Drafting Oil and Gas Title Opinions
Our firm’s most active practice is drafting drilling and division order title opinions for exploration and production companies. Our philosophy and methods in this practice are based around three key principles.
1. Smart Drafting to Provide Complete Title Coverage
The goal of a title opinion should be to provide a firm basis of the state of title to the client and other readers. Everything that’s pertinent to know about title as of the effective date of the opinion should be revealed within the opinion, without need to look beyond the opinion itself. We always provide a complete discussion relating to the calculation of parties’ interests, the validity of an operator’s oil and gas leasehold estate, and any significant title defects.
Lengthy explanations unrelated to title defects are avoided. Title examinations must balance cost and timeliness when chasing down small issues or matters that do not materially affect oil and gas operations. Any limitations on the opinion should be client driven; otherwise, new title opinions should cover all depths and formations and all relevant information for the lands under review.
2. Useful Format
Oil and gas title opinions should be put into a useful format to the client, while limiting the title attorney’s risk by using exceptions and comments. Our title opinions are traditional in format, which includes a listing of the materials examined, exceptions and qualifications, tract and lease descriptions, basic ownership tables for the surface, mineral, and leasehold estates, net acreage figures, followed by comments and requirements. In addition, we provide a flexible spreadsheet with calculations for every interest, along with additional exhibits listing out encumbrances, leasehold assignments, and important documents.
3. The Buck Stops Here and Avoid Sloppy Mistakes
During drafting an opinion, great care should be taken to ensure accuracy.
The attorney must not conceal information or gloss over possibly severe title issues. The most valuable title opinion provides honesty, clearly laying out all title risks to a client’s future operations.
Title attorneys are often provided title data from the client to prepare a title opinion. The title data can arrive in various formats and can be subject to limitations, including mistakes made by the preparer, incomplete information, or other defects. In addition, sometimes a title opinion is based off an older title opinion drafted by another attorney which could contain mistakes that are either apparent or latent.
The drafting attorney must attempt to recognize significant problems with either abstracts or prior title opinions and make note of these possible issues. In the interest of efficiency, however, the attorney should not try to redo an abstract or prior opinion from scratch. Where information or a new review would be prohibitive based on cost and time, the attorney should note the issue in the opinion or contact the client for further instructions. The drafting attorney must not ignore defective materials, but must work to solve issues prior to delivering the new opinion to the client.
Please contact our firm to learn more about our title opinion practice and how we can help your company with your title needs.