I didn't think I owned any minerals. If they land man pays me for royalties and then I find out later I didn;t own anything, can they take the money back.
Oil and Gas Problem
Real Estate Attorney
Hello and welcome to Avvo. You really have a two-part question.
Determining mineral ownership is best left to attorneys, title companies, landmen, and the like. It takes a certain amount of skill to interpret deeds and reservations. Therefore, I highly suggest you seek a local attorney for an in-person consultation in this matter. To research title, you need to physically visit the county courthouse where the land sits and look through the records for conveyances and reservations of title. Sometimes these records are available online for a fee, but rarely do they go far back enough in history to make reliable opinions.
Although the landman, if she of he is experienced, will most often be correct about determining mineral ownership, you must remember that they do not work for you. If they are wrong, it may look bad for them, but usually it's not their problem.
The "standard" oil, gas and mineral lease will contain a warranty clause whereby you warrant that you own the minerals. This would, in fact, allow the lessee to require you to give any money back if it is proven later that you did not own the minerals. This doesn't happen often, but is more likely if you own a large portion of land and the money they have paid you is substantial.
However, the oil, gas and mineral lease is not an instrument set in stone. You, or your attorney, can negotiate the terms. You can strike the warranty clause or even replace it with a statement such as, "There is no warranty that Lessor owns these minerals." A clause as such would remove your obligation to return any funds paid in reliance on your ownership.
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Oil / Gas Attorney
In order to determine if you own all or a portion of the mineral interest on your property, you will either need to go to the courthouse and check title or hire a landman to run title for you. You could hire an attorney to check title and prepare a title opinion, but if you just want to verify ownership without an attorney it would be less expensive to hire a landman to prepare a run sheet and division of interest listing. However, please note that landmen are generally not attorneys, so the information provided to you will not be a legal opinion should you elect to go that route. Typically, prior to a landman making an offer to lease minerals, they have already gone to the courthouse and pulled the relevant title documents so as to ascertain who owns what interest. In the event you do own the minerals, you should certainly hire an oil and gas lawyer to, at the least, review and explain the lease, or preferably, to handle the negotiations for the lease. There are multiple issues to consider when leasing minerals and this forum is limited so I will not get into the details except to say that when a mineral owner signs the lease, he/she will usually receive a per acre bonus amount for signing the lease and if a well is drilled and production obtained, then the owner receives his/her share of the revenue from production based on the royalty amount in the lease.
As a direct answer to your question, if you lease the property and it turns out you do not own the minerals, then they would be entitled to a return of the bonus paid if you warrant title in the lease. A warranty of title is an issue that can be negotiated in the lease as well, so it is also possible to lease without warranty and not have to return the bonus should it turn out you did not own the minerals. It is doubtful that a company would lease the property, drill a well, lay a pipeline, obtain production, pay royalties, and then verify title and ask for bonus and royalty money to be returned if you did not own the minerals (not impossible, just highly unlikely). I would suggest you discuss this matter in more detail with an oil and gas attorney who is familiar with leasing in the piney woods of east Texas and in particular, Harrison County, Texas.
Gary J. Holloway
The Holloway Law Firm
Texas & Kentucky Oil and Gas Law Firm
Please note that neither this Avvo reponse nor any other communication establishes or intends to establish an attorney client relationship between any party and this firm as same is only effective upon the execution of a written retainer agreement. Thank you.
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Oil / Gas Attorney
I don't recommend you incur a lot of expense researching ownership yourself - the more important thing in my opinion is to check the language of the lease you are being asked to sign. It will contain a "warranty of title" - if left unmodified, you will be liable to reimburse the bonus and any royalties if it turns out that a landman made a mistake in getting your signature at all (or the interest he claims you own). Generally, initial lease offers are not based on full abstracts of title and mistakes are not uncommon. The abstract of title which will verify your ownership will be prepared by the Operator (through an abstract attorney) at the time Division Orders are prepared and forwarded (not done until AFTER a well has been drilled and determined to be capable of production). You can negotiate in your lease that you don't have to sign a Division Order, but otherwise Texas statutes allow an operator to hold royalties until you sign and return. I like my clients to get Division Orders as it allows us to verify ownership and the correct computation of Decimal Interest in a pool early in the life of the well. As you can tell from the answer, the effort I do recommend is the stage of negotiating the terms of the lease you are being presented and the amount both of the bonus (initial payment) and the percent of royalties you will receive. There are other terms equally important and retaining an attorney to advise you at this stage is definitely something that can make a significant difference to you over the life of a lease.
Information provided is intended to be general in nature and does not constitute legal advice or establish an attorney-client relationship.
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