Brooke-Willbanks v. Flatland Mineral Fund, LP, No. 11-21-00105-CV, 2023 WL 162773 (Tex. App.—Eastland Jan. 12, 2023, no pet. h.)
The oil and gas business can be filled with specialized lingo and terms of art. For instance, those in the business of buying and selling mineral and royalty rights often engage in deals using the phrases ‘net mineral acres’ and ‘net royalty acres.’ Those phrases can be helpful shortcuts in some circumstances, but it is not uncommon for buyers and sellers to have conflicting understandings as to what those phrases mean, and the implications they may bring. Indeed, in a recent appellate case, the grantor and grantee disagreed as to whether a conveyance of 70 ‘net mineral acres’ conveyed an interest free of a pre- existing NPRI.
In this case, the Eastland Court of Appeals reviewed a 2016 deed from Brook-Willbanks to Flatland, conveying “an undivided Seventy-Two (72) Net Mineral Acres” in a 320-acre tract of land in Martin and Howard Counties, Texas. The dispute focused on whether pre-existing NPRI interests burdened solely the interest of the grantor, or whether they proportionately burdened both the grantor and grantee.
The dispute largely centered on a subject-to clause in the deed, which read as follows:
This conveyance is made subject to the terms of any valid and subsisting oil, gas and other mineral lease or leases on said land; and Grantor's [sic] have granted, transferred, assigned and conveyed, and by these presents do grant, transfer, assign and convey unto the Grantee, their heirs, successors and assigns, the above stated interest of Grantor's interest in and to the rights, rentals, royalties and other benefits accruing or to accrue under said lease or leases from the above described land. [...]
Notwithstanding, it is the specific intent of this instrument to convey to Grantee the right to receive all bonuses, rents, royalties, production payments, or monies of any nature, including those in suspense, accrued in the past or in the future, associated with the undivided interest herein conveyed.
The appellate court first discussed the meaning of the term “net mineral acres.” The court found two recent CLE papers persuasive. One indicated “one net mineral acre is typically considered to equal the fee- simple mineral estate in one gross acre of land.” Another explained that, when “net mineral acres” are used the numerator will stay constant even though the denominator may change upon resurvey.
Turning to the “subject to” clause, the appellate court held that it clarified that Flatland took was taking its interest subject to the outstanding oil and gas lease, and that Flatland was receiving the same interest the grantor possessed.
The appellate court quoted the Texas Supreme Court’s opinion in Wenske v. Ealy, 521 S.W.3d 791, 794 (Tex. 2017), stating “a severed fraction of the royalty interest-like [an] NPRI-generally would burden the entire mineral estate [...].” In the appellate court’s view, nothing in the deed expressed any contrary intent. Instead, the appellate court held that the subject-to clause expressed an intent to follow this principle, because it stated the intent was to convey “the above stated interest of Grantor's interest in and to the . . . royalties . . . accruing or to accrue under said lease or leases.” The court further emphasized that the subject-to clause expressed an intent for the grantee to receive royalties “associated with the undivided interest herein conveyed,” meaning the interest as existed at the time of the conveyance, which was burdened by previously received NPRIs.