September 26, 2012 Articles

Leasing the Mineral Owner Who's Gone AWOL

When an owner cannot be identified, a receivership may be the solution.

By Thomas G. Ciarlone Jr. – September 26, 2012

Exploration and production (E&P) companies in Texas are encountering with increasing frequency the vexing problem of mineral and royalty owners who have gone AWOL. The most common scenario is where an E&P has leased some—but not all—of the minerals in a tract of land, and where one or more of the other mineral owners in the same tract cannot be identified or found. Depending on the size and location of the land, this can bring the E&P’s operations to a sudden halt.

The mineral receivership, a creature of statute, can help resolve this problem. Enacted by the Texas legislature specifically “to encourage the exploration and development of mineral resources,” the receivership statute sets out a process for the E&P to continue its work notwithstanding the missing mineral owner. Tex. Civ. Prac. & Rem. Code § 64.091(a). A word of caution, however: While the statute is not especially complex, its strictures must be followed to the letter. Otherwise, a receivership—including any leases taken under it—will be subject to collateral attack. Errors can translate into costly problems for an E&P that has already commenced drilling or other operations on the land.

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