Heir Property and Mineral Rights in Arkansas: Practically Unsolvable v. Solvable Scenarios

I get a call a couple times a month from someone who believes they own mineral rights in Arkansas.  Many calls imply that somebody, somewhere cheated they caller out of their birthright.  I sympathize, I really do.  Mineral rights law is very complicated.  Many actions that seem opaque and shady to a normal person are actually standard operating procedure for oil and gas companies.  There’s a good reason why these actions that appear callous are the standard operating procedure.  It is not personal–believe me.   Folks at oil and gas companies are sympathetic human beings.  The thing is that there are only so many of them, but there are 1000x more of you the royalty owner.  For that reason, the company has to prioritize some requests and outright turn down others.

A simple 640 acre gas unit out in the country may have 100 owners.  In towns, the number will be in the 100’s.   If a company has 64,000 acres in a gas play, it may deal with 64,000 royalty owners.  That company may only have 10 division order analysts.   This is why the oil and gas companies sometimes seem callous.  They are outnumbered and outgunned.  If they hired enough people to answer everyone’s calls and letters the same day, they could not afford to drill and produce.

Because of this asymmetry between owners and company employees, the companies lobbied States to have laws and regulations to pass the responsibility of keeping up with unclaimed royalty money to the State government.  This is how royalty money disappears.  There are exactly zero State employees actively looking to reunite you with your money because frankly if they don’t find you, they get to keep your money.

This is why you call me.   I appreciate the calls, but there are some fact scenarios that are solvable and others that are not.  Here are some common but practically unsolvable situations:

  1. You have no clue whatsoever where the land was and who originally owned it.
  2. You know that one or your parents or grandparents owned the land, but you don’t know or understand how much.
  3. You know that your great grandfather owned the land.  He had 12 children.  They had 8 children each.  Your parents had five children  (or some variation of these numbers where there are 50 plus descendants).

The first one does not help me help you.  I don’t have the time to hunt down your ancestor’s names on deeds in the courthouse.  The second is usually someone who actually is in the third situation but just doesn’t know it yet.  If you are in the third situation, you have such a small interest in the property, it would cost you many times more in your share of any possible royalty money to hire me.  I say “practically insolvable” because the cost/benefit on my fee to your recovery makes recovery impractical.

Solvable scenarios:

  1. Some person or company approached you to buy/lease/integrate your mineral rights.
  2. You’ve seen your name or your parents’ names on a State unclaimed property list.
  3. You know you have fewer than 20 owners in the whole tract of land and there is an oil or gas well on the land.

The first is a big tell that you have something valuable.  You are sitting on a full house and they are bluffing.  The person who approached you did the homework. You need me to figure out what he/she knows, clear your title, and claim your money.  The second is also a good sign and provides plenty of information that will allow me to find your money and mineral rights.  The third is also acceptable because you will likely have enough interest to make it worth your while to hire me.

So there it is.  I hope you found this, read it, and understand what I can and can’t do for you if you think you own Arkansas Mineral Rights and haven’t been paid.

Types of Deeds in Arkansas

There are broadly, five types of deeds in Arkansas:

  1.  Warranty Deed:  The Cadillac of deeds.  This property transfers all title with a covenant of warranty.  The warranty assures the buyer that the person giving title (grantor) has full title free of flaws and claims by other people.  If there are other claims or flaws, the grantor may be sued for breach of warranty.  The warranty will also transfer any title acquired by the grantor after the conveyance.
  2. Special or Limited Warranty Deed:  With this type of deed, it is hard to understand what the grantor is really giving.  Typically, the warranty is for “acts done and suffered by the grantor and no other.”  What does that mean?  It means that if the problem with the title did not arise during the grantor’s tenure of ownership, the grantor is off the hook.
  3. Quitclaim Deed:  A quick and dirty conveyance of the property.  This is the 1970 Volkswagon Beetle of deeds.  It transfers only what the grantor owns right then and there and nothing in the future.  The quitclaim deed offers no protection to the purchaser.  It is title given caveat emptor “as is, where is.”
  4. Fiduciary Deed:  A deed given by a court-appointed fiduciary.  This usually happens with a guardian, executor, receiver, or administrator.  It may or may not include a warranty. Usually, it includes only the “right title and interest” of the person whom the fiduciary represents.  E.g. “all right, title and interest of the Estate of John Smith, deceased in the property.”  The phrase “right, title and interest” do not carry a warranty.  Fiduciary deeds must usually be authorized by the Court.
  5. Beneficiary Deed:  A statutorily authorized “pay on death deed.”  It transfers no present interest in the property, but becomes an irrevocable transfer upon death.  This is a great estate-planning tool for non-residents of Arkansas because it avoids probate.

Avoiding probate on small mineral interests in Arkansas.

Clients often call me with a request to probate a will to transfer title to some mineral rights in one of the oil or gas producing Arkansas counties.  Many times, the cost of the probate far exceeds the present value of the mineral rights.  For those mineral owners, it is too late.  The law requires a probate to transfer title if the deceased’s will leaves the property to someone other than the intestate heirs.  This most comes up frequently because many will leave property to a spouse or to a trust, and neither are intestate heirs under Arkansas law.

If you own mineral rights, and want to avoid probate in Arkansas, then an Arkansas Beneficiary Deed is a very good option.  The deed can automatically transfer your Arkansas mineral rights upon your death, much like a pay on death bank account.  Also like a pay on death bank account, the designated beneficiary can be any person, company, or charity.

In my opinion, an Arkansas Mineral Beneficiary Deed is the best option to avoid probate for clients with mineral interests in Arkansas who will have a gross estate that is less than the Federal Estate Tax Exemption.  Contact Law Offices of Mark Robinette for more information.

How to transfer land without a will in Arkansas.

Do you have only a tract of land in Arkansas?  If you live in another state and have a vacation home, rental property, timber land, or mineral interest in Arkansas, you may leave your family with a burden if you utilize a will to transfer title at your death.

Merely filing a will in the County real estate records in Arkansas is not enough.  The law will require your heirs to admit your will to probate.  The average probate costs around $2000.

There is a very low cost alternative to probate.  Act 1918 of 2005 allows beneficiary deeds.  This makes your Arkansas land or Arkansas mineral interest transfer ownership just like a pay on death bank account.  The best part is that it is very flexible and low cost.  The beneficiary of your land at your death can be a trust, company, person, or a charity.

Contact Law Offices of Mark Robinette to learn more.

In what Arkansas Counties can you utilize a beneficiary deed?  All 72, of course!  This includes Arkansas County, Ashley County, Baxter County, Benton County, Boone County, Bradley County, Calhoun County, Carroll County, Chicot County, Clark County, Clay County, Cleburne County, Cleveland County, Columbia County, Conway County, Craighead County, Crawford County, Crittenden County, Cross County, Dallas County, Desha County, Drew County, Faulkner County, Franklin County, Fulton County, Garland County, Grant County, Greene County, Hempstead County, Hot Spring County, Howard County, Independence  County, Izard County, Jackson County, Jefferson County, Johnson County, Lafayette County, Lawrence County, Lee County, Lincoln County, Little River County, Logan County, Lonoke County, Madison County, Marion County, Miller County, Mississippi County, Monroe County, Montgomery County, Nevada County, Newton County, Ouachita County, Perry County, Phillips County, Pike County, Poinsett County, Polk County, Pope County, Prairie County, Pulaski County, Randolph County, Saline County, Scott County, Searcy County, Sebastian County, Sevier County, Sharp County, St. Francis County, Stone County, Union County, Van Buren County, Washington County, White County, Woodruff County, Yell County

Landowners Prevail in Cleburne County Arkansas Mineral Rights Litigation But Damages Lacking

Cleburne County landowners Bruce and Jan Smith won on appeal in the case of Smith v. Mountain Pine Timber, Inc., 2016 Ark. App. 193.  In this case, Mountain Pine timber previously sold the minerals to land later sold to the Smiths.  Mountain Pine then sold the land to the Smiths with full warranty of title and with no mineral reservation.

Under Arkansas law, a warranty of title is actionable as a breach of contract.   The statute of limitations does not begin to run until a third party disturbs the purchaser’s rights to possession of the property.  This is particularly important feature of the law when it comes to minerals.  Minerals are not possessed until produced.  Many years can pass before the requisite mineral development and production takes place.

In the Smith case, they purchased the land from Mountain Pine Timber in 1987.  It was not until 2008, when the Smiths were approached to sell their mineral rights that the Smiths discovered that Mountain Pine previously sold the Cleburne County mineral rights.

Another point of black letter law in Arkansas is that the damages for breach of warranty of title are “so much of the consideration paid as is proportioned to the value of the land lost, with interest.”  Furthermore, the damages cannot exceed the total value of the purchase price.  The Court of Appeals therefore reasoned that the property point in time to fix damages was the time of the conveyance.  In this case, that was the 1987 conveyance to the Smiths from Mountain Pine.  The Smith trial court awarded only $250.22 in damages or $1/acre.

Notably, the only evidence offered on the value of the Cleburne County mineral rights in 1987 was from one of the Defendants who testified that the mineral rights were sold by Mountain Pine for $1 per acre in 1985.  This underscores the importance of offering expert testimony of damages.  Most likely, the actual value of the Cleburne County mineral rights was much higher than the $1 per acre awarded by the trial court, and the low damages award was the result of insufficient testimony by the Plaintiffs.   I’ve seen numerous mineral deeds in the Cleburne County records prior to the Fayetteville Shale discovery that easily exceeded $1 per acre.

Justice, however, was in some manner served for the loss suffered by the Smiths.  In a companion appeal of Mountain Pine Timber v. Smith, 2016 Ark. App. 197, the Court of Appeals upheld an award of attorney’s fees in the same case.  Arkansas law allows attorney’s fees to the prevailing party in a contract action (which a deed covenant is) provided the fees are reasonable.  The court awarded $17,500 in attorney’s fees.  The Appeals Court concluded the award of attorney’s fees was not excessive.

Van Buren County, Arkansas surface owners win partial victory over mineral owners on bad legal description.

In XTO v. Thacker, 2015 Ark. App. 203, a Van Buren County, Arkansas trial court ruled that a mineral deed with an extra handwritten description “also the South quarter of the Northeast quarter” invalid as surplusage.  In legal language, “surplusage” is just extra language that means nothing.    Surplusage is language that is unintelligible and repugnant to the matter at hand.  In this case, there was a typewritten legal description of 118 acres with a handwritten notation including “the South quarter of the Northeast quarter.”

When affirming the Van Buren County, Arkansas trial court’s ruling on the legal description in the deed, the Arkansas Court of Appeals noted that someone made the notation on the deed after the date of recording.  Thus, the land description attempted was not in the original parties’ bargain and the language placed in the deed after the recording date was surplusage.

Drafting is very important in any deed, but especially important in Arkansas mineral deeds.  Accurate legal descriptions are among the most important parts of a mineral deed.  It pays to have your Arkansas mineral deed lawyer to perform some title work to obtain the correct legal descriptions when giving an Arkansas mineral deed.  This may make the deed cost more, but it saves down the road when others may choose to scrutinize the title conveyed by the deed because the property has valuable oil and gas production and royalties.  It is also crucial that when granting Arkansas mineral interests title is clear and of record.   This too becomes an issue years later when there is real money at stake that makes the extra paid to a competent mineral deed lawyer a bargain in comparison to future litigation costs.

Mark Robinette is an Arkansas lawyer and attorney providing Arkansas mineral deeds and supporting Arkansas title work in all 72 Arkansas counties including the Fayetteville Shale counties of White County, Cleburne County, Van Buren County, Faulkner County, Conway County, and Pope County.   Arkansas lawyer Mark Robinette also represents persons in the South Arkansas oil patch including Nevada County, Ouachita County, Miller County, Lafayette County, Columbia County, Union County, and Calhoun County.

Mineral Rights in Brine: A right peculiar to Union County, Arkansas and Columbia County, Arkansas

Brine, or salt water, seems common enough. After all, the 70% of the Earth are oceans, so why in the world would anyone drill a well on dry land to recover saltwater?  The answer is that not all salt water is created equal.  Salt from sea water is of fairly consistent composition.  It is mainly sodium chloride, potassium chloride, and various trace elements.  By contrast, the salt water taken from beneath Union and Columbia County, Arkansas has a high concentration of bromine.   It is 70 times greater than that of sea water.  The salt water in Union County and Columbia County, Arkansas yields about one half of a gram of bromine for every 1000 barrels of brine.  This doesn’t seem like much, but it is commercially significant.  So much so, that Arkansas leads the world in bromine production.

Bromine compounds are useful as a flame retardants in furniture, medicines, insect and fungus sprays, anti-knock compounds for leaded gasoline, disinfectants, photographic preparations and chemicals, solvents, water-treatment compounds, dyes, insulating foam, hair-care products, and oil well–drilling fluids.

A unique rule of property in Arkansas caused many of the landowners who missed out on the oil and gas boom of the 20’s and 30’s to cash in on the Bromine boom of the late 1950’s.  Under the Strohacker doctrine, surface owners whose oil and gas rights were sold off in the oil boom were pleasantly surprised to learn they owned full brine rights.  Under Strohacker, a conveyance or reservation of “minerals” only includes those minerals known to exist in the mind of the public at the time and locality of the conveyance.   Thus, all the early mineral deeds in Union and Columbia County did not apply to Bromine because the mineral was unknown to the public until the 1950’s.

There are two major bromine producers in Arkansas:  Great Lakes Chemical and Albemarle Corporation.  Great Lakes Chemical has Arkansas headquarters in El Dorado, Arkansas.  Albemarle has Arkansas headquarters in Magnolia, Arkansas.  These companies handle royalty payments for brine mineral rights holders.  Just like oil and gas production companies, brine companies have a land department that manages royalty payments and royalty ownership changes.  The Arkansas Oil and Gas Commission regulates brine production in Arkansas.

If you own brine mineral rights in Union County, Arkansas or Columbia County, Arkansas, Law Offices of Mark Robinette can provide many services to you including:

  • Brine Rights Mineral Deeds
  • Affidavits of Heirship in Brine Rights
  • Probates of wills to establish claims to Brine Rights
  • Ancillary Probate of wills to establish claims to Brine Rights
  • Affidavits of small estates to establish claims to Brine Rights
  • Redemption of Tax Forfeited Brine Rights
  • Transfer of Brine Right ownership with Great Lakes Chemical and Albemarle Corporation
  • Surface use agreements and damage settlements with brine pipeline companies
  • Surface contamination claims from brine production activity
  • Ground water contamination claims from brine production activity
  • Complaints to the Arkansas Oil and Gas Commission regarding brine unitization or production

Mark Robinette’s principal office is in Little Rock, Arkansas, but he routinely handles matters in Union County Arkansas and Columbia County Arkansas.  Deeds, probates, affidavits of small estates, tax forfeitures redemptions, Oil and Gas Commission complaints, and most surface use agreements involve no travel costs from Little Rock to Union County, Arkansas or Columbia County, Arkansas as these are routinely handled by regular mail or email.  You can put Mark Robinette’s years of oil, gas, and mineral experience to work for you without worrying about costs.  Many routine ownership transfer matters are done on flat, turn key pricing.  Call Mark Robinette today at 501-251-1076, email him at info@robinettefirm.com, or click one of the response button in the right frame of this website. Mark is looking forward to hearing from you!   Mark Robinette is licensed in Arkansas. Mark Robinette is a Arkansas oil, gas, and mineral lawyer and attorney who can help you with your Columbia County, Arkansas and Union County, Arkansas brine rights.

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Integration necessary and no cause for concern for mineral owners

Occasionally, I receive questions from people who are upset because they got a letter from a lawyer for an oil and gas company stating that the oil and gas company applied to the Oil and Gas Commission to integrate their land. The letter includes a legal notice giving the date and time for a hearing along with instructions on how to notify the Commission of any opposition to the integration. The first reaction from most getting these letters is that they’ve been sued or the oil and gas company is taking something from them. Neither is the case, and being subject to an integration is no cause for concern.

The hearing before the Oil and Gas Commission is the culmination of months and sometimes years worth of work on the part of the oil and gas company. The company has to identify an area prospective for oil and gas, run title on the area, attempt to lease everyone in the area, and attempt to get all other companies with leases in the area to agree to the operation of the unit before going to the Commission. I will omit identification of the geology, and start with running title.

Running title is ordinarily a precursor to leasing and a must prior to integration. In order to know who owns the oil and gas, a company must check the land records at the county courthouse or in a private title plant. In some cases, oil and gas companies simply buy out a private title plant. This happened in a few instances in Fayetteville Shale Counties, allowing the plant owners to retire wealthy. The oil and gas company examines the title back to when the United States owned the land. Once they determine ownership, the companies send out landmen to make a lease offer to the mineral owner.

If the landowner and landman agree to a lease, the landowner is out of the integration process. The lessee becomes the only “interested party” in the integration. If the landowner says “no thanks” to the lease, the landman will haggle and persist for a time, sometimes until the landowner cuts off communication with the landman. At some point between negotiating and persisting, the company meets its obligation to make “reasonable efforts” to lease. There is no published case on how far a company has to go to lease, but it probably isn’t a high bar to clear. Once the company makes reasonable efforts to lease, the company (assuming it meets other requirements) may apply to the Oil and Gas Commission to “integrate” the unleased interest.

The term “integrate” is a polite term for “compulsory pooling.” The Oil and Gas Commission holds a power granted by statute to compel parties in a prospective oil and gas unit to come to an agreement as to how to share costs and revenues for the production oil and gas from the unit. The proceeding before the Commission is administrative in nature. Thus, nobody is being sued. The company seeking to operate the drilling unit is the “operator” or “applicant.” The unleased mineral owners and uncommitted working interest owners (other companies with leasehold interests) are “interested parties.” A lease mineral owner or not interested because the oil and gas lease effectively transfers the mineral owner’s interest to the control of the lessee.

A company seeking to integrate drilling unit must hold a majority leasehold acreage interest in the unit. They must prepare an application documenting their efforts to lease the unleased parties, documenting efforts to get other companies with acreage in the unit to agree to the operation of the unit, listing the drilling costs of the first well, listing the highest bonus and royalty it paid in the unit, and detailing the geological risk of drilling the well. The company gives notice of the pending integration to all interested parties by certified mail and by publication in the newspaper. Once the applicant submits the application and notice delivered, the company goes to hearing before the Oil and Gas Commission.

The hearings are usually uneventful. The company and its attorney will present the application to the Commission, and a landman representative of the company will be present to answer questions about the company’s acreage position in the unit and efforts to lease. The Commission usually has few questions for the company and will approve the application if it is in order.

Occasionally, a landowner will object or otherwise appear before the Commission at the hearing for one reason or another. The most common complaints are ownership disputes and surface use issues. The Commission has no jurisdiction to resolve either problem. The Commissioners will listen to the complaint, though they cannot take any legally binding action on ownership of surface use issues. I’ve seen this happen many times. Once the landowner finishes speaking, one of the Commissioners will explain why they cannot take action.

Sometimes, the landowner will bring an attorney. I’ve seen many times where an attorney unfamiliar with the Commission’s powers will make a number of arguments about the propriety of the proceeding. Perhaps the greatest misconception among general practice attorneys is that the Commission’s proceeding is an eminent domain proceeding. Pursuing this line of reasoning, they present arguments about the amount of compensation paid. An integration proceeding is not a “taking” under the Constitution. The proceeding is an exercise of police power by the state to prevent the drilling of unnecessary wells and the waste of a non-renewable resource.

Yet another angle taken by attorneys representing landowners is that the lease bonus and royalty stated by the applicant is not the highest paid in the section. The best known case of this is where the United States received $8,000 an acre for their acreage in a unit, and the landowner’s attorney argued that should be the highest bonus paid. The statute authorizing integration says the terms of the integration “shall be upon terms and conditions which are just and reasonable.” In that case, the attorney didn’t realize the “just and reasonable” applies to both the applicant and the unleased mineral owner. Most of Commissioners were appointed to serve because they are industry professionals. Because of their own experiences and their hearing of integration applications, they have extensive knowledge what bonus and royalty is reasonable. A common bit of industry knowledge is that leases from the United States are always sold at an extreme premium in producing areas. The Commissioners took this into consideration, and they chose to accept the applicant’s highest bonus and royalty rather than that paid to the United States.

The only points of dispute in an integration that are likely to make any headway with the Commission are deficiencies in the contents of the application or lack of a majority interest. If a landowner finds a deficiency, the applicant will move to amend the application or delay the proceeding until they can correct the deficiency. At best, this type of objection will simply buy the landowner a bit more time to find a better lease than what will be offered by the Commission. Theoretically, the landowner could object or dispute more technical things in the application such as the geological risk or the drilling costs, but doing so would require the retention of an expert such as a petroleum geologist or drilling engineer.

After the hearing, the Commission will enter and order setting forth the integrated party’s options. The applicant sends out a lease form and election letter to each unleased interest. The interested parties have 15 days after the order to make their election. For an unleased mineral owner, the options are to affirmatively accept the commission lease at the applicant’s highest bonus and royalty, do nothing and being deemed to accept the lease, participate in the well, or affirmatively reject the lease and be deemed “non-consent.” The choice to participate makes the interest owner a partner in the well. As a well partner, the interest owner must pay Joint Interest Billing Statements (JIBS) issued by the operator for well costs. For example, if well #1 costs $2,000,000 and the participating owner owns 64 acres out of a 640 acre unit, the JIBS for that owner for well #1 will be $200,000. The non-consent choice subjects the unleased mineral owner to a geological risk factor penalty of 300% to 600%. That is, the non-consenting interest gets all of the money attributable to the interest from the well, but has to forfeit 1 to 6 times the cost that would have been paid had the owner participated with the interest. In the example above, Well #1 would have to pay out 6 to 12 million before the non consenting interest sees their first payout. Typically risk factors are 300% to 400%.

Uncommitted working interest owners may either participate in the well or be non-consent. The same risk factor is imposed on non-consenting working interest owners as non-consenting mineral owners except that the royalty is paid out to the lessor and the remaining balance of the revenue goes to satisfy the risk factor.

Integration and oversight by the Oil and Gas Commission provides an important function. Without regulation, profit demands that everyone drill as many wells as possible as quickly as possible. In order to prevent the drainage by neighboring tracts, each and every landowner has an incentive to drill their own well. As a result, several expensive wells could drain one pool, scarring the surface estate of each Tract and decreasing the overall profitability of the enterprise by drilling unnecessary wells. Further, excessive wells decrease the reservoir pressure leading to lower overall recovery and the intrusion of fossil brine causing the resource to become less recoverable.

Landowners who are noticed for Integration should not be alarmed. Integration is a not a lawsuit, and nothing will be lost by being a party. Integration is fair and efficient means to give every interested party a fair share of production while minimizing economic waste, damage to the surface estate, and maximizing the overall recovery from the pool of oil or gas.

For more information about integration, consult the Arkansas Code in title 15, section 72 along with Arkansas Oil and Gas Commission Rule B-43.

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The above represents the opinion of the author and not of any organization or group to which the author may belong. This material is general information, and it is not intended to create any lawyer-client relationship. Neither the transmission nor receipt of this information is an offer to extend representation by the author. Any information, opinion, and comment provided herein should not be taken as legal advice or relied upon by the reader for any purpose. The author is licensed in the state of Arkansas. Commentary on cases and law from jurisdictions where the author does not hold license to practice are for demonstrative or scholarly purposes and do not represent the author is licensed or accepts cases in the applicable jurisdiction. If you are need of legal services, you should contact a licensed attorney in your jurisdiction.

Finder’s Fees and “Lost” Mineral Rights in Arkansas–What to Know When You’ve Agreed to an Heir or Property Finding Contract.

In tough economic times such as these, a letter like this in the mail provides welcome news:

Dear Sir/Madam,
I am with a company that helps others find lost property.  I believe you have claims to minerals in Arkansas.  Our fees are just 40% of the amount of the property recovered.   Please give me a call at 555-555-5555.
Best Regards,
John Heir Finder

What’s wrong with this picture?

By Arkansas law, a non-attorney cannot accept a fee of more than 10% in an heir-finding contract.  In other words, the “finding” portion of the fee can only be 10%.  The example solicitation is 4x times the fee for a non-attorney heir finder.   The non-attorney heir finder will not be able to represent you in Court.  You may have to pay for the attorney on top of the heir finder’s fee!

If you’ve signed a contract with a non-attorney heir finder that is in excess of 10%, then you may have a case under the Arkansas Unclaimed Property Act.  Give attorney Mark Robinette a call at 501-251-1076 for a case evaluation.  You can recover all of your money in excess of the 10%, sometimes more!

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