Liens

Oil and gas in place, so long as they remain unsevered from the soil, are a part of the realty and pass by a conveyance of all the interest and estate of the fee-simple title holder.  It necessarily follows that the execution of a real estate mortgage on said lands creates a lien against the royalty interests, or the minerals in place, at the time of the execution of said mortgage, and that title thereto is absolute in the mortgagee from and after the date the mortgage is foreclosed by proper proceedings[i].

The mineral estate is dominant in that the law implies, where it is not granted, a legitimate area within which mineral ownership of necessity carries with it inherent surface rights to find and develop the minerals, which rights must and do involve the surface estate. Without such rights the mineral estate would be meaningless and worthless[ii].
Where a statute authorizes a lien for labor performed or material furnished with regard to the drilling of an oil well or gas well, the lien is subordinate to prior liens which may exist against the specific interest to which the lien for material or labor attaches.

In certain jurisdictions, every person who shall furnish any material or labor for, or perform any labor upon, any building or land for improvement, alteration, or repair thereof, by virtue of any contract with the owner, contractor, or subcontractor shall have a lien upon such building or improvement to secure payment for the material or labor furnished or labor performed[iii].

Services performed in the operation of an oil and gas well such as hauling dirt, lumber, construction equipment and materials, building and repairing roads in connection with an oil exploration and drilling project; work done on gas pipelines, galvanization of steel pieces for incorporation into offshore oil well drilling platforms; and any other services performed in connection with a pipeline construction shall be deemed as labor within a mechanic’s lien statute.

Many lien statutes contemplate application of the lien not only to the leasehold itself but also to the pipeline, the rental materials, and equipment used in relation to the work on oil and gas wells, and the well.  The oil and gas lien does not attach to detached personalty which is not supplied by the lien claimant.  However, it is attached to items that become so integrated into the well that they shall be considered fixtures.

Any person seeking to attach a mechanic’s lien or material men’s lien has to comply with the statutory requisites in a substantial manner.  The instruments filed should be clear and the general language should be used in an oil and gas lien.  The contractor should also cite the necessary oil and gas lien statute.

[i] Williams’ Adm’r v. Union Bank & Trust Co., 283 Ky. 644 (Ky. 1940)

[ii] XTO Energy, Inc. v. Schmidt, 2009 U.S. Dist. LEXIS 105530 (D.N.D. Oct. 20, 2009)

[iii] ABM Janitorial Servs. v. Pami Ryan Town Ctr. LLC, 2009 U.S. Dist. LEXIS 83415, 4-5 (N.D. Iowa Sept. 11, 2009)


Inside Liens