Oil and Gas Lawyer Blog
An essential element of any oil and gas lease is a description of the land to be covered by the lease. The test for a legal description is that it must contain, or make reference to recorded documents that contain, a description of the land of sufficient specificity that a surveyor could locate the property on the ground with reasonable certainty.
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.
The requirement that the lease contain an adequate legal description comes from the Statute of Frauds. That statute in Texas is in Texas Business and Commerce Code, Section 26.01. It provides that any agreement regarding land, including an oil and gas lease, must be in writing and must contain a description of the property. The original Statute of Frauds was passed by the British Parliament in 1677 as “An Act for Prevention of Frauds and Perjuries.” Every state has a version of this law.
The minerals covered by an oil and gas lease can be limited by depth. An oil and gas lease can cover only certain defined depths – for example, from the surface of the ground to 5,000 feet subsurface — or certain known formations – for example, the Eagle Ford formation.
Although lease forms generally cover all “oil, gas and other minerals,” it is better practice for the lease to cover only “oil, gas and associated hydrocarbons and other substances produced with oil and gas.” The land may have other mineral deposits like coal or uranium, and there is no reason for the lease to cover such other minerals.
Most lease forms contain a clause like the following:
This lease also covers and includes all land owned or claimed by Lessor adjacent or contiguous to the land particularly described above, whether the same be in said survey or surveys or in adjacent surveys, although not included within the boundaries of the land particularly described above.
Such a clause is referred to as a “Mother Hubbard” clause. (I’m not sure how it got that name.) Care should be taken if this clause is included. If the Lessor owns other land adjacent to the leased premises that is not intended to be leased, it should either be stricken or limited. The purpose of the clause is to include small strips of land and mineral interests under adjacent roads that are owned by the Lessor but are not included in the description of the leased premises. A more narrow Mother Hubbard clause might read:
This lease also covers and includes any narrow strips of land and adjacent roads owned or claimed by Lessor adjacent or contiguous to the land particularly described above, whether the same be in said survey or surveys or in adjacent surveys, although not included within the boundaries of the land particularly described above.
Even if the Lessor does not own the entire mineral estate in the lands to be lease, an oil and gas lease almost never describes the interest owned by the Lessor. The title work done prior to acquiring an oil and gas lease may not be complete, and the Lessee wants to be sure that the lease covers the entire interest owned by the Lessor even if the title work done to quantify the Lessor’s interest is wrong. So the lease reads as if the Lessor owned the entire mineral estate. If the Lessor owns less than all of the minerals, the “proportionate reduction clause” in the lease takes care of the problem. That provision typically states something like the following:
If this lease covers less than all of the oil and gas in the leased premises, then the royalties and other monies provided herein to be paid to Lessor shall be reduced in the proportion that the interest in the oil and gas owned by Lessor bears to the entire fee simple mineral estate in the leased premises.
Landowners should be confident before they sign a lease that they agree with the Lessee’s conclusions as to what interest the landowner has in the minerals to be leased. If the landowner is unsure, she should get the title information from the company upon which it based its conclusions, and satisfy herself that the computation of her undivided interest is correct.