MINERAL TITLE EXAMINATION ON FEDERAL LANDS

• Jurisdiction: United States

Oil & Gas Mineral Title Examination (Sep 2019)
CHAPTER 8B
MINERAL TITLE EXAMINATION ON FEDERAL LANDS
Jared A. Hembree
Hinkle Shanor LLP
Roswell, NM

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JARED A. HEMBREE is a partner in the Roswell, New Mexico office of Hinkle Shanor LLP and is an adjunct professor at Washington & Lee University School of Law, where he teaches Oil and Gas Law. His primary practice is in oil and gas law, including title examination, transactions, and litigation. Mr. Hembree is a Trustee of the Rocky Mountain Mineral Law Foundation and is on the faculty for the RMMLF Federal Oil and Gas Leasing Short Course. He has served in various capacities for the American Association of Professional Landmen, as a director for the Independent Petroleum Association of New Mexico, and is a past-president of the New Mexico Landmen's Association. Mr. Hembree received a J.D. from Washington & Lee University School of Law in 2005 and graduated with Honors receiving a B.A. in History with a Minor in Museum Studies from Montana State University in Bozeman, Montana in 2000.

I. Introduction

Examining title to federal lands involves an examination of two sets of records. The examiner must look at both the county records and the federal records. The process for examining county records is discussed in depth throughout this institute, so this paper will focus on the necessary steps to conduct a proper and thorough examination of the federal records. Because examining title to federal lands presents certain pitfalls which can trap an unwary examiner (e.g., differences between operating rights and record title, unitization, and lease severance), this paper is designed to help an examiner avoid those pitfalls. However, the information here is not new and has been presented many times over by respected title attorneys.¹

The first question to be answered is why an examiner needs to look at both the federal and county records. The answer is fairly simple. First, every assignment or transfer of an interest in a federal oil and gas lease must be filed for approval with the Bureau of Land Management (the "BLM").² Second, instruments conveying or transferring real property interests must be filed of record in the office of the county clerk for the county in which the land is located for constructive notice purposes. Part of the reason that recording in the county is necessary is because most states do not recognize the BLM records as imparting constructive notice.³ As a result, you end up with two sets of records which should be reflect the same chain-of-tilte, but more often than not the records are very different.

II. Relevant Federal Land Records

It is important to start by knowing where the records are located and how to find the information necessary to conduct your examination. Most of the information needed will be found

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in the BLM State Offices.⁴ At the State Office, the examiner will find the Plat Book, Historical Index, Serial Register Page , Case Files, Patents, and a host of other types of records that may be relevant to an examination. The types of records and a brief description are set forth as follows:

(i) Plat Book (now on microfiche or electronic image in most states): contains master title plats of all townships. It usually contains use plats and other and supplemental plats showing the mineral status of an area. It contains the serial numbers of entries. For example: oil and gas leases.

(ii) Historical Index (in plat book and now maintained on computer): arranges in chronological order descriptions of actions taken with regard to the lands in a township. For example: patents, withdrawals, and leases. This index has details of actions that no longer appear in the plat, i.e., cancelled homestead entries and expired oil and gas leases.

(iii) Serial Register Page (now maintained on computer): are arranged by serial numbers of land actions. Each serial register Page gives the history of a particular action, summarizing, for example, issuance, assignment, and other details of a single oil and gas lease. Serial register Pages can now be accessed via the internet at www.blm.gov/lr2000.

(iv) Case Files: contain the original documents relating to a given lease or other BLM action, including the lease, stipulations, assignments, old rental receipts, accounting advices, copies of approved Applications for Permits to Drill, and BLM decisions relating to extensions, suspensions, renewals, terminations, unitization, communitization, assignment approval, and related matters.

(v) Competitive Lease Sale Files: contain notice, publication, and sale results documents for a particular sale.

(vi) Simultaneous Leasing Records: contain lists of lands available and relevant stipulations and results lists.

(vii) Unit and Communitization Agreement Files: contain the approved agreement, ratification instruments, unit operating agreement, and BLM decisions relating to a specific unit or communitized area.

(viii) Patents: show reservations of minerals to the United States.

(ix) Survey Records: include (1) Surface Plat which includes resurveys, shows significant physical features including lakes, rivers and reservoirs, and shows the

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correct acreage of lots in sections (NOTE: you should rely on these acreage figures, not those on the master title plat); and (2) Field Notes are a written description of the survey as performed.

(x) Mining Claim Records: include (1) the Geographic Index of Mining Claims which identifies existing mining claims recorded with the BLM by township, range and section subdivisions, and gives the serial number assigned to each claim; and (2) Case Files contain copies of location certificates, assessment work affidavits, and related documents for a claim or series of claims.

In addition to the records at the State Offices, it is possible that you will need to examine the records at a federal records center (archives) or at a field office. The field office will have specific right-of-way files, APD records, possible correspondence regarding held by production status, and unit and communitization agreement files.

III. Record Title and Operating Rights

One very important concept to understand when examining title to federal oil and gas leases is the difference between record title and operating rights. Record title, when used in connection with a federal oil and gas lease, refers specifically to a lessee's interest in a lease which includes the obligation to pay rent and the rights to assign and relinquish the lease.⁵ Overriding royalty and operating rights are severable from record title interests.⁶ An initial lessee holds both record title and operating rights and an assignment of record title also transfers operating rights, absent provisions to the contrary.⁷ Operating rights are defined as the interest authorizing the holder of that right to enter upon the leased lands to conduct drilling and related operations, including producing oil and gas from such lands in accordance...