THE MINERAL-ROYALTY
DISTINCTION IN OKLAHOMA
By Richard W. Hemingway
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MINERAL OR ROYALTY:
GENERAL CONSIDERATIONS
Since the subject matter of this paper deals with the distinction between a mineral interest and a
royalty interest, it would seem appropriate that the terms be defined at the outset.
As used by the writer, "mineral" or "mineral
interest" denotes the aggregate of rights pertaining
to the possession and development of the minerals,
including (a) the right of self development, (b) the
right to lease, (c) the right to bonus, (d) the right to
delay rentals and (e) the right to royalty.
"Royalty" or "royalty interest" is limited to a
right entitling the owner to a fraction of gross
production, not chargeable with the costs of
development or production.
Problems of interpretation involve both the
quality of the rights involved (does the interest
owner have the right to lease or the right to bonus,
etc.?) and the quantity of those rights (does a
1/16th interest entitle the owner to a 1/16 or 1/16 x
1/8,'i.e., a 1/128, of gross production?). The first
decisions of courts were made at a time when
neither the lawyers drafting the instruments nor the
judges interpreting them had a clear understanding
of the nature of severed mineral interests involving
oil and gas. To a great extent the nature of these
interests evolved from one case to the next; it is no
wonder that the cases are not consistent as to
concept or result. It is hoped the -following
discussion will be of aid to the practitioner in
interpretation of grants and reservations of mineral
and royalty interests in Oklahoma.
Tl e Oklahoma Bar Journal
The cases usually involve the following typical
clauses in grants and reservations:
(1) "an undivided interest in and to all of the oil, gas and other minerals in,
under, and that may be produced from the
described land, together with the right of
ingress and egress for the purpose of entering, developing and producing same.
(2) Same as (1), above, without the right of
ingress and egress.
(3) "an undivided interest in and
to all of the oil, gas and other minerals that
may be produced from the described land.
(4) same as (3), above, with a right of ingress
and egress.
(5) "an undivided royalty
interest in and to the oil, gas, and other
minerals in, under, and, that may be produced from the land described.
(6) "an undivided royalty
interest in and to all of the oil, gas and other
minerals produced and saved from the land
described.
(7) same as (5) and (6), above, with rights of
ingress and egress.
(8) ""an undivided interest in and
to all of the oil royalty and gas royalty that
may be produced from the described land"
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(9) "an undivided interest in and to all of the oil royalty and gas royalty, and the rights thereto, that may be produced from the described lands"
(10) "an undivided interest in all of the oil, gas and other minerals, in and under the land, with grantor reserving the right to
lease, bonus moneys and delay rentals."
As a background to an understanding of the
Oklahoma cases, it will be helpful to survey the
various approaches to interpretation applied by the courts in other oil and gas producing states:
(1) Whether, looking at the instrument as a
whole, it expresses an intent that the interest be cost
bearing or free of costs.' This can be found from
direct language in the instrument or implied from
the presence or omission of statements relating to
the right to discover or produce, to lease, rentals,
and bonus.
(2) Whether the language of the instrument
indicates an interest in place in the ground2
(mineral) or only after produced3 (royalty), a
mechanical approach.
(3) That the term "royalty" has a definite
meaning,' indicating only an interest in gross
production equal to the fraction stated, or to the
percentage of royalty provided for in later leases. This interest would not share in bonus, delay
rentals or the right to lease.
(4) A lingering construction of the terms "roy-
alty" and "profits" as indicating a mineral interest.5 This conclusion follows the common law concept that a conveyance of the profits of the land is a
conveyance of the land itself.
(5) Treat the words as ambiguous and allow
parol evidence to determine intent.
(6) Any combination of the above.
Early Oklahoma cases dealing with the
mineral/royalty distinction adopted the view of the
West Virginia courts that a conveyance of the
profits of the land was tantamount to a conveyance
of the land itself. This is a basic factor in
understanding the Oklahoma cases in this area. In
the case of Burns v. Bastien,' involving a
reservation "an undivided three-fourths interest in
and to all the royalties," the court stated:
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.... We conclude, therefore, that the term
"'royalties of oil and gas" in the conveyance in
question was used in the sense of proceeds or
income from those minerals, and, under the
doctrine of the West Virginia cases cited above,
approved by this court in Dunlap v. Jackson,'
supra, the reservation carried with it the
beneficial ownership of those minerals. We do
not, of course, follow the West Virginia court
to the extent of holding that oil and gas are
owned in place, for this court does not
subscribe to that theory
It was held that a mineral interest was reserved.
The decision seems unfortunate. Much confusion
would have been avoided if a definitive meaning
had been applied to the term "royalty." As it now
stands, and as is discussed below, in certain
circumstances, a grant or reservation of "royalty,"
may actually convey or reserve a mineral interest.
This is not helpful when the very issue to be
resolved is: mineral or royalty? Oklahoma seems to
have all of the constructional problems that plague
other jurisdictions, and, in addition, that the word
royalty may be interpreted to mean "mineral
interest."
CREATION OF A MINERAL
INTEREST: CASES NOT
INVOLVING THE WORD "ROYALTY"
In Oklahoma, as in most jurisdictions, a grant or
reservation in the form of,
an undivided 1/2 interest in and to all of the
oil, gas and other minerals, in, under, and that
may be produced from the described land,
together with the right of ingress and egress for
the purpose of entering, developing and
producing same."
will pass a mineral interest whether or not a lease is
outstanding at the time. This is true whether or not
the right of ingress and egress is included. Early
Oklahoma cases, however, drew a sharp
distinction between grants and reservations of a
mineral interest. Where rights of ingress and egress
were omitted from a grant of the minerals, it was
held that the conveyance was void; if omitted from
a reservation of the minerals, the rights would be
implied.' This distinction is no longer followed. If
the rights of ingress and egress are omitted, they
will be implied in either case.'
Vol. 52-No. 42
RICHARD W. HEMINGWAY
who joined the OU College of Law faculty
August, 1981, previously was Dean ad interim, Acting Dean and a Horn Professor at Texas Tech
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University School of Law. A lecturer and author,
Professor Hemingway holds a B.S. from the
University of Colorado, a J.D. from Southern
Methodist University School of Law and a
L.L.M. from the University of Michigan School
of Law.
Manley v. Boling" is an early example. In this
case the court was faced with questions both as to the quality and quantum of the interest granted
under the following clause,
find company with most jurisdictions. The
"* * * an undivided one-sixteenth (1/16) of all difficulties in distinguishing between a mineral and
the oil, gas and other minerals in and under the royalty interest in Oklahoma do not extend in this
aforesaid lands, and which may be found direction.
therein, or produced therefrom, together with
the right to go upon said lands and prospect the CREATION OF A MINERAL INTEREST:
same for oil, gas and other minerals * * *" CASES INVOLVING A BROAD
CONSTRUCTION OF THE TERM
It was held that a 1/16th mineral interest was "ROYALTY"
granted, entitling the grantee to a 1/16 of the
bonus, rentals, and royalties. If a lease with a 1/8
landowner's royalty were later executed, the As mentioned above, Oklahoma has followed
royalty interest entitlement under the above deed the West Virginia rule equating profits to a mineral
would be 1/16 x 1118, or 1/128, of gross production. interest in certain circumstances, where not
Later cases also have emphasized the "in and restricted by the wording of the instrument. The
under" language as an indicator of a mineral court in Burns v. Bastien,14 further quoted from the
interest." West Virginia case of Toothinan v. Courtney:`
The Manley court stated that the language in the * * * his reservation of all the rental or royalty
above deed was unambiguous, and that parol to be derived from it compels the court to hold,
evidence would not be admissible. However, by construction of the instrument, that it vests
Oklahoma courts in such cases seem prone to look in him the title to that thing, the beneficial use
at parol evidence when it is contained in the whereof has been reserved, namely, the oil in
record. 12 place. Jarman on Wills, * * * says: 'A devise of
a-.e is
not A variation on the Manley type clause is found in
Early the case of Hinkle v. Gauntt," where the language
.harp concerned an interest in "oil and gas deposits" that
of a could be developed on the land. Again showing a
:tress tendency conceptually to treat a mineral interest as
was an interest in place in the ground, the court held
from that a mineral interest was created.
d be
d. If In so construing the Manley type clause as
they creating a mineral interest, the Oklahoma courts
The Oklahoma Bar journal
rents and profits or of the income of land
passes the land itself both at law and in
equity- a rule, it is said founded on the feudal
law, according to which the whole beneficial
interest in land consisted of the right to take the
rents and profits * * * .
* * * if there had been no lease on the land, I
would be of the same opinion, for a reservation of all possible benefit of the oil is tantamount to a reservation of the corpus thereof
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The landmark case in Oklahoma applying the
above principle appears to be Melton v. Sneed. 16 At
Elie'time that the deed in question was executed,
there was no oil and gas lease outstanding on the
land. The deed contained the following grant,
The case of Federal Land Bank of Wichita v.
Nicholson, 29 is . typical of the cases following
Carroll. In it the following reservation was
construed:
royal
land
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one-third (1/3) of all royalties, from
it. is understood that the grantors herein royal retain a one-half interest in all royalties
oil, gas, or other minerals arising from or out
of or produced upon the said above described
lands."
The court construed the grant as an undivided
1/3 mineral interest, which entitled the grantee to one-third of the royalty, rentals and bonus. In
explaining the holding, the court stated:
* * * upon examination of the conveyance it is
readily apparent that the word was not used in
its strict sense, but in the broader sense * * * as
denoting an interest in the minerals. That the
word (royalty) is frequently used in this State
to denote an interest in the mineral rights is a
matter of common knowledge. The
conveyance in question here employed it in
that sense. There is no reference therein to any
lease, or to the royalty reserved thereunder,
and the grant is expressly made perpetual
The court relied upon the case of Carroll v.
Bowen. 17 In Carroll the court stated:
.... if the reservation of "royalty" does not
specify the percentage of production meant to
be included therein, and where it is not made
with reference to any existing lease establishing
the amount, the term is ambiguous and
extrinsic evidence may be examined . to
determine the intent of the parties
(emphasis supplied).
The Melton court held that the deed was
ambiguous. Parol evidence was deemed to be
admissible, including the presence or absence of an
oil and gas lease at the time of execution of the
deed. The Melton case established a rule of
construction that has been consistently followed in
Oklahoma, viz., that a conveyance of a fractional
interest "of royalty,""' where no reference is made
in the deed to any lease, or to the royalty reserved
thereunder, and the deed is executed at a time when