Dear Mr. Stephenson.
Your title speaks volumes. First, the mineral - royalty distinction is something that has vexed landowners, mineral owners, grantors, grantees, drafters of documents, landmen, wannabe landmen, oil companies, the courts, etc., for decades.
The first item to go over is the GENERAL RULES OF CONSTRUCTION
1. Four Corners Doctrine
2. Earlier Clauses Prevail
3. Doctrine of Merger
4. Written Words Prevail over that Printed
5. Typed-In Words Prevail over that Printed
6. Construed Against Grantor
7. Construed Against Preparer
8. That which is not specifically reserved is conveyed
Now that that is taken care of, you need to understand the GENERAL CHARACTERISTICS OF A MINERAL INTEREST;
1. The mineral owner has the right of entering, occupying and making such use of the surface as is reasonably necessary in the exploring, drilling, mining, removing and marketing of the minerals;
2. Such a mineral interest is not free of the costs associated with exploring, drilling, mining, removing and marketing of the minerals;
3. The mineral owner has the right to execute oil, gas and mineral leases, thus conveying the right of exploring, mining, removing and marketing to third parties.
4. The mineral owner has the right to receive all bonus and delay rentals associated with executing oil, gas and mineral leases; and
5. The owner of minerals also owns the possibility of reverter of the minerals in fee upon expiration of the lease.
Likewise, you need to understand the GENERAL CHARACTERISTICS OF A ROYALTY INTEREST;
1. The royalty owner has no right to explore, mine, remove or market the minerals, thus no right of ingress and egress;
2. Such an interest in production is not charged with any of the costs of exploring, mining, removing and marketing of the minerals;
3. The royalty owner has no right to grant oil, gas and mineral leases to third parties; and
4. The royalty owner has no right to receive bonus and/or delay rentals.
NOW WE COME TO WORDS OF ART! AKA SPECIFIC TERMS OF CONSTRUCTION
Effect of words “Minerals”, Mineral Interest” or Mineral Acres”
• Most courts construe such terms as a mineral interest.
• However, it is well established that such a designation in and of itself is not conclusive.
• If the instrument references other characteristics which point to a royalty interest, such characteristics may outweigh the “mineral” reference resulting in a royalty construction.
Effect of words “in, on and under”
Generally, the grant or reservation of minerals “in and under” will create a mineral interest if such a grant or reservation does not otherwise contain contradictory provisions.
Effect of words, “in, on and under and that which may be produced”
This phrase, standing alone will generally create a mineral interest.
However, some courts have held “which may be produced” to create a royalty.
Effect of words “produced and saved”
• The combination of these words has consistently resulted in interpretation of a royalty interest.
What other minerals could be produced? Coal gasification in place, uranium, thorium, helium, coal, lignite, uranium, iron ore, all those items generally considered to be minerals. However, in Texas (somebody correct me if I am wrong), when you add the words oil and gas to all other minerals, the legal theory of ejusdem generis applies, where the wellbore method of extraction is contemplated. But that is a whole 'nother stack of lawbooks.
Best,
Buddy Cotten