Texas Supreme Court Holds That References To "One-Eighth" In Old Oil And Gas Conveyances Presumptively Refer To The Entire Mineral Estate

• Jurisdiction: Texas,United States
• Law Firm: Liskow & Lewis
• Subject Matter: Energy and Natural Resources, Oil, Gas & Electricity
• Author: Samuel Allen, James T. Kittrell and Alma Shields
• Published date: 14 March 2023

The Texas Supreme Court recently released its opinion in Van Dyke v. Navigators Grp., No. 21-0146, 2023 WL 2053175 (Tex. Feb. 17, 2023), in which it re-affirmed the axiomatic principle that a text retains the same meaning in the present day as when it was drafted. In the context of antiquated oil and gas conveyances including a double fraction that includes "one-eighth," the Court affirmed this principle by holding that such language gives rise to a rebuttable presumption that "one-eighth" refers to the entire mineral estate. Trying to construe double fractions outside the bounds of basic arithmetic has been at the heart of many controversies decided by many Texas courts in recent years. As the Court stated in its introductory sentence, "Only in a legal text could the formula 'one-half of one-eighth' mean anything other than one-sixteenth." But the history of oil and gas conveyances in Texas shows why this has become such a challenging issue for the state's judicial branch.

In the 1920s'the time the deed at issue was executed'lessors commonly reserved a one-eighth royalty interest when they executed oil and gas leases. It is believed that those lessors were under the impression that they received one-eighth of the production from the lease because they retained one-eighth of the mineral estate instead of what they actually retained'a one-eighth royalty interest and a fee simple determinable with the possibility of reverter in the entire mineral estate. It also believed that because lessors thought they retained only one-eighth of the mineral estate, they would often attempt to convey all of their interests in the mineral estate by conveying one-eighth thereof. Texas courts refer to this phenomenon as the "estate-misconception" theory.

According to the Court, the estate-misconception theory was so prevalent in instruments in and around 1924'the time of the deed at issue'that "courts have taken judicial notice of this widespread phenomenon." That rationale led to the Court's holding that the mere use of one-eighth in a double fraction is some evidence that the parties were operating under the estate misconception theory.

In addition to the estate misconception theory, the Court analyzed the "legacy of the one-eighth royalty." Stemming from the same common occurrence underlying the estate misconception theory'that lessors commonly reserved a one-eighth interest in production from their leases'it is believed that mineral owners in and around the 1920s would...