HBP from 1926 Lease, Sections 3 & 4, Block C-23

Texas Mineral Rights Winkler County, TX
1

The minerals involved are in Block C-23, Sections 3 & 4. A landman recently approached us with a lease offer, but later withdrew the offer after discovering that these tracts appear to still be covered by a very old lease dating back to 1926.

Here is the general issue:

From what he could tell, the lessee(s) over the decades have managed to maintain production somewhere on the leased acreage since the early 1930s. Wells have been drilled or maintained in different sections at different times, but he says that there appears to have been continuous production somewhere on the original leased lands all the way to the present day. Current production appears to be in Section 13, Block 26—and while that is not our tract, it is reportedly part of the same 1926 lease.

Because this lease predates modern drafting practices, there is no Pugh Clause. Those did not become common until the 1940s. Without a Pugh Clause, any producing well anywhere on the total leased acreage holds the entire lease—it holds every section and every acre.

So the logic the landman gave us is:

  • Production has existed somewhere on the leased acreage since the early 1930s.

  • The 1926 lease never expired.

  • The whole original acreage is still held by production (HBP).

  • Therefore, Sections 3 & 4, Block C-23 are already under lease.

It’s a frustrating situation.

I’m nowhere near as knowledgeable about this I probably should be. Trying to learn. I’m posting here to get other opinions from people familiar with historical leases, HBP questions, and how these situations are evaluated. I’ve quizzed my resources and some have indicated that it may be possible to challenge the HBP.

Does anyone have experience with similar early-1900s leases that have been kept alive through scattered production? What is the usual outcome of such a challenge?

2

There are other mineral owners in a similar situation where a single landowner leased extensive acreage, and all the subsequent owners are subject to the lease. And you can see the problems this creates. You should get a copy of the lease from the deed records to see all the acreage and terms. Mounting a challenge will only be economic if you own sufficiently large net mineral acres or you can organize a group of owners to commit to paying legal fees. Often the acreage has been divided and subdivided into small interests. You will also need to trace the lessees over the last 100 years because it is likely that that leasehold interest has also been divided, by both section or partial section and by depths. So there may well be multiple lessees holding your acreage. No idea how likely you are to prevail or to convince the lessee(s) to voluntarily release their interests in the lease. Keep an eye on permits and area activity, since you know there is interest in development.