Stipulation of interest and cross-conveyance of Oil, Gas and other minerals

Law & Legal
1

My son received a letter from the oil company who holds his lease. It says the Drilling and Division order attorney has determined the intent in the conveyances was unclear and ambiguous.

Without trying to make things too complicated but provide enough so that someone can give some type of educated answer, his minerals were distributed in a final decree back in 1957 to 7 children, one of which was my son’s grandmother. She then conveyed her interest to her four grandchildren of which he was one of.

The problem arises in the NE 1/4 of one of the sections. In it 7/8 of the minerals were conveyed in 1957. The other 1/8 goes to the person who purchased the land. However, since the state owned around 80 acres, more or less, the original owner (his great-grandfather) had only 53.234375% of the minerals (85.175/160 acres). As a result, he could not convey an undivided 7/8 mineral interest, as appears in the final decree of distribution. The transfers to the grantees in those documents must, therefore, be apportioned from the 85.175 mineral acres owned by the estate in the NE 1/4.

The apparent intent of the estate was to divide the interests of the estate into 1/8 and 7/8 parcels, a division which would result in each 1/8 interest equaling 10.646875 acres. However, the administrator’s deed to the buyers of the land approximately a year and a half prior to the final decree of distribution conveys a 1/8 interest in and to all of the minerals under NE 1/4, and not just the minerals owned by the estate. As a result, on its face, that deed conveys 20 mineral acres to the grantees.

Under this interpretation of the deed, the estate retained 65.175 mineral acres for the distribution to the heirs and the deed which purports to convey an undivided 7/8 mineral interest in the NE 1/4 conveyed a 40.734375% mineral interest, or the 65.175 acres. Each of the heirs named in the final decree of distribution received the 9.310714 mineral acres, and not the 20 mineral acres as provided for on the face of the final decree.

So… if anyone can read through all this and understand it all, great. My son is supposed to sign the Stipulation and return to the company. Question: what else can he do? Their interpretation is possibly correct. To hire an attorney to review it would not be practical as far as the cost/benefit. However, even though the number of acres is small, if eventually there was a monster well it could mean the difference of several thousand dollars.

2

Dear Mr. Peterson,

A stipulation and cross conveyance is a title curative matter, as you have seen. Without such a document being signed, the oil company will hold the disputed funds for a certain period of time, then in all likelihood, when the dollars are big enough, file suit as an interpleader to let the court decide how the property is to be divided.

3

What Buddy said! Also if you follow the money, there isn’t anything in it for the lessee/operator. I think it’s likely the facts are just as they stated in this matter. I’d sign it if the math came out right. Good luck Mr. Peterson, whatever you decide.

4

Thanks Buddy and R W. I agree with what you both have said.

But just to throw in another twist. He top leased his minerals to another company back in May. Their lease became effective on June 1. The letter and stipulation was received from the company holding the bottom lease. By signing the stipulation he would be signing a document from a company who no longer holds the lease. I am really in the fog on this. How should he proceed? Call the company who now holds his lease, or maybe call them?

5

Mr. Peterson, I would want to clear things up now, before there is a well. I’m sure you would rather be paid promptly. I think the operator will hold the royalty money because it is the easiest and safest thing to do. The operator can also use the cash until they have to pay you. It’s not like you get your own separate account, it’s a line in a ledger and it won’t be gathering interest for you. Getting paid can be tough as a mineral owner, it’s good to clean up your title as you find problems. I think the previous lessee did you a favor whether they knew it or not.

6

Mr. Peterson,

I am going to make a wild guess that the oil company is on top of their business and have perpetuated the lands past the expiration date, hence the request for a stipulation of interest.

Has the holder of the top lease paid all the monies due? Most pay a portion of the bonus during the term of the bottom lease and the balance when and if it vests.

The solution to your question is straightforward. Call the bottom lessee and ask if they have perpetuated their lease by operations, or ask if they have acquired the interest of the top lessee. If neither is the case, ask for a release of the bottom lease.