Requirement 14.007 – Net royalty Acre Conflict

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Requirement 14.007 – Net royalty Acre Conflict


 Net Royalty Acre Conflict:  Henry Courtman granted Lease 1, which covers Tract 1, to Brazos Oil and Gas Company, Inc., by oil, gas, and mineral lease dated March 36, 2008, and recorded in Deed Book 1255, page 955.  Lease 1 provides for a primary term of five years and a three-sixteenths (3/16) royalty.  Three months after granting Lease 1, Courtman conveyed an undivided royalty interest in Tract 1 to Guadalupe Petroleum, Inc.  The interest, which terminated after five years in the event of no production, was alternatively described in the deed as being a fraction equal to 7.5/20 of 1/8 and as being 7.5 royalty acres.  We construe the term “royalty acre” to be an 1/8 royalty on one mineral acre.  That construction is consistent with a 1983 decision by the Alabama Supreme Court in the case of Dudley v. Fridge, 443 So.2d 1207, 1209 (Ala. 1983). That construction is also apparently consistent with the intent of the parties, as indicated by the fraction set forth in the deed, which is tied to an undivided one-eighth rather than to the undivided three-sixteenths specified in Lease 1.


 The Courtman - Guadalupe Petroleum deed further stated that in the event of any conflict between the 7.5 royalty acres stated in the intention clause and the fraction stated in the deed, the fraction would control.  The fraction assumes that Tract 1 contains exactly 20.00 surface acres.  If Tract 1 contains more or less than 20 surface acres, the fractional grant will conflict with the 7.5 royalty acre grant.  The parties to the deed anticipated this possible conflict and provided that the 7.5 royalty acre grant would control.


 Requirement:  If you obtain production from Tract 1 or lands pooled with Tract 1, obtain a survey to determine the area of Tract 1.  If Tract 1 does not contain exactly 20 acres, credit Guadalupe Petroleum, Inc., with a royalty interest of  (1/8) * (7.5/<actual area>) and credit Courtman with the remainder.

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