Court Determines Type of Royalty Under Oil and Gas Lease.

A tract of land was owned by Mom and her eight kids.  Together they owned 100 percent of the surface estate and 100 percent of the mineral estate.  Mom and six of the children sold their interests in the surface and mineral estates to the remaining two children, reserving a royalty interest in the six children that sold their interests of "an undivided interest in and to the 1/8 royalties paid the land owner upon production of oil, gas and other minerals."  The two purchasing children then sold their interest in the minerals to the plaintiff who entered into an oil and gas lease with an oil production company.  The plaintiff claimed that the deed reserved a fixed royalty of 1/8 and, as such, each of the eight children held a 1/8 interest in a 1/8 royalty.  The two children that sold their interest to the plaintiff claimed that they had a floating royalty of 1/8, and the court agreed.  The court noted that at the time of the initial deed there was no existing lease in place and the usual royalty at that time contained in a mineral lease was 1/8.  Thus, the deed's reference to a 1/8 royalty was based on the assumption that a landowner's royalty would always be 1/8.  Thus, the 1/8 language referred to a future royalty that might be reserved.  The deed also referred to "royalties paid to the landowner"  and that royalties would be pooled and shared equally, which bolstered the selling children's argument.  Medina Interests, LTD v. Trial, et al., No. 04-14-00521-CV, 2015 Tex. App. LEXIS 6382 (Tex. Ct. App. Jun. 24, 2015). 

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