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By Will Huguet

Terminology employed in oil and gas exploration may often become antiquated. In this regard, this comment is intended to introduce the reader to the dated and potentially confusing terms “mineral acre” and “royalty acre.” Although the author is not a large proponent of the use of such terms, they are part of the fabric of mineral and royalty deeds and will continue to be utilized for the foreseeable future.

Mineral Acre Discussion

A “mineral acre” is a full mineral interest in one (1) acre of land.  One may ask – why not simply say “acre” when a full interest in one (1) acre equals one (1) mineral acre?  It is surmised that use of “mineral acre” sprung from concerns over warranty and quantifying what is to be sold.  In this respect, if the exact acreage of a tract is unknown, e.g. somewhere between 45-50 acres, or undivided ownership is unknown, e.g. the person either owns a 3/5 interest or 4/5 interest in a tract, a mineral purchaser may seek to protect itself by establishing a floor and buying a set number of mineral acres. For example, in a scenario wherein a seller is to convey fifty percent (50%) of their interest in a “50 acre” tract, but the exact acreage is unknown, a prudent buyer may set forth that they are purchasing 25 mineral acres. In the event that a survey (or other title impediment) reveals that the tract actually comprises 45 acres, the buyer would receive a mineral servitude covering 25 net acres (with the vendor now owning 20 net mineral acres), rather than 22.5 acres under the fifty percent (50%) conveyance language. In summary, although the term “mineral acre” is fairly basic to grasp, there still may be areas of confusion pertaining to multiple tracts and inadvertently blending the concept with those of royalty, etc.

Royalty Acre Discussion

A “royalty acre” appears to have been originally conceptualized as the full lease royalty on one (1) acre of land, i.e. the lessor’s royalty. As the longstanding (but now largely inapplicable) lessor’s royalty was one-eighth (1/8), if one purchased one (1) royalty acre from a landowner subject to a mineral lease with a one-eighth (1/8) lessor’s royalty, that party would be buying all of the royalty payable to the landowner under said lease. Over time, it appears that the term “royalty acre” became disconnected from lease royalty and came to mean a “1/8 royalty on the full mineral interest in one acre of land.” See Dudley v. Fridge, 443 So.2d 1207, 1208 (Alabama 1983). Stated alternatively – one (1) mineral acre came to be equated with eight (8) royalty acres.

However, some scholars and commentators (like Williams & Meyers) counter that “royalty acre” should continue to reflect a full lease royalty. In other words, if a landowner is subject to a one-fourth (1/4) lessor’s royalty on one (1) acre of land and sells one (1) royalty acre, then such grant would cover the full lessor’s royalty interest. However, if one (1) mineral acre equals eight (8) royalty acres, a one-fourth (1/4) lessor’s royalty on a one (1) acre tract would yield two (2) royalty acres and only transfer one half (1/2) of the grantor’s lessor’s royalty. There is Louisiana case law on this matter, which appears to embrace the definition that a “royalty acre” equates to a “1/8 royalty on the full mineral interest in one acre of land,” as discussed in following.

In Thibodeaux v. American Land & Exploration, Inc., 450 So.2d 990 (La. App. 3 Cir. 1984), the Court noted the following in footnote 3:

Supple testified that the term “royalty acre” is a commonly used industry term. He also stated that production distribution is based on the ownership of royalty acres which are derived by converting ordinary acreage into royalty acreage on the basis of the standard one-eighth (1/8) royalty, which was the fraction ordinarily reserved by owners leasing their land for oil production. Thibodeaux had, however, reserved a one-fifth (1/5) royalty interest in the production under his lease with Stone Oil, thus creating more royalty acreage on the land than would have existed under a one-eighth (1/8) reservation.

Harrison and Supple both calculated that the 29.5 acres owned by Thibodeaux and his children contained 47.2 royalty acres. [1]  In his deed to American Land, Thibodeaux transferred one-half of his one-half interest, or one-fourth of the total (or 11.8) royalty acres.

Therefore, Louisiana appears to have adopted the position (albeit with limited authority), that one (1) mineral acre includes eight (8) royalty acres regardless of the lessor’s royalty. However, due to this issue, prudent parties often specifically define “royalty acres” in a royalty deed. [2]  Using this definition, if one (1) acre of land is subject to a one-eighth (1/8) lease, there is one (1) royalty acre available to the lessor, if subject to a three-sixteenths (3/16) royalty lease, the lessor is entitled to one-and-one-half (1.5) royalty acres, and if subject to a one-fourth (1/4) royalty lease – two (2) royalty acres. [3]  Returning to the rationale behind use of “mineral acres,” if attempting to buy fifty percent (50%) of a landowner’s royalty interest in one (1) acre of land under a one-fourth (1/4) royalty lease, one could set forth that they are buying 1 “royalty acre.” In doing so, if the tract is ultimately found to only comprise 0.8 acres, then the purchaser owns a mineral royalty covering 0.5 acres, whereas the seller will only be entitled to the royalty on the remaining 0.3 acres.

Additional Issues

The reader is further advised of a couple of additional problems which may be encountered in conveyancing. The first is the use of inconsistent and potentially conflicting grants – such as using both a stated percentage of the grantor’s interest and specifying the exact mineral acres or royalty acres conveyed. This may be remedied by avoiding the conflict or clearly stating which is to control, e.g. the intent is to convey one-half (1/2) of grantor’s interest, but the specific figure will control in the event of a conflict. Further, when the grant covers several tracts or involves several units, attribution issues may be encountered. The undersigned has reviewed royalty deeds wherein several tracts were covered and the tracts included differing undivided ownership, were subject to different mineral lease burdens, or presented distinct title issues. In such an event, issues with attribution of the stated gross mineral or royalty acres to specific tracts may be encountered, which may potentially be remedied by separately listing the mineral or royalty acres to be conveyed with respect to each separate tract.

Will Huguet has assisted buyers and sellers in numerous transactions involving mineral and royalty deeds, including title, curative, negotiation, and drafting the involved instruments.

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[1] Which would be calculated as follows: 29.5 x 8 x 1/5 = 47.2. 

[2]  An example would be as follows: “When used herein, the term ‘Royalty Acre’ means and includes a mineral royalty interest in 1/8 of 8/8 in and under one (1) acre of land.”

[3]  Note that under this formulation, if one (1) royalty acre is sold subject to a 1/8 mineral lease and said lease lapses and the landowner enters into a new mineral lease with a 1/4 lessor’s royalty, the royalty purchaser and landowner would each be entitled to 1/2 (or 1/8 each) of the lessor’s royalty.