The misapplication of basic Texas property law (primarily by one South Texas attorney) has led to extensive controversy regarding unclaimed mineral proceeds from lands patented by the Spanish Crown, Mexico, the Republic of Texas and the State of Texas. In response to the controversy, the Texas Legislature passed HB 724 in 2013 that created the Unclaimed Mineral Proceeds Commission (the “”Commission”). The Commission’s directive is to study the distribution of minerals derived from an original land grant, owned by a descendant of the original grantee, unclaimed and presumed abandoned under Chapters 72 through 75 of the Texas Property Code and delivered to the Comptroller under Chapter 74 of the Texas Property Code. The Commission produced the Unclaimed Mineral Proceeds Commission Report (the “Report”), the main conclusions of which are paraphrased below. I have recently worked with several clients dealing with this issue, hence my interest.
The short answer to the issue is that a successful claim with the Texas Comptroller must demonstrate mineral ownership and that unclaimed funds were reported to the Comptroller.
- Failure to prove ownership of an identifiable mineral or royalty interest terminates a descendant’s right to recover unclaimed mineral proceeds.
- The attorney for the majority of the claimants misstated basic Texas property law. The correct view is that conveyances of lands that do not explicitly reserve minerals convey all rights in the land, including the minerals.
- The 1866 amendment to the Texas Constitution released mines and minerals previously claimed or owned by the State to the owner of the soil as of 1866 and not to the original patentees or their heirs.
- The Texas Railroad Commission does not adjudicate title issues or boundary disputes, and its records do not directly correlate with the names of mineral interest owners.
- Texas real property laws, including statute of limitations, apply to all Texas citizens, so that they are subject to foreclosure, execution sales, trespass, adverse possession, etc. Additionally, the Commission noted that declaratory judgments (heirship proceedings) determine genealogy and not mineral interest ownership.
- The scope of the Commission’s directive directly prohibited it from suggesting reparations or restitutions for past injustices despite testimony of such wrongdoings at the hearings.
The Report noted that oil and gas companies are currently substantially complying with the law. It also noted that the Texas Comptroller could prospectively require oil company holders to report property-specific information for unclaimed property, including the lease, property or well name and the county where such property is located. This information is already required for check-stub reporting under Natural Resources Code Section 91.502.
The Report made several recommendations, some of which are paraphrased below:
- That the Comptroller by rule, or the Legislature by statute, prospectively requires oil company holders to report property information required to be included on check-stubs as per Texas Natural Resources Code Section 91.502.
- That the Comptroller by rule, or the Legislature by statute, prospectively require oil company holders to report the survey name, the General Land Office abstract number from Railroad Commission Form W-1 (Application for Permit to Drill, Deepen, Plug Back or Re-Enter, item 10 on current form), and the GPS coordinates from Railroad Commission Form W-1 for each well for which mineral proceeds are reported and remitted to the Comptroller as unclaimed property.
- (As per the Texas Comptroller: future unclaimed mineral proceeds will be reported with both well and lease information in addition to payee name. This will only begin in the reporting year 2016, and will not be applied retroactively).
- That the Comptroller by rule, or the Legislature by statute, hold unclaimed mineral proceeds derived from areas within the original Spanish and Mexican land grants in a separate account.
- The Legislature should suggest that the Speaker of the House of Representatives and the Lieutenant Governor set a committee interim charge to study and address past injustices against Tejano landowners.
In conclusion, it is well known that South Texas title is messy, at best. Due to the basic nature of Texas property law, it is highly doubtful heirs to original land grants have retained minerals, without additional actions. My conversations with potential clients always begin this way and I generally spend significant time debunking the misstatements of law they have been led to believe. Ultimately, no claim can be successful without proving ownership and that unclaimed mineral proceeds were reported to the Texas Comptroller. I have yet to encounter a successful claim, but my experience is limited to my own client base.