Understanding Non-participating Mineral/ Royalty Interest

Hello,

I inherited mineral rights from my mother who inherited from her mother who, in turn, inherited from her father (my great-grandfather).  The original property was 415 acres in Wetzel County, WV.  My great-grandfather and his sister divided the land by a road, resulting in 182 and 233 acre parcels but the sub-surface was divided evenly (50-50).  In the separation deed, the following exists:

"THERE ARE EXCEPTED AND RESERVED, HOWEVER---
Unto <owner of 233.16 acres> all of her undivided one-half (1/2) interest in and to all (that is, the whole) of the oil, gas, coal and other minerals of any and every nature whatsoever, situate upon, within and underlying all of the 182.11 acres; provided, however, that <owner of 233.16 acres>, party of the first part do hereby transfer unto <owner of 182.11 acres>, party of the second part the leasing and mining rights and privileges, forever, in relation thereto."

And an equivalent statement conveying the same from my great-grandfather to his sister (remember, all this is in West Virginia).  I have a few questions:
   1) What rights, exactly, were conveyed away?
   3) Do I have any say in how the 233 acres is leased?
   4) Do I have any bonus or rental right?
   2) Am I a mineral owner or royalty (non-participating) owner under the 233 acres?
   5) What rights do I have if the 233 gets pooled?

I am 50% owner of what my great-grandfather owned (25% share under the whole).

Trying to find an attorney that does not want a retainer and a $1K check to answer these questions, but that has not been easy.

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Permalink Reply by Patrick VanO on June 30, 2010 at 7:30am
I'm not an attorney, but deal with this kind of thing in my job from time to time. Still, take this with a grain of salt. It sounds to me like the person that made the initial reservation reserved a non-participating royalty interest. However, you ask about the 233 acres, but the conveyance language seems to have more to do with the rights to the 182 acres...

Still, as to the interest reserved (Again, I think only in the 182 acres), here's my take, in the numerical order they appear above:

1) From what I can tell, you only have the right to receive income when a well is drilled. The question of bonuses strikes me as a little ambiguous though.
3) No, based on the bolded portion of the deed, the leasing rights seem to have been severed from your interest.
4) I don't think so, as I would imagine receiving a bonus would be considered an executive right privilege, but it seems ambiguous to me.
2) Non-participating.
5) This question is above my pay-grade. You at least have the right to receive royalty income.

Hope this helps!
Permalink Reply by bungalow_steve on July 12, 2010 at 8:23am
there are five seperate parts to mineral rights which and sold and divided as desired

1) right to sign a lease
2) right to develop the land
3) right to recieve bonuses
4) right to recieve delay rentals
and
5) right to recieve royalties

for the 233 acres you have at least #1, I don't think you have bonus and rental rights

anyway with the large acreage you need a lawyer.....
Permalink Reply by Dan Bezilla on July 12, 2010 at 9:33am
That's the problem. I know I have royalty rights (#5) but 1 - 4 were really what is in question. All the lawyers are telling me - send a $1200 retainer, and we will review what you have and tell you whether or not you have any rights.

Currently, $1200 is a little to much to bite off, not knowing if anything will come of it.

Know any good (reasonable) lawyers in WV? Thanks!
Permalink Reply by Martha Ann Murray on July 12, 2010 at 9:05pm
Dan, my family is in the same boat. We don't know any reasonable lawyers and don't know what to do at this point.
Permalink Reply by Rick Heinzmann on July 2, 2012 at 1:19pm

The exact wording in the deeds is very important and can significantly change/affect what is conveyed & who gets what. From what is included in this posting, it appears the mineral rights were split 50/50 with the right to negotiate & sign any lease (executive rights) was conveyed to the party with the owner of the 182 acres.

 

Some guidelines that may be helpful; anyone wanting to develope your mineral rights needs to approach you & negotiate, in good faith, to try and do so. You cannot lease to them what you do not own and they cannot drill & develope without making a 'Good Faith' effort to negotiate with you. Before approaching you an oil & gas company 'should' have researched your ownership of the mineral rights they want to lease & develope. They will come to you representing that you own the mineral rights they would like to lease you are not representing to them what you own or think you own. By deleting the warranty verbiage in the lease, you can protect yourself from any mistake(s) they might make researching the title to the mineral rights.

 

Rick

 

Permalink Reply by pipe fitter on July 2, 2012 at 4:52pm

Has anybody payed the property tax if not you might not even own them. In west virginia you pay taxes on oil gas coal

Permalink Reply by Rick Heinzmann on July 3, 2012 at 2:33am

The assessment, billing & payment of taxes on severed mineral interests (a severed mineral interest is one where the owner(s) of mineral rights to a parcel of land are not owner(s) of surface rights) is not the same in all states. Generally you are not obligated to pay taxes that you are not billed which means the Assessor for the County must identify your ownership and send you a bill but this varies by state and very few states do this. All states do, however, tax your royalty income from the production of hydrocarbons.

 

Rick

Permalink Reply by Dan Bezilla on July 3, 2012 at 3:52am
Yes, I pay taxes annually for the property and have since I inherited it 7-8 years ago.

It boils down to my cousin and I who have inherited the 50% that was owned by my grandfather (meaning I own royalties for 25% of the entire 415 acres). I understand I would get bonus payments and can negotiate royalties on 25% of the 182 acres. What is not clear is how or if I can negotiate royalties for my 25% under the 233 acres?

What the gas company is telling me is that I can get bonus payment on 50% of the 182 (the portion my grandfather agreed that he could negotiate), and that I will get royalties from the 233 based on whatever is negotiated by the current owner of the royalty defined as my grandfather's sister's portion.

It does not seem to make sense to me or I simply don't fully understand the legal terminology used.
Permalink Reply by Rick Heinzmann on July 3, 2012 at 5:58am

Terminology is critical. Are you paying taxes on your mineral interest and/or your mineral interest and the surface?

Depending upon how you inherited your grandfather's 50% mineral interest will depend upon what you have & what rights you have relating thereto ie did Grandpa die with/without a Will? If he died without a Will the distribution of his estate & interest will be according to the Laws of Descent & Distribution of the state where this mineral interest is located NOT upon the laws of the state(s) where Grandpa, you & your cousin live(ed).

From what you indicated previous, it sounds like the owner of the smaller interest also received the executive rights (ability to negotiate & sign mineral leases) for all the mineral interest. If you do not have a copy of the deed(s) in question you should get and keep copies. They are available at the County Clerk & Recorder's Office for a nominal fee. The difference to you & your family can be substantial. The gas & oil company has already found & examined this doc. If you are really tactful, you might coerce them into showing you this document to prove their point & disprove yours. You can then nicely say yo would like to keep it to check it out. If they won't let you, you will at the very least have the reference numbers you will need to get a copy from the County Clerk & Recorder. If they don't let you keep it make sure you get this information because it can very difficult to find the right document without this!

 

Again, terminology is critical and it is best to understand it, before hand, than to have it explained to you later by an attorney or in court.

 

Rick

 

 

Permalink Reply by Dan Bezilla on July 3, 2012 at 6:41am
Yes, I have the deed, the quote I supplied was from the deed done during the split. There are wills for each generation, all of which were filed in the Wetzel County court house (same county where the property is). My cousin owns the surface (purchased it from the heirs 20 years ago) but the subsurface is what has passed through inheritance (of which I am 25% owner). There is a clear ownership path and documented tax record so there are no worries there.

The issue revolves around executive rights (which I assume is both right to bonus money AND ability to negotiate percentage royalty). Historically, we (my cousin and I) viewed the subsurface as 25% (our 1/2 of the 50%) of the whole property (25% under 182 and 25% under 233), with executive rights to 25% under the whole (signed seperately for each portion of the 415).

The way the deed is written (quoted in my original post), the gas company believes my grandfather (owner of the 182) parted with 100% executive rights to the 182 and 0% executive rights to the 233 HOWEVER retaining royalty right to 50% of the 415 (the whole). Translated into today's terms, my cousin and I split our common grandfather's 50% while a 3rd party now owns my grandfather's sister's 50%. Meaning we can sign a lease for the 182 portion and the 3rd party gets 50% royalty (no bonus payment) on whatever we negotiate and we get 50% royalty (no bonus payment) on whatever they negotiate on the 233 portion.

My confusion is around how we can execute on 182/415 or 43.8% and have no say in the remaining 6.2%.

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