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Permalink Reply by Dion Warr, CPL on July 9, 2013 at 6:05

I copy the following from Steve Walkinshaw's website (Vision Exploration, LLC).  Amongst other things (including well and prospect promotion, E&P consulting, etc.), he is a consulting geologist with decades of experience who also evaluates prospects and data for both individual owners and industry clients.  This passage speaks directly to this issue, and I consider it to be very well written: (from www.visionexploration.com/leasing_issues.htm)

"We Need your Help

Consider this hypothetical scenario: Your great-great-grandfather acquired your family's land and mineral holdings over 100 years ago. He had four children. They inherited the minerals. All four married, had children, and two later divorced, remarried and had more children. They divided their share of the mineral interests among all of those children. Then those children grew up, and had children of their own; some went on to get divorced, then later remarried, and had more children.   And so on.   Along the way, records got lost, deeds were misplaced, disputes and feuds arose. Some family members sold their land and minerals to outside parties. In time, many family members died, some having failed to prepare wills; their children squabbled over who inherited what, but no one was really sure of what they were legally entitled to.  And, of course, they had more children, got divorced, remarried, and so on...

By the time you inherit your share of your great-great grandfather's original mineral holdings, you're not exactly sure what you've actually inherited. All you know is that your mother thinks that you're entitled to a 2% ownership in the "old Home Place" - but your second cousin is convinced that he owns it, too. You've never seen the actual deed or the will that gave you title to the minerals, but you've been told that your Uncle John has been keeping up with it, and he says that it's somewhere down at the courthouse...

Now put yourself in our place.   At great financial risk, we've decided to attempt to lease an area that includes your great-great-grandfather's original mineral holdings (the old Home Place). We go to the courthouse to try to determine exactly who owns the rights to the minerals in the area. What we find is 40 to 50 individuals that claim to own some interest (exactly what, they're not sure) and evidence of "clouded title" - great uncertainty regarding actual mineral ownership. Being optimists, we spend weeks in the courthouse and pay brokers and lawyers thousands of dollars to study the courthouse records in an attempt to determine the chain of mineral title for the property. Finally, when we think that we have identified a key family member, we attempt to contact him or her, often only to find that that person is uncooperative or reveals additional information that indicates that the title to the land is severed (subdivided) even worse than our preliminary investigations had suggested.

Faced with high legal bills and a seemingly insurmountable obstacle to our lease efforts, we reluctantly withdraw from the area, and seek another area where records were better kept and the chain of title is clearly evident.

Meanwhile, you have another baby, as does your cousin, and Uncle John passes away unexpectedly, leaving neither a will or any records as to who owns what...and so on...

The scenario that we've just described is a very real one. In much of the United States, the advanced subdivision of private mineral interests through inheritance, sale, and foreclosure has reached a critical point. In other words, private mineral owners in this country need to realize that clouded title and/or the existence of dozens of partial interest owners effectively drives away the very people who are trying to create value for everyone by attempting to lease and develop their minerals. It is getting to the point where large areas are comprised of mineral interests that are so severely "cut-up" that it costs more to pay the brokers and lawyers to figure out who owns what, than it actually costs to lease those myriad owners once the chain of title is successfully determined. If the trend continues, those factors will severely impact the value of such "cut-up" mineral holdings - because no oil & gas company is going to attempt to lease those minerals in the future.

What can you do to help?

It is always beneficial to have good records of the chain of title to your property, including copies of wills, quitclaim deeds, and other relevant legal instruments. And, if you do own a very small interest and are contacted via telephone by one of our land brokers, please remember that he is not a telemarketer, or conducting a survey - he is simply trying to lease your minerals and create value for you and your family. Your assistance and cooperation is not only helpful, it is often critical, and we appreciate any help that you can give us. Thanks in advance for your time. You will be the greatest beneficiary in the long run."

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Permalink Reply by Skip Peel - Mineral Consultant on July 9, 2013 at 7:40

Thanks, Dion.  Well written and accurate.  I would like to emphasis an excerpt.

It is getting to the point where large areas are comprised of mineral interests that are so severely "cut-up" that it costs more to pay the brokers and lawyers to figure out who owns what, than it actually costs to lease those myriad owners once the chain of title is successfully determined. If the trend continues, those factors will severely impact the value of such "cut-up" mineral holdings - because no oil & gas company is going to attempt to lease those minerals in the future.

This situation exists now in E TX.  I strongly suggest that anyone with ownership in undivided E TX minerals review their chain of title, record missing instruments and consider consolidating ownership.  Otherwise the value of these assets may be lost forever.

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