A General Overview of Federal Onshore Oil And Gas Lease Title Examination

A General Overview of Federal Onshore Oil And Gas Lease Title Examination

A General Overview of Federal Onshore Oil And Gas Lease Title Examination

6
Minutes

Managing Complex Title Examination So You Don’t Have To 

According to the Bureau of Land Management (BLM), the Federal government manages a massive onshore subsurface mineral estate — about 700 million acres (30% of the United States). This land is held by the BLM, U.S. Forest Service, and other Federal agencies and surface owners for the benefit of the American public.

All Federal oil and gas royalty, rental fees, and bonus bid revenue are split about half between the U.S. Treasury and the states where development occurred. 

The amount of annual revenue that Federal mineral development provides to the U.S. Treasury is second only to that provided by the Internal Revenue Service. 

Dudley Land Company assists Oil and Gas Operators with understanding mineral and leasehold ownership and identifying any title defects. Our partners trust us with the complicated process of title examination because of our expertise, accuracy, and professional product. We also save them time and money by staffing with local expert Land Agents who understand the title peculiarities of their region.

The following information is a general overview of working in a region with federal-owned minerals. Each region will have its own unique challenges and processes.

Accurate Mineral Title is Vital for Successful Operatorship

Understanding the complexity of mineral title in their project area helps our clients accurately forecast their timeline and budget. 

For example, a recently issued federal oil and gas (BLM) lease is likely to be a straightforward and quick process. However, examining title to a “Held by Production” BLM lease issued several decades ago that covers multiple sections and horizons is likely to be a complex and time-consuming process.

The Challenges of Title on Federal Land

The process of confirming the status and recording title and working interest ownership of a BLM oil and gas lease is complicated. Clients outsource the work to our land agents because we specialize in mineral title and use multiple resources to reach client’s goals both for accuracy and timeliness.

  • Finding qualified Land Agents with experience in researching federal mineral title and leasehold is difficult. There are only a select few within our industry with the knowledge necessary to adequately get the job done.
  • Dealing with the state BLM offices can be tricky and time consuming. Knowing and having relationships with the office personnel is vital.
  • The BLM is typically several months backlogged in approving Transfers of Operating Rights and Assignments of Record Title, making it challenging to obtain current, up to date leasehold information
  • BLM lease files are not stored digitally. To obtain a copy of a BLM lease file requires either a physical visit to the BLM state office, or paper copies can be requested from the BLM, but typically take several weeks to receive.
  • A lot of times the BLM office misplaces BLM lease files. Files can end up missing for days at a time.
  • BLM routinely ships closed/purged/segregated lease files to their “Federal Records Center” for offsite storage. This makes it more time consuming to retrieve and examine those files.
  • BLM Adjudicators, or personnel tasked with approving Transfers of Operating Rights, can be difficult to reach when questions arise.
  • Federal Exploratory Unit files are not located in state BLM offices. They are managed and stored within the BLM field offices. This requires more legwork to obtain up to date information on Units.

Resources Dudley Uses For Title Examination

Every project is unique based on the mineral ownership rules of the area. Some of the sources our team uses for thorough title examination follow.

Bureau of Land Management Records

The hard copy lease file maintained by the Bureau of Land Management contains documents relating to the lease sale, a copy of the lease, any filed/BLM-approved assignments, and other documents, such as those relating to communization agreements.

BLM rules and regulations require that Assignments of Record Title and Transfers of Operating rights be filed on prescribed forms and approved by the BLM.

Federal regulations also require that transfers of overriding royalty interest (ORRI), merger/acquisition documents, and similar interests be filed with the BLM.

In some circumstances, a lease may have been created by segregation from another lease. In these instances, it is important to also examine the original lease file from inception until the time that the original lease was segregated into the new lease.

There could be an overriding royalty interest or other burden on production in the original lease file that is applicable to the new lease. We seek to understand the complete chain of title and confirm the term and status of the new lease.

Because BLM lease files are not online, our local Land Agents are essential for reviewing files at the State BLM office within the jurisdiction of the leased lands.

General Land Office (GLO)

There are several online sources available through BLM’s General Land Office (GLO) that provide useful information and should also be reviewed when examining titles to federal oil and gas leases.

Oil and gas mineral ownership, rights, and reservations can be determined by examining plat maps and patents, copies of which are available through GLO records.

Plat Maps

The BLM maintains an Oil and Gas Plat (in addition to other use plats, such as Master Title Plat, Coal, etc.) for each Township and Range.

The Oil & Gas Plats outline the mineral estate currently owned by the federal government, governing jurisdiction, and rights previously reserved by the federal government in the original patent, i.e. rights of way for ditches and canals, coal, and full mineral reservations. 

Oil and Gas Plats are useful tools to determine what rights may exist on the lands, such as communitization agreements, federal exploratory units, rights-of-way, land management areas, and other uses.

Oil and Gas Plats may also contain field notes and other notations in the margin of the plat, such as orders affecting part of or the entire township that can be easily missed when examining title.

Patents

Duplicate patent information may also be recorded in the county records. However, the BLM maintains the original copies of patents, while copies in the county were often recorded on patent “forms.”

 

Due to human error, at times the wrong legal description, township/range, or federal government reservations were captioned, and the county copy conflicts with the BLM copy, which is problematic because the copies may conflict as to what rights were actually reserved by the United States. 

Because of this, the Dudley Land Company title examiner relies on patent copies maintained by the BLM/GLO.

Mineral & Land Records System (MLRS)

MLRS is a highly useful resource that provides reports on BLM authorizations and the status of Federal Oil and Gas Leases.

Serial register pages are commonly used by title examiners (SRPs). SRPs are essentially a snapshot of the BLM authorizations, including the relevant federal oil and gas lease, and contain relevant information, such as their status (active, expired, etc.).

SRPs note affected lands, acreage amounts, relevant lease dates, if production was achieved, and any communitizations involving the federal lease. 

SRPs indicate the current record title owner and any operating rights owner recognized by the BLM and may contain entries relating to recent assignments that have not yet been included in the lease file.

County Records

County records are another necessary source to examine the complete chain of title and confirm the term and status of a federal oil and gas lease.

In most states, filing documents with the BLM does not provide “constructive notice.” Constructive notice is provided to other parties by recording the instrument in the appropriate county office.

Because certain documents must be filed with the BLM (as previously noted), this often results in two separate chains of title. Frequently, these chains of titles do not entirely match each other.

The two chains are useful to explain gaps that appear in the other chain of title, such as missing assignments or mergers, and to understand the intent of parties when their intent may be unclear by reviewing just one of the chains of title.

As noted previously, assignments filed with the BLM must be on prescribed forms. However, County documents have the advantage that they do not need to be in a certain form. This flexibility allows parties to include additional provisions in the instrument and to incorporate other documents by reference, such as an unrecorded purchase and sale agreement between the parties. 

Parties can record assignments in the county that are not recognized by the BLM, such as wellbore assignments, term assignments, or assignments containing reversionary rights. 

Although the BLM does not recognize these types of assignments, these documents are binding between the parties and on third parties who have constructive notice.

State Regulatory or Commission Sources

State regulatory or commission websites vary depending on each state. Records that can be found at these sources may include administrative orders (such as pooling or spacing orders), well files, and production records.

These records are an important source to understand the history and status of the lease as it relates to production.

For example, a BLM lease file may indicate that a federal oil and gas lease achieved production during its primary term and is held past its primary term by production (HBP). In such instances, it is important to review the production records to ensure that there is still sufficient production on the leased lands (or lands communitized or unitized within the leased lands) to continue holding the lease.

The Outcome

Once all necessary research is completed in the diligent manner characteristic to Dudley, we prepare and provide a detailed Mineral Ownership Report on the basis of oil and gas leasing, leasehold acquisition and divestiture, drilling unit calculations, drilling and spacing unit notification, and much more.

This detailed process and outcome is extensive and complicated, which is why our partners trust the professional, experienced Land Agents of Dudley Land Company.

Whether the records are straightforward or complex, by reviewing the resources outlined herein, our title examiners can be confident that they are obtaining a full picture of the title and status of a federal oil and gas lease and can identify any potential pitfalls that exist so clients have a more successful, profitable, and valid lease. 

Sources

  • 43 CFR § 3106.4-1. See e.g., River Gas Corp. v. Pullman, 960 F. Supp. 264, 266 (D. Utah 1997) (“It is well established that a party must receive the approval of the Secretary of the Interior in order for an assignment of a government lease to be valid.”).
  • 43 CFR § 3106.4-2.
  • https://reports.blm.gov/reports/MLRS
  • Home - BLM GLO Records

solutions you need

The Long-Term
Partner You Deserve