, Tanner, Downing & Knowlton, P.C.
Denver, Colorado

I. INTRODUCTION

This paper is intended to be for landmen, both those who work in-house for companies and those who are independent. Also, it is intended to be practical, not theoretical or legalistic. A primary focus is on the relationships among companies, attorneys and independent landman, with some thoughts and comments on how we might work together better to produce required title opinions more efficiently and at a lower cost, especially opinions prepared in conjunction with large acquisitions.

Details of types of title opinions, examination of title to fee, state and federal lands, and preparation of title opinions are not presented here, because these topics are covered well and comprehensively in The Rocky Mountain Mineral Law Foundation manual titled Mineral Title Examination III, Volume 1992, Number 2, specifically the following papers:

Paper 1, Types, Nature and Scope of Title Opinions, by Janet N. Harris of Clanahan, Tanner, Downing & Knowlton, P.C., Denver, Colorado

Paper 2, Methodology of Reviewing Title Data and Preparing the Title Opinion, by William P. Pearce of Pearce & Durick, Bismarck, North Dakota

Paper 3, Title Examination of Fee Lands, by George A. Snell, Amarillo, Texas

Paper 4, Title Examination of State and Federal Lands, by Gregory R. Danielson, now of Bjork, Seavy, Lindley & Danielson, P.C. Denver, Colorado

At the outset I want to acknowledge my reliance on those papers in the preparation of this paper and to express my admiration and appreciation for the authors' hard work and fine articles.

II. COMPANY — ATTORNEY — INDEPENDENT LANDMAN ROLES; AN ATTORNEY'S PERSPECTIVE

Introduction — Most title opinions include input from oil and gas company personnel, examining attorneys and independent landmen in varying degrees. The role of each participant will differ based on many factors, including primarily the practices and philosophies

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of the company, which as the ultimate consumer of the product has final say on who performs certain functions and how they must be performed. The following is a discussion of the perceptions of one attorney regarding what the respective roles should be.

Company — The primary role of the company, often performed by landmen who are employees of the company, is to understand the "big picture". Company personnel should organize, coordinate and supervise the efforts of others involved in the project. They need to have clear objectives, especially in regard to the degree of title perfection desired.

Perfect legal title to real property is hardly ever found in oil and gas title examination, but usually that does not cause any great concern to an oil and gas company or anyone else. Companies generally are willing to accept "good" title, "marketable" title, "defensible" title or maybe even something I will call "probable" title, depending on the circumstances. The first three concepts are reasonably well understood among those in the business, and a relatively clear legal definition of the concepts can be stated. While it is not necessary to dwell on technical legal definitions of the various degrees of title quality, the following are general statements to illustrate the meaning given to the terms in the present discussion.

Good title will be considered to require title to real property free of any defects, which is distinguished from perfect title in that good title may have had defects, but they have been cured of record.

Marketable title, or merchantable title, will be defined as title to real property that is free from reasonable doubt such that a reasonable purchaser would be willing to accept it (in many states "marketable title" is defined by comprehensive curative statutes, often called Marketable Title Acts, or by title standards).

Defensible title will be deemed to require title to real property that has no title defects which, if litigated, would result in title failure (for example, title based on adverse possession, which one may be able to prove by uncontroverted evidence but is not marketable until actually decreed by a court).

Probable title is not an accepted legal concept but rather is a term coined by the author for discussion purposes in this paper. The idea is that in some instances, especially in conjunction with large acquisitions, a company may be satisfied to insure that there are no obvious and serious defects in title as to some or all of the properties. For example, in a large acquisition the company may decide on a business risk basis to examine title to leases which comprise a stated percentage of the total value of the

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acquisition. As to the balance of the properties, if there is any title examination at all it may be simply a cursory review of county and/or federal records to determine whether title appears to be as represented by the seller. Often an experienced landman or title attorney can make this determination quickly and cheaply, and with a rather high level of comfort as to the status of title.

Company personnel who know the company's risk tolerance and the economics of the transaction must make the determination what degree of title perfection is required and communicate their desires to the examining attorney and to independent landmen involved in the title examination. In my experience clear directions in this regard are seldom given, and attorneys generally assume that marketable title is the appropriate standard.

In addition to giving clear directions to attorneys and landmen, the company should provide complete resources on a timely basis (although this is sometimes difficult in the fast paced world of acquisitions). Specifically, it is crucial that existing title opinions be furnished at the earliest possible time, hopefully before the commencement of supplemental record examination. If there are no prior title opinions, information from the company's, or seller's, lease files, division order files and other files usually is helpful. In short, the examining attorney and landmen assisting in the process can do their jobs better and with greater efficiency if they have some reasonable understanding of the titles under examination before they begin the detailed record searches.

Attorney — The examining attorney is primarily responsible for bringing legal knowledge and experience to the project and for the drafting of the actual title opinion. If asked, an attorney should be able to assist the company in developing efficiencies consistent with the company's needs. Specifically, the attorney must provide sufficient information for the company to evaluate business risks and to balance them with economic considerations. This usually is done in the title opinion, but especially in acquisitions there should be some discussion of these considerations in the planning stages of the project.

Independent Landman — Independent landmen are primarily responsible for bringing public record search and company record search knowledge and experience to the project. Like the attorney, if asked a landman should be able to assist the company in finding efficiencies consistent with the company's needs. Normally an independent landman is expected to have a good understanding of available resources, such as county, state and federal records, and of the usual (and sometimes unusual) ways in which companies (sellers) maintain lease, prospect and division order files. In acquisitions landmen often are relied upon to conduct due diligence investigations and to find and make available from the seller's files complete information for the title examination. Landmen also usually have primary responsibility for dealing...