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Chapter 7 Complications of Examining Title Within a Pooled Unit, Working Interest Unit, Exploratory Unit, or Secondary Recovery Unit

Jon D. Tjornehoj, Advanced Mineral Title Examination – Oil, Gas, and Mining

Title attorneys today must wear many hats. In addition to their skills analyzing conveyances and researching legal issues, they must also be part geologist, part accountant, and part cartographer. Like the GIS mapping systems that many of us timorously attempt to use, oil and gas title itself can be conceptualized as a multi-layered system of ownership rights. The “base” layer can be thought of as common-law ownership rights--a basic infrastructure of mineral owners and leasehold interests. The next layers up are the state and federal regulatory regimes regarding spacing and unitization. These in essence re-draw the boundary lines of the ownership map from one focused on a single tract to one accounting for the interrelationships of neighboring owners within a spacing regime or a common source of supply. Finally, the working interest owners themselves can create a new set of boundary lines that co-exist with the lower layers by agreeing to a different set of ownership rights as between themselves. Understanding the interactions of these layers is essential to avoiding common traps that face the oil and gas title examiner.

II. The Common-Law Rule of Capture

The starting point for understanding the impact of pooling and unitization is with the so-called “rule of capture.” In the late 19th and early 20th centuries, courts wrestled with the manner in which to char