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The “Mineral Addendum”

by | February 3, 2014

Mineral interests have been an important aspect of farm and ranch transactions in Texas for decades.  The recent expansion of drilling activity in Texas, using more refined and efficient technology in the various shale fields, has made this component of the transaction even more salient.

As Texas real estate brokers/agents, we are required to use the “Addendum For Reservation of Oil, Gas and other Minerals” as promulgated by the Texas Real Estate Commission (“TREC”) in the event a seller is reserving all or a portion of his owned mineral rights.  This addendum is to be completed and attached to the Farm and Ranch Contract as an Addendum.

At first glance, the TREC mineral addendum looks fairly simple and straightforward.  Sometimes things are simple and this Addendum is sufficient; however, other times the details become complicated and confusing.  Simple is not always workable and many times the TREC Mineral Addendum is not an adequate tool to reflect the desires of the parties.

There are several sections to the TREC mineral addendum that need to be considered.  The addendum defines the “Mineral Estate” but does not adequately allow for definitions of which particular mineral rights are involved as certain types of mineral rights can be severed from other types (e.g. executive rights can be severed from minerals, royalty interests can differ from mineral interests and so on).

In addition, parties to any transaction need to be on the same page as to which mineral substances are being conveyed or reserved and are those particular substances consistent with the TREC mineral addendum’s definition of the Mineral Estate as well as governing statutes and case law.   For example, at times the parties may wish to only include certain substances or certain geologic strata or depths.  The TREC mineral addendum does not allow for those complexities.

Lastly, there is a clause in the TREC mineral addendum regarding an Implied Mineral Easement for ingress, egress and the reasonable use of surface to exploit the mineral interest.  This implied interest is derived from the mineral estate being dominant over the surface estate in Texas.   The clause in question is included to allow the seller to waive (or not) the aforementioned surface rights of Seller (although it could have been written more clearly).  If a seller reserving minerals waives his surface rights then he restricts his ability to access his owned minerals under the surface. Any needed surface access would then involve reasonable negotiations and agreements with the buyer/surface owner.

As always and especially dealing with minerals, it is important for, and we recommend that, both buyers and sellers consult a competent attorney with respect to the meaning of contract/addendum language as well the statute and case law that apply.  Ultimately, it is imperative to make sure the desires of the parties involved are appropriately reflected in the deed language regarding the transaction.

Disclaimer:

The information contained herein represents the understanding, opinions and assessments of the author and should not be considered legally conclusive or expert opinion. Republic Ranches, LLC and its principals, members, officers, associates, agents and employees cannot guarantee the accuracy of such information.

 

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