263 Range Res. Corp. v. Bradshaw

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
Range Resources Corporation v. Bradshaw, No. 2-07-263-CV, 2008 WL 2002534 (Tex. App.—Fort Worth May 8, 2008, no pet.) (Memorandum opinion), examines whether the grantor of an interest in minerals reserved a “fraction of royalty” or a “fractional royalty.” The royalty reservation provided the following:
 
[1] The Grantors herein reserve unto themselves, their heirs and assigns and except from this conveyance an undivided one-half (1/2) Royalty (Being equal to not less than an undivided one-sixteenty [sic] (1/16) of all the oil, gas and/or minerals in, to, and under or that may be produced from said [land]. . .
 
[2] Said interest hereby reserved is a Non-Participating Royalty. . . provided, however, that all such leases shall provide for Royalty of not less than one-eighth (1/8). . .
 
[3] In the event oil, gas or other minerals are produced from said land, then said Grantors, their heirs and assigns, shall receive not less than one- sixteenth (1/16) portion (being equal to one-half (1/2) of the customary one-eighth (1/8) Royalty)of the entire gross production and/or such net proceeds as hereinabove provided. . .
 
The owner of the non-participating royalty interest contended the interest reserved was 1/2 “of royalty,” and the mineral owners contended the interest reserved was a fixed 1/16th of production. The court construed the reservation language in the deed to create a “fraction of royalty” instead of a “fractional royalty.” To reach its conclusion, the court examined the four corners of the deed to ascertain the intent of the parties. The court noted that each paragraph contained “not less than” language. The parenthetical language found in paragraph [1] states that the reserved share of production was to be “equal to not less than an undivided one-sixteenty [sic].” The court interpreted this to express the intent to establish a minimum one-sixteenth share of production.
 
Paragraph [2] provides that all leases “shall provide for Royalty of not less than 1/8.” The court found that when the first two paragraphs are read together, it was evident that the parties contemplated future leases would be executed on the property and that royalty rates in subsequent leases might vary. However, regardless of the royalty, the language found in paragraph [2] ensures grantor that the retained royalty interest would be calculated on at least a one-eighth royalty. When the court read paragraph [2] with the parenthetical in paragraph [1], the court determined that the clauses worked together to ensure grantor would be entitled to at least a minimum of a one-sixteenth share of production.
 
Paragraph [3], provides that grantor is entitled to receive “not less than one-sixteenth (1/16) portion . . . of the entire gross production (being equal to 1/2 of the customary 1/8 Royalty).” Like the other paragraphs, the “not less than” language requires that grantor receive a minimum of one-sixteenth of production.
 
A “fractional royalty” is a fixed fractional amount of oil and gas while a “fraction of royalty” is a fractional amount that is determined upon the execution of some future lease. The court determined that by using “not less than” language, the royalty calculation was not intended to be fixed. The court concluded that because the parties intended that the royalty was not to be fixed, the reserved interest could not be a “fractional royalty,” and therefore, 1/2 “of royalty” was reserved by grantor. The significance of the case is that it continues the resurgency of the “four corners” rule as the rationale for interpreting cases similar to Range Resources.