I want to get back to posting about title issues. The idea for this post occurred to me several weeks ago and I shelved it. Who could possibly be interested in such a topic? Well, it must be the curse of the dark side or something, because since then we've encountered more mineral rights and oil and gas lease questions than in the previous two or three years combined. So maybe if I post this, we can stop all this nonsense and get back to normal files with foreclosures, tax liens, dead people and such. That's the plan anyway.
Mineral Rights is an estate in land that can be separately owned from the fee title in the same manner as an easement (utility grant), right to use (lease), or right to live on the property (life estate) to name a few.
In Southern Indiana we often encounter recorded Oil and Gas Leases. O&G Leases usually give the O&G producer the right to enter upon the land and drill a well to produce whatever it is they're looking for. In return, the owner of the property receives a "lucrative" royalty payment of say $75 to $100 a year. With two of these and you can fill up your Expedition! Although O&G leases almost always are for a specific term, the leases universally contain language that extends their term for so long as the well is producing. When we examine title, we don't know whether or not there is a well and if it's producing so we show the lease as a title exception. It's rare that anyone pays attention to it. The vast majority of O&G Leases we encounter are not producing and no royalty payments are being received. Indiana law provides that the owner can make an Affidavit of Non-Production stating those facts and after recording it, the Recorder must release the O&G Lease in the public records. At that point we can remove the Lease as an exception to title.
Less frequently (except recently) we encounter situations where ownership of mineral rights is severed from the fee title and owned by someone else. In these instances the mineral rights are actually excepted from the legal description of the property insured in the same manner as we except a portion of a lot (Lot 1, except the West 10 feet, and Lot 1, except the mineral rights in and to the land, for example). Indiana law also provides for a similar affidavit as with O&G Leases that the mineral rights lapse, but the specifics in the law are so vague and undeterminable that title insurers will not rely upon them and instead require a Quit-Claim deed from the owner of the mineral rights be recorded before they will included them in the insured legal description.
O&G Leases are fairly easy to deal with, severed mineral rights less so. The ALTA 2006 Loan Policy and the 1998 and 2008 Homeowner's policies contain coverage insuring against loss in the unlikely event that the owner of the mineral rights exercises their right to extract the minerals and in doing so damages the surface of the land.
Let's hope that this is enough information to ensure that we won't be dealing with these questions in the office again anytime soon. Now, about this foreclosure ....
