There are mineral interests on my property, now what?
Real property with mineral interests.
In Wyoming, real property will have often have a mineral interest, which is sometimes referred to as a "mineral estate" or "mineral fee". This is an estate or ownership in fee simple in and to the minerals. A conveyance or reservation of a mineral fee gives title to the minerals. The ownership of a mineral interest includes all ownership, including the right to execute oil, gas and mineral leases and the right to receive bonuses, rentals and royalties. Mineral fee owners have the capacity to create and convey any one or all of the separately identifiable interests in oil and gas under their property, including royalty interests. The ownership of a mineral fee includes five essential interests: the right to develop, the right to lease, the right to receive bonus payments, the right to receive delay rentals and the right to receive royalty payments. Keep in mind a landowner has the power to create separate interests in oil and gas by grant or exception.
The Wyoming Supreme Court, in a case called Estate of Curt Allen Smith v. B & G Royalties, 2020 WY 106, dated August 18, 2020 found that where the language of the deed in question stated "it is the intent of Grantor to convey to Grantee 40 mineral acres together with the right of ingress and egress at all times for the purpose of mining, drilling, exploring and operating the land" is by definition a "mineral interest" rather than a royalty interest. Another key factor in this case, is the deed conveying the mineral interest had no language reserving any mineral interest to the grantor.
A conveyance of a mineral estate need not dispose of all interests; individual interests can be held back, or reserved, in the grantor. However, when an undivided mineral interest is conveyed, it is presumed that all attributes remain with the mineral interest unless a contrary intent is expressed. Absent that limiting language, that interest necessarily includes the right to receive royalties.
The type of deed matters.
If a grant is made with a warranty deed, the grantor is warranting, or promising, that he owns what the deed purports to convey and if he does not, he is liable for breach of warranty. In this case, the owners granted an unrestricted mineral interest without reserving what is an unbundled, or separate, royalty interest. The warranty language in the deed that conveyed the property estops them from claiming that anything less than an unrestricted mineral interest was transferred. Conveyance or reservation of "oil and gas produced and saved" creates a nonparticipating royalty interest.
The Duhig Rule.
In Wyoming, conveyance of real property that has mineral interests almost always includes mention of the Duhig Rule because it illustrates how a reservation of mineral rights functions and can fail in a conveyance. In the case, a third party owned a one half mineral interest in land and the grantor owned the surface and the other half of the mineral interest. The grantor conveyed the surface to the grantee by warranty deed. The grantor reserved, by language in the deed, one half interest in all of the minerals under the surface. When the grantor and grantee both claimed the one half mineral interest was not owned by the third party, the Court concluded that the grantee owned the surface AND a one half mineral interest. The Court found the third party owned the outstanding one half mineral interest. And the Court found the grantor owned nothing because the grantor conveyed all that he owned.
The moral of the story, as they say, is to know what kind of deed you are using and why. See this article on types of deeds in my article on this website, Deeds and Estate Planning.
Another moral of the story would be to know and understand the type of mineral interests your property has, if any, and determine which, if any you wish to convey.
I would be pleased to speak to you about how to own and convey your real property. Please contact me at 307.200.1914 for a free consultation.