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Exceptions and Reservations

Exceptions and reservations with regard to deeds is something that sets forth a limitation on the right granted by a deed.  Reservation regarding oil and gas rights made in an instrument may have to be construed taking into consideration the circumstances of the case and the intention of the parties.

Reservation of oil and mineral rights may imply an easement to explore and remove the oil and minerals found in the subsurface of a land.  An owner of a severed mineral estate or lessee may access the surface and use that portion of a surface estate that is reasonably necessary to develop a severed mineral interest[i].  The rights implied in favor of the mineral estate are to be exercised with due regard for the rights of the surface owner[ii].

A grantor has the right to reserve all or any part of the oil and gas right from his/her transfer.  All the rights reserved or excepted will not pass in a transfer of the land.  All oil and gas rights appurtenant to whole property that can be reserved include; ownership of oil and gas, right to receive royalties pursuant to leases, the right to control existing leases as provided in a deed.  It also includes the right to drill and explore for oil and gas on the entire property subject to the existing leases, and the right to lease for oil and gas drilling any portion of the property not encumbered by leases in existence at the time the deed was executed.

Reservations can be made with regard to all royalties and benefits from existing leases and a grantee shall be given a right to participate in future leases.  Reserving a mineral interest in the property means that the subsurface area of a land is being retained by the land owner.  When a land owner conveys the surface area of a property and retains ownership of the mineral rights in the property, two independent ownership rights come into existence.  An instrument conveying the land reserving the mineral rights is called the surface deed.

When a document specifically states the subject matter of a lease, all other matters excepting it shall be considered retained with the landowner irrespective of where it was located in a property.

The nature of the interest or right in the property depends on the terms provided in the deed.  Usually, if there is a right to receive a certain amount of oil without reference to its source it may be treated as a right in the personal property, whereas, it is an interest in real property if the right is to receive the oil and gas from a specified piece of land.  Certain jurisdictions consider such reservation an interest in real property irrespective of the source of the claim and whether it is in cash or in kind.

A deed which contains provisions reserving oil and gas rights in the land and the right to ingress and egress for mining purposes may not be considered as against the right for quiet possession and for freedom from encumbrance.  But, unreasonable intervention on one’s property must not be done while carrying out mining or excavation.  A grantor who has reserved mineral rights and the right to grant leases in a conveyance deed may grant leases extending beyond the period specified in the deed.

A previously granted easement may be excepted from a conveyance.  In order to except certain property out of a conveyance the words of exception must be as definite as those required to convey title; and if it is not done so correctly, the whole property passes[iii].

With regard to the construction of the term minerals, different courts have taken different views.  Some courts have construed that a reservation made as to mineral rights may include oil and gas or all inorganic substances which can be taken from land.  Some courts have held minerals include oil and gas irrespective of the fact that at the time of conveyance there was no production of oil and gas in a land or the area where land is situated.  So it can be justified in reserving rights to use the land for excavation of oil and gas while transferring a land.  Certain courts construe the term mineral as including all substances that can be taken from a land or earth.  Otherwise if the intention is not to included it, it has to be specifically mentioned in the document.  While construing the term minerals, the intention of the parties will be taken into consideration.

[i] Gerrity Oil & Gas Corp. v. Magness, 946 P.2d 913 (Colo. 1997).

[ii] McFarland v. Taylor, 76 Ark. App. 343 (Ark. Ct. App. 2002).

[iii] Texas Co. v. Newton Naval Stores Co., 223 Miss. 468 (Miss. 1955).

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