Leasehold Interest

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Leasehold Interest

 

 It is not altogether clear under Alabama law as to what estate is created in an oil and gas lessee, although the Alabama Supreme Court has previously described some of the aspects of an oil and gas lease. For instance, in Lake v. Sealy, 165 So. 399, 401 (1936),  the court held that “oil and gas leases and land owner’s royalties . . . 1/4 (one-fourth) interest in all oil, gas and mineral rights” were incorporeal hereditaments.  In Huddleston v. Humble Oil & Refining Co., 71 So.2d 39 (1954),  the court held that the sale of an oil and gas lease is a sale of an interest in land. The court has characterized a suit to rescind an oil and gas lease as a suit to recover a corporeal hereditament, which was governed by the ten year statute of limitation. Wilcutt v. Union Oil Co. of Cal., 432 So.2d 1217 (Ala. 1983); Ala. Code § 6-2-33 (1975).   Sun Oil Co. v. Oswell, 62 So.2d 783, 788 (1953),  establishes that “the lease does not grant the ownership of the oil and other minerals, but grants and leases to [the lessee] the land described for the purpose of investigating, exploring, prospecting, drilling, mining for and producing oil and other minerals.” The language of “lease and let” in an oil and gas lease does not transform the relationship between the lessor and the lessee to that of a landlord and tenant. Cross v. Lowrey, 404 So.2d 645 (Ala. 1981); Gilbert v. Union Co. of California, 667 F.2d 963 (11th Cir. 1982).  Furthermore, the oil and gas lessee can repudiate his lessor’s title without being subject to the harsh landlord-tenant rules prohibiting disavowal of title, especially where the lease has a reduction clause. Id.

Copyright 2011 by Edward G, Hawkins. All rights reserved.