I have a situation where a fixed NPRI was established a long time ago (ie: 100yrs ago). Then over the next few decades some chunks of the sections were sold off over time. Then the sellers passed and the remaining interests were willed to current owners.
Now that production is underway the calculation of the NPRI is being called into question. The question is whether or not the current mineral interest owners that are part of the main chain of inheritance should fulfill the entire burden of the fixed NPRI or if it should be shared across all owners.
The deeds do not explicitly indicate one way or the other. The deeds basically just state that an undivided percent of the interest of all of the land is granted with all bonuses, rents, royalties, and other benefits, etc...
And would the determination of the NPRI being fixed or floating have any impact on whether the NPRI should stick with the original owner or be proportionately distributed among future grantees as well?
NPRI was established in 1928. Portions of mineral interests were sold in 1950's and 1960's. Remaining mineral interests were inherited in 1990's. Production began in last couple years. Had never produced before that as far as I know.
I have been told that the fact that the deeds are not explicit then there is a lot of grey area and a court could take it either way. I'm trying to get a feel for which of these concepts is more correct (if either):
1) Selling a portion of mineral interests is generally unencumbered by any outstanding NPRI and the original ownership chain will take on full burden of the NPRI.
2) Outstanding NPRI is no different than a lien and anyone purchasing a portion of those interests is taking on the proportionate liability based on the amount of interests they purchased.
#2 is the best scenario for me, but I'm trying to determine if it's realistic based on if anyone has experience with existing NPRI and the granting of deeds through a sale after the NPRI was already established.
The deeds do not say anything about the NPRI in either direction (ie: it doesn't indicate the NPRI exists, it doesn't indicate the interests are encumbered by it, and it doesn't indicate the interests are free and clear of the NPRI either).
My general thought would be that situation 2 that you outlined above would apply. However, I would need to see the wording in the mineral deeds out (1950's and 60's deeds) to really say with any certainty. I'm sure others will say the same about wanting to see the deeds.
I would bet though that unless the Mineral Deeds out specifically state that these minerals are NOT encumbered by the 1928 NPRI, then they would share the burden. Someone on here correct me if I am wrong, but I wouldn't even thing Duhig could potentially apply here as we are dealing with different interests - the royalty estate and mineral estate. If they sold 50% of the minerals in the 1950 deed, the grantee's still received 50% of the minerals.
The deeds do not specifically state that the minerals are NOT encumbered by the NPRI, but they also don't specifically reference that it is subject to the NPRI either. I have a lawyer involved now looking at it, but I'm certainly curious if anyone else has any opinions. Fingers crossed.
I’m not an atty but it seems to me the burden would follow the chain of conveyances of the party originally carving out a non-participating mineral interest unless expressly stated otherwise. These type of interest can create title questions as you are finding. Be certain to use an attorney versed in
Oil and gas title in the state where property is located.
Julie, I can give you the full run down. It ended up working out for us, but it almost did not. #1 above is what the outcome was, but we found another piece of the chain of title that worked out for us. You can email me at steven.burris (AT) gmail.com.
With #1 being your resolution, am I correct in assuming then that the older deeds in the chain of title did not contain a "this conveyance is subject to all reservations and encumbrances of record" provision? Usually newer deeds have them as standard language which will put the subsequent grantees on notice to look for NPRIs or other mineral severances, but in the older ones, it is much more possible that it doesn't say that, which would be what would have led to a #1.
Julie, if that is what you are currently going through, your interest could hinge on the language in subsequent title documents as well.
Our situation was influenced by two different titles in the chain. The NPRI was sold very early on when the original owner still had 64/64ths of the land. Along the way heirs sold off pieces of the ownership (specific X/64ths blocks). Our inheritance came through the original chain of ownership so the argument was that the full burden of NPRI fell on us.
Somewhere along the way though one of the primary heirs in our chain sold "one-half (1/2) of the interest of the Grantor" and that was then interpreted to include the NPRI as well. So ultimately one title hurt us, but an earlier title helped us, so we ended up about the same as we were originally.
Absent any explicit language to the contrary in the chain of title, the NPRI is a burden on the mineral owners corresponding to the tract of land on which the NPRI was established. For example, if A owns 160 acres, sells the 160 acres to B and reserves an NPRI on the 160 acres, and B creates a subdivision and conveys the 160 acres in one-acre tracts to 160 different owners, then should production ensue ALL 160 of those mineral owners' respective interests will be diluted slightly, in an amount appropriate to satisfy the NPRI belonging to A or his heirs and assigns.