May 1 is Law Day, a day to focus the nation’s attention on the rule of law and the rights and freedoms it secures. That focus may seem abstract, but the rule of law is a foundational principle of our democracy — and arguably more threatened than ever.

The rule of law can be defined in different ways, but certain elements are fundamental. It is the principle that we are governed by published laws, not by the unchecked decisions of elected or appointed officials. John Adams said we are “a government of laws, and not of men.” In our system, the Constitution and laws apply to everyone, regardless of status or position, and are enforced by independent courts.

The more interesting part of the case is the applicability of the presumed grant doctrine, also addressed in Van Dyke. The appeal of the Fasken cases was a permissive interlocutory appeal; the Eastland Court refused to consider the the Boren and Mabee parties’ contention that the presumed grant doctrine applied, concluding that it was not one of the issues referred by the trial court for the interlocutory appeal.

The Supreme Court has elected to return the case to the Eastland Court for further proceedings. First, it told the Eastland Court that it should consider the Supreme Court’s more recent opinion in Clifton v. Johnson, which addressed a another fraction-of-royalty issue. Second, it said the Eastland Court should have considered the Boren and Mabee parties’ claim that the presumed grant doctrine applied.

There is SAVED, EXCEPTED AND RESERVED, in favor of the undersigned, B. A. Puig, Jr., out of the above described property, an undivided one-sixteenth (1/16) of all the oil, gas and other minerals, except coal, in, to and under or that may be produced from the above described acreage, to be paid or delivered to Grantor, B. A. Puig, Jr., as his own property free of cost forever. Said interest hereby reserved is Non-Participating Royalty . . . .

In Chesapeake v. Hyder,  483 S.W.3d 870 (2016), the Texas Supreme Court ruled on a similar issue. The Hyders’ lease contained an unusual provision granting them an overriding royalty on production from horizontal wells the surface location of which was on the Hyders’ land but whose lateral produced from adjacent land. The reservation of overriding royalty provided that they would receive “a perpetual, cost-free (except only its portion of production taxes) overriding royalty of five percent (5%) of gross production” from such wells. Chief Justice Hecht, joined by four other justices, held that the overriding royalty must be paid free of post-production costs. Justice Hecht said that “We disagree with the Hyders that ‘cost-free’ … cannot refer to production costs. … But Chesapeake must show that while the general term ‘cost-free’ does not distinguish between production and post-production costs and thus literally refers to all costs, it nevertheless cannot refer to post-production costs.”  Four justices dissented; they concluded that, because the overriding royalty was based on “gross production,” it was valued at the well, and so the Court’s prior decision in Heritage v. NationsBank meant that, not withstanding the cost-free language, post-production costs can be deducted.

John Doe hereby leases to Gusher Oil Company the oil and gas in and under Section 5, Block 4, T&N RR Co. Survey, Jones County, Texas, for the purpose of exploring for and producing oil and gas. This grant shall be for a term of three years and as long thereafter as oil or gas is produced from the property. John Doe reserves a royalty of 1/4th of all oil and gas produced and saved.

Dated ___________________, 2014

The reservation construed in Van Dyke was a mineral reservation:

It is understood and agreed that one-half of one-eighth of all minerals and mineral rights in said land are reserved in grantors … and are not conveyed herein.

Oliver’s leases were on a printed form with an addendum that provided the addendum’s provisions would prevail over any conflicting language in the leases. The royalty clause in the lease form provided that the royalty on oil would be

1/5th of all oil produced and saved by lessee from said  land, or from time to time, at the option of lessee, to pay lessor the average posted market price of such 1/5th part of such oil at the wells as of the day it is run to the pipeline or storage tanks, lessor’s interest, in either case, to bear 1/5th of the cost of treating oil to render it marketable pipeline oil. …

The deed being construed in Hoffman v. Thomson contains the following relevant language:

[T]here is hereby expressly reserved … an undivided three thirty-second’s (3/32’s) interest (same being three-fourths (3/4’s) of the usual one-eighth (1/8th) royalty) in and to all of the oil, gas and other minerals ….

The lease itself can contain a metes and bounds description from a survey, or (more commonly) it can refer to an earlier recorded document that contains a metes and bounds description of the property. Sometimes descriptions have to be cobbled together from two or more other descriptions. For example: “All of that certain 100 acres of land described in deed from John Doe to Robert Smith recorded at Volume 99, page 99 of the deed records of Karnes County, Texas, save and except 10 acres of land described in deed from Robert Smith to Mary Jones recorded at Volume 100, page 100 of the deed records of Karnes County, Texas.”

There are other ways to adequately describe a tract. The test is whether the surveyor can use the description to locate the property.

“This lease shall remain in effect for a term of three (3) years (the primary term) and as long thereafter as oil or gas is produced from the leased premises or operations, as provided herein, are being conducted on the leased premises.”

The primary term can be one month or ten years or more. Today, most leases provide for a three-year primary term. If no production or operations take place during the primary term, the lease terminates automatically and the mineral estate reverts to the lessor.