Energy Title LawTitle Examination

The Impact of Acreage Determinations On Pre-Existing Oil and Gas Leases

Operators today have access to geographic information that far outstrips the information once commonly available.  County Assessor’s records are routinely linked through GIS (Geographic Information Services) to provide interactive maps that allow for detailed and accurate mapping and measurement.  At the same time, mineral ownership in large subdivisions has created the need for accurate acreage measurement of numerous parcels.  These factors have led operators to undertake mapping and acreage determinations in order to allocate royalty payments and working interest ownership. What happens when these acreage determinations differ from acreages stated in pre-existing leases?  Where the newly determined acreage is smaller than the stated estimate of area it may result in reduced royalties.  Where the acreage is larger a more problematic question arises.  Is the “new acreage” covered by the lease? 

In Hild v. Johnson, 723 N.W.2d 389, 391 (N.D. 2006), the North Dakota Supreme Court ruled that an unambiguous property description controls over a statement of acreage.  In 1960, Hild took title to all of Section 21 by Marshal’s Deed, which described the land as “containing 582.76 acres, more or less,” which represented the section less the lands underlying the Little Missouri River. The same year, Hild conveyed an undivided 382.76/582.76 interest in the minerals of all of Section 21 to Harding.  The Deed described the land as “All of Section Twenty-one in Township One Hundred Thirty-Nine (139) North of Range One Hundred Two (102) West, containing 582.76 acres, more or less.”

In 1992, the 8th Circuit ruled that the Little Missouri River was non-navigable at the time of statehood for North Dakota, and as such, the state did not own the land or minerals underlying the river as previously thought. Instead the minerals underlying the river belonged to the adjoining parcels.  This increased the acreage of Section 21 from 582.76 to 640 acres.

Hild argued that the 1960 deed conveyed only 382.76 acres. The Court disagreed and held that the fraction used in the 1960 deed from Hild to Harding represented an undivided interest, rather than a specified acreage. Id. at 393-394. The Court ruled that “[w]here the deed purports to convey the whole of a designated tract, with the description of it as containing a given number of acres ‘more or less,’ the primary significance of that deed is that the grantor intended to convey all the land in the tract described, whatever may be its acreage, and the grant is not defeated by a discrepancy between the recited and the actual area” Id. At 394 (quoting 16 Am. Jur. Deeds,§ 282). Thus, the 1960 deed conveyed undivided 382.76/582.76 interest in the 640 acres of Section 21.

That same logic was applied to acreage statements in North Dakota Oil and Gas Leases by the Court in Lario Oil & Gas Co. v. EOG Res. Inc., 832 N.W. 2d 49, 53 (N.D. 2013). Colorado has not yet expressly adopted these principles, but numerous other jurisdictions have. See, e.g., Anderson-Prichard Oil Corp. v. Key Okla. Oil Co., 299 P. 850 (Okla. 1931); Koennicke v Maiorano, 682 A.2d 1046, 1053 (Conn. 1996). Moreover, Colorado courts presume that general descriptions include the acreage of adjoining strips. See Near v. Calkins, 946 P.2d 537, 541 (Colo. 1997). Accordingly, we believe that a Colorado court would agree with the outcomes in the Hild and Lario cases.

Tjornehoj & Hack LLC, 2019