A Railroad Runs Through It: How to Evaluate Who Owns the Minerals in Your Field of Dreams

As long as the current economic conditions prevail and domestic oil production provides better opportunity for American interests, the acquisition and development of stateside mineral rights will predominate. An excellent and obvious example of this is the redoubled interest in the Permian Basin and the ramping up of activity in Midland-Odessa. As these plays continue to run, title questions will continue to emerge. Where especially arcane conveyances to railroads are memorialized in ancient documents, the archaic language can lead to disputes because simple phrases that seem ordinary and clear to us in modern parlance were used differently a century ago when the original transactions took place. If there are railroad tracks on your parcels, this may affect your ownership interests in a way that a typical title commitment may not catch.

Recently, in BNSF Railway Co. v. Chevron Mid-Continent L.P.*, decided on March 22, 2017, the El Paso court of appeals examined an ancient deed that conveyed surface rights to BNSF in 1903. Chevron subsequently acquired the mineral rights and, having drilled under the railroad tracks, struck oil.  BNSF sued for trespass to try title, arguing that the terms of the deed granted fee simple ownership of the land “from Heaven to Hell.”  Chevron argued that the fee simple language was not outcome-determinative, and the language in the deed that called out the width of the parcel used the phrase “railway right of way,” typically used to describe easements. Chevron argued that the nature of a right-of-way was an easement instead.

Chevron won. The court of appeals affirmed summary judgment in favor of Chevron and against BNSF Railway. It announced its view that the placement of a statement of purpose in a granting clause should count for something but that, in this case, the granting clause could be fairly construed as conveying either the tract of land in fee simple or an easement. The court articulated its obligation to arrive at and effectuate the grantor’s true intent.  Since the granting clause was ambiguous, it examined the rest of the deed.   The court pointed to the additional language granting BNSF permission to use the natural resources on the property or "appertaining thereto," arguing that permission would not have been necessary if the original conveyance included all property rights included in a traditional fee simple transaction.

In addition, it found the following factors to be persuasive: an opening recital suggesting that the landowner was bargaining for the benefits he would receive if a railroad were to pass over his land; at the time the deed was prepared, use of the term “for a right of way” suggested an easement; language describing the surveyor’s line also included “over, through, and across” language; and the habendum clause referred only to “premises,” instead of “property and premises.”

As domestic production ramps up, and whether or not this case is appealed further, it is important to consider special circumstances that might give rise to title disputes and to evaluate them. Title examinations should catch most of these issues but certain unique transactions – like those for railroad rights of way – may bear closer examination.

* BNSF Railway Co. v. Chevron Mid-Continent L.P, et al., __ S.W.3d __, 2017 WL 1076540 (Tex. App. – El Paso 2017, no pet. hist.).