Lease Checks: A Land Map, a Tank of Gas and Thou

And so it begins. An oil company has decided that an area is worthy of a look. They place a call to their favorite Landman and ask him to come on down to the office for a little chat. Once there the maps come out. Big maps, pretty maps. Color-coded maps divided into neat patterns and shapes. Each color and shape has a meaning and a reason for being there. I love maps, I think that every Landman has a special place in his heart for a well-made map. There is and should be, in my opinion, great reverence given to the cartographer's art. Without a good map, there is no way to accurately represent a property and get a good feeling as its place in the overall scheme of things, but I digress.

On the map there is the outline of a possible buy area. Before an area can be leased, however, its availability must be assessed. This is where every play starts, finding out if an area is under lease, and if so how much of a lead the competition has. Stealth is called for here because someone is always looking to jump in front of a lease play and flip the leases back to the interested company for a healthy profit, so be careful. But exactly where do you start?

Once on the ground in the county seat, there is the small problem of getting from the map to the people. How the heck does one go about finding who owns the mineral rights and if they are leased? The place to start is the appraisal district. These good folks can tell you who owns and is paying taxes on various surface tracts. In most cases, the surface owners (surface taxpayers) will own at least some of the minerals. The volume and page of the conveyance into the present owner will many times also be noted. Here is a starting point. Armed with the name of the present surface owner and the conveyance into them, the courthouse becomes a much friendlier place.

There are two ways of looking up records in the courthouse: direct (by Grantor) and reverse (by Grantee). The reverse indexes are going to be the most relevant if there is no volume and page reference. Go back through them looking for the instrument conveying the subject tract to the current owner. A well-made instrument will note any mineral conveyances out of the tract and the recording data for the conveyance into the Grantor. A feel can usually be garnered from the last instrument as to whether or not the present surface owner is also a lessor. In any case, get a copy of this source deed for your report to the contracting company. Be sure that there is a metes and bounds, township and range or other accurate land description that can be plotted on a map to show exactly which lands are open, under lease or held by production.

If there is a volume and page from the appraisal district, then the last conveyance can be looked up directly. After finding if the current surface owner is a Lessor and getting a copy of the deed, much of the work is done. Go back through the reverse indexes and find the last oil, gas and mineral lease covering the subject tract. Primary terms rarely last more than 3 years now. Going back 10 years should be more than adequate to ferret out if the subject lands are currently under lease. Be sure to see if there is a release on file clearing the last lease in the record. If there is no lease in the last 10 years, go back a little further and find the last lease given on the subject tract. Get a copy of this for your report. Including a copy of the last lease gives the contracting company information as to the term and royalty last taken by the Lessor and the nature of any amendments.

To be sure all Lessors are covered "deed hop", go from one conveyance of the property to the next in the reverse indexes, back to the turn of the century and look at these conveyances to try and find mineral reservations or reference to mineral conveyances. The dust bowl era and the great depression are two times that should be closely looked at. Many landowners sold their minerals in whole or in part to literally save the farm.

Run the names of any Lessors forward through the direct indexes looking for any conveyances that include minerals. These Grantees become new Lessors and they in turn must be run through the indexes. Look for other instruments that give clues as to the status of the tract. Division Orders, Stipulations of Interest, Unitization Agreements and other instruments pointing out activity on the lands in question are invaluable assets and should be noted. At times, Lessors spread out like bacteria in a petry dish.  During a lease check, following the main Lessors is all that is required. Remember, we are checking to see if the land is open, we are not doing buy title. Following a 5% mineral interest through an intestate party three generations ago is ridiculous. Following a 25% mineral conveyance is expected. If a tract does become unwieldy, a trip to the abstract plant is warranted.

An abstract plant is a wonderful place that has records of all transactions on a given tract of land listed in a concise format. When dealing with a tricky piece of land, it can save time and money to run records here. It is expensive, but if an hour or two at the plant can save an entire day in the courthouse, then it is time and money well spent. The accuracy and availability of abstract plants varies from place to place, but a well maintained and logically laid out plant can be a joy to work in.

Once a preliminary determination has been made that the subject tract is not currently under lease; it is a good idea to double-check everything. Land maps, such as Tobin or Heydrick make, will show leased property and production, but don't count on them. The tax office can be contacted and research done to determine if the mineral owners are being taxed on producing hydrocarbons. If so, it stands to reason that there is currently production on the subject tract. Drive around the area looking for wellheads or pump-jacks that appear to be in the proposed lease play. Plot them on the map and see where they fall.

Once the Lessors have been identified, the last thing left to do is phone them to be sure that there is not an unrecorded current lease and that they would be willing to lease their land for exploration. Most people are willing to talk about an oil lease. There is something about easy money that softens even the most savage landowner.

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Copyright © 1997, 1998, 1999, and 2000 by Lewis G. Mosburg, Jr. and Ogden, the Invisible English Sheep Dog

"Lewis Mosburg's OIL & GAS NEWSLETTER"™ and "Lewis Mosburg's OIL & GAS PRIMERS"™  are trademarks of Lewis G. Mosburg, Jr.