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Allen D. Cummings, Nuts and Bolts of Mineral Title Examination (2012)

Why Examine Title?

This may seem an unusual question, but it may be the first question from someone who is accustomed to obtaining a title insurance policy on real property. I know of no state where a mineral owner or producer can obtain a title insurance policy covering mineral fee or mineral leasehold ownership. One major reason is the complexity of mineral fee and mineral leasehold ownership. The “bundle of sticks” that comprises a mineral fee interest (executive right, bonus, delay rentals and royalty) can be owned separately in undivided shares in perpetuity or for a limited term. Mineral leasehold ownership can be divided into different cost bearing and non-cost bearing interests (working interest, carried working interest, back-in working interest, overriding royalty interest, production payment, net profits interest, before and after payout interests) which may be owned in divided and undivided shares and for a term coincident with the continuation of the lease or some shorter term defined by the parties. It would be very difficult to underwrite a mineral fee or leasehold title policy, which is essentially an indemnity agreement based on the value at interest at the time of the insured transaction.

Therefore, buyers and sellers of mineral fee and leasehold interests must rely on title examination to assure themselves that they are getting the title the