Petroleum Land Titles

This article is not intended to make you into either a surveyor or landman, but some familiarity with the principles of petroleum land titles is useful to anyone in the business. After oil is removed from the ground it is sold and dealt with just like any other item of personal property, but while still in the ground it is governed by the rules governing real estate transactions. In the United States, the surface owner generally has title to all air rights over the land and all minerals under the land, including oil and gas. In some foreign countries the government retains title to minerals, and the landowner has only surface rights. Oil and gas are also subject to a unique characteristic not applicable to other minerals-they can travel without regard for legal boundaries.

A landowner owns all oil produced on his land even if the reservoir extends under another person's land and he is draining oil from the entire reservoir. Of course, the well, must reach bottom on his own land, and he cannot slant or directional drill to reach bottom on someone else's property. Thus, a landowner is subject to being deprived of his oil if his reservoir extends as far as a well on someone else's property. The principal defense to this is to drill an "offset well" to recover one's own oil or gas before it is lost ("pooling" and "unitization" are other answers, but they are beyond the scope of this discussion).

The horizontal well has changed the way people look at land boundaries. Now the boundaries are regulated in many states; however, in some states they are not. The directional driller's job is to not exceed the legal boundary. He does this by giving accurate directional surveys to the consultant on location and by following a preset directional chart. One foot could cause a legal problem if it were drilled into another person's boundary. A cement plug may be all that is necessary, but do not count on anything concerning regulation being simple. Politics plays a.big part in drilling wells. Sometimes it comes down to how the regulator feels that day.

Ownership of land is determined by finding the original grant from the sovereign to a private owner and then tracing each transfer down to the present. Most states west of the Mississippi were originally federal territories with the land owned by the federal government. Titles in these states will generally start with a federal grant. Texas was never a federal territory, and all land titles in Texas trace back to a grant from the King of Spain, the Republic of Mexico, the Republic of Texas, or the State of Texas. The title then changes hands through various transfers, such as deeds, wills, intestate inheritances, tax sales, and mortgage foreclosures. A transfer may cover the entire property or it may include only a portion, such as the transfer of part or all of the minerals to one person, with surface rights left to another.

There are other documents that are not transfers but that do affect title such as mortgages, oil and gas leases, easements, etc. Almost all of these transfers are evidenced by a document that is recorded in the county where the land lies. The documents are a public record and thus give notice to anyone who seeks to determine title to a tract of property. Some transfers, however, such as an intestate inheritance (an inheritance by law from a person who left no will) or title obtained by adverse possession (title obtained by using the land and claiming ownership for a specified number of years) are not represented by a document. Such unrecorded transfers are always a challenge to the landman.

The landman or other title examiner can save a lot of time by obtaining an abstract of title prepared by an abstract company. An abstract of title is a book or file that contains copies or summaries of every recorded document affecting title to a particular tract. However, since the abstractor will not interpret the documents, the title examiner must know what the documents mean.

Because title is normally conveyed in writing, it is important to have a method of describing land area, so that the land conveyed by title can be determined on the ground. There 'are two basic methods of describing land areas:
  1. The rectangular survey
  2. The metes and bounds description.

The rectangular survey is the simplest method to deal with. It was adopted by the United States Government shortly after the Revolutionary War and applied to almost all lands owned by the federal government west of the Appalachians. It is thus the system used in most of the oil producing states in the Rocky Mountain-Prairie area except for Texas. Texas entered the Union as a republic and was never a federal territory, therefore the federal system does not apply there.
Figure 1. Example of a Rectangular Survey

In the rectangular survey the surveyor lays out a northsouth principal meridian and an east-west baseline to form a cross. He then measures off townships of 36 square miles each, 6 miles on a side (see Figure 1). The east-west measurement is then counted in units called ranges, and the north-south measurement is counted in units called townships. Thus, if you start at the intersection of the meridian and the baseline and want to describe the location of a township that is 3 units north and 2 units to the east (Figure 1) it would be described as Township 3 North, Range 2 East or simply- T3N, R2E.
Figure 2. Numbering Order of the Section of a Township

Each township is then divided into 36 sections of one square mile each (640 acres), which are numbered 1 to 36 in the manner shown in Figure 2. A section can then be described simply by referring to a section number. The sections are not subdivided in the original survey but are easily subdivided by the owner into halves, quarters, etc. (See Figure 3.) Thus, the shaded area in Figure 3 consisting of 80 acres can be described as the north half of the southwest quarter, section eight, Township 3 North, Range 2 East. This is written N 1/2 of SW 1/4, Section 8, T3N, R2E.
Figure 3. Example of ways a section can be subdivided 

A metes and bounds description is simply one laid out on the ground using:
  1. Physical monuments (e.g., a river, a tree, a rock, a concrete marker)
  2. Directions (e.g., North 30° East)
  3. Distances.

This is a difficult system to deal with because many early surveys were inaccurate to start with and the monuments have long since disappeared. This is the system used in most of Texas, although Texas has its own form of rectangular survey in the more recently settled areas. To make matters more confusing, in Texas everything is not traced to one federal government but to four different sovereigns, each with different methods of granting and describing land. Many early grants cover tens of thousands of acres in poorly described metes and bounds surveys, which sometimes use monuments such as trees that no longer exist. See Also: Basic Terms of an Oil and Gas Leases

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