Mineral Rights and Royalties

MINERAL RIGHTS AND ROYALTIES.Private title to all land in Texas emanates from a grant by the sovereign of the soil (successively, Spain, Mexico, the Republic of Texas, and the state of Texas). Under the laws of Spain and Mexico, mines and their metals or minerals did not pass by the ordinary grant of the land without express words of designation. In one of the earliest acts of the Congress of the Republic of Texas, this rule was adopted, and it was continued in force after Texas had become a state. A grantee of land before 1866 therefore had no interest in the minerals in the land unless that interest was expressly granted. By a provision of the state Constitution of 1866, which was carried over in substantially the same language into the constitutions of 1869 and 1876, the state released to the owner of the soil all mines and mineral substances therein. This constitutional provision had retrospective effect; the landowner was given complete ownership of the minerals in all lands that passed from the sovereign before the effective date of the Constitution of 1876. A similar relinquishment to the landowner of the sovereign’s retained interest in minerals was made in the revision of the Texas Civil Statutes in 1895, though it has not been litigated in the courts. Since 1876, it has been assumed that a grantee of land from the sovereign has received all minerals unless they are expressly reserved. Since 1895 substantial acreage of the public domain has been conveyed by the sovereign with a retention of rights to the minerals. Under the Relinquishment Act of 1919, as subsequently amended, the surface owner is made the agent of the state for the leasing of such lands, and both the surface owner and the state receive a fractional interest in the proceeds of the leasing and production of minerals. A considerable portion of the land of the state has been allocated to various educational and eleemosynary institutions, some of which has not been sold but merely leased for mineral development.

To the extent that a landowner also owns the minerals in his tract, he may legally sever such minerals from the surface estates. The owner of the minerals may produce them himself. The usual practice, however, is for a lease to be executed by the mineral owner to an operator who undertakes to develop the minerals. Although several lease forms are in use, their provisions are generally uniform; the significance of the variant provisions is not to be minimized, however. Typically, under a lease the operator assumes all expenses of operations to develop the mineral resources in return for a conveyance of 7/8 interest in them; the landowner or lessor retains 1/8 interest free and clear of all costs. This interest of the mineral owner or lessor is what is correctly known as royalty, although the term is sometimes more loosely used to describe an undivided interest in minerals arising out of an instrument other than a mineral lease.

Legally, oil and gas are minerals. About 2/3 of the 254 counties in Texas produce oil. About 54,000,000 acres of land in the state were under oil and gas lease in 1947. Since the mid-1950s oil and gas royalties have increased. The basic royalty on oil and gas was increased from 1/8 to 1/6 by the public school and other state land boards in 1955 and by the Board for Lease of University Lands in 1960 on gas and in 1961 on oil. The practice of overriding royalties being utilized as a portion of leasing and development promotion fees in the oil and gas industry, in amounts ranging from 1/32 to 1/4, has increasingly become a common practice. By 1995 royalties for state-run lands of the Permanent School Fund had a minimum standard of 6.25 percent of the gross value. Royalties in Texas, however, are usually negotiable and depend on a number of factors, including type of mineral and deposit.

curated from https://www.tshaonline.org/handbook/entries/mineral-rights-and-royalties

Ann Van Wynen Thomas and A. J. Thomas, Jr., “Sal del Ray: Who Owns the Mineral Rights in Texas,” Journal of the American Studies Association of Texas 13 (1982).

Who Owns the Mineral Rights on Your Property?

It is not enough for a landowner to assume that he or she owns both the surface and mineral rights to the property. The only way to determine your rights is to conduct a search of the public land records in the county where the property is located. All the deeds conveying the property must be reviewed. This is known as reviewing the property’s Chain of Title.

Unfortunately, the chain of title in mineral rich states like Texas can be difficult to determine. The reason for this is that mineral rights were likely conveyed several times. Such conveyances do not necessarily coincide with the conveyance of surface rights. Further complicating matters is the fact that deeds often contain errors and omissions. For instance, a deed could state that mineral rights are being conveyed to the new owner, but the party conveying the rights may not even own the rights due to a defect in a prior deed. Or a deed could be silent on the issue altogether, requiring the new owner to determine what rights he or she acquired.

Searching through the county records can be a difficult process for those lacking a legal education or experience in these matters. Unfortunately, land records in Texas are not as user-friendly as some other states, especially in some rural and remote counties. In Texas, it may be necessary to review “grantor/grantee” indexes in order to locate the correct deed. Once that deed is found, it is necessary to return to the index to locate the next deed (as well as all prior deeds). Further complicating the process is the need to review each deed in detail to determine what rights were conveyed. For these reasons, many people seek the assistance of an experienced Texas real estate lawyer to do the research for them.