Journal Title
Texas Tech Law Review
Volume
55
Issue
1
First Page
133
Document Type
Article
Publication Information
2022
Abstract
Most people think of property as a thing: a chunk of land or a piece of personal property. Most lawyers, hopefully, have a more sophisticated view and think of property as a set of rights that exists with respect to a thing and governs how one interacts with that thing vis-a-vis other people. But even that nuance is not refined enough for an oil and gas lawyer. Such a practitioner does, of course, view ownership as a set of rights, but the thing at hand is not just a piece of real property or the part of the land that you can see--the really interesting thing to these folks is the minerals that lie underneath the property.
A "mineral estate," as opposed to a "surface estate," is just what it sounds like: the rights to minerals. Out of this subterranean "bundle of sticks" spring many issues and complications. The issue this Article discusses is the unusual--and unusually expensive--issue of just how fractured these underground ownership rights become. In relevant part, this fracturing starts with understanding the difference between mineral rights and royalty interests--a right to payment contingent on mineral (mostly oil) production that constitutes one facet of mineral ownership. Part II delves into these definitional issues, laying the foundation for a basic understanding of mineral rights both as an independent concept and as applied in the modern economy. From there, Part II examines the nature of the rights that come from minerals by describing the distinct elements of mineral ownership. Unlike normal property, where the bundle of sticks is more of a metaphor, the concept of fractured rights is more concrete for mineral rights. That is, there is a clear and defined list of five rights that inhere to all fee mineral interest owners. Defining and explaining these rights in some detail sets the stage for this Article's primary thesis that these fractured rights are suboptimal.
More specifically, the law's express condonation of these independent rights creates a situation in which the owner of the mineral rights might have all, one, or some combination of these rights-meaning that the owner of the mineral rights does not necessarily own what you think they own. And that is a problem, as is initially laid out in Part III. Therein, I return to a topic that I have written about a number of times over the years, which draws extensively from three prior articles of mine. In particular, I have repeatedly written about the "numerus clausus," a term and principle meaning "the number is closed." As Part III explains, the numerus clausus has become a positive description of, and an explanation for, the fact that property generally exists only in certain standardized forms under the common law. It first sets forth the numerus clausus in the level of detail necessary for this sort of examination.
Part IV then delves into the numerus clausus as a normative tool, applying it to the mineral interests discussed above and analyzing how the law should view these fractured rights. As Part IV explains, the variegated nature of mineral rights violates the numerus clausus by permitting property owners to widely--and inconsistently--customize their rights." This customization comes with a significant cost. Part IV sets forth an abbreviated example of the kind of cases that inevitably arise from the confusion incumbent in creational creativity, but the point extends beyond any historical case or list of cases. The theoretical solution, then, is to weigh the benefits of the different facets available to mineral right owners and entrepreneurs against these costs. Of course, such an exercise is fraught with theory and uncertainty, but playing out such an analysis provides a concluding framework for ascertaining the extent to which ownership of mineral rights should qualitatively differ from ownership of surface rights.
Recommended Citation
Chad J. Pomeroy, The Cost of Unstable Property: Oil, Gas, and Other Confusing Mineral Interests, 55 Tex. Tech L. Rev. 133 (2022).