CPL Due Diligence & Title Opinions 2 — Questions and Answers
Question 1: Which document is typically the starting point when examining oil and gas title in a new area with no prior production history?
- The most recent deed in the chain
- The original patent or grant from the sovereign (Correct answer)
- The county tax assessor records
- The state oil and gas commission records
Correct answer: The original patent or grant from the sovereign
Title examination must trace ownership back to the original sovereign grant or patent, which is the root of title.
Question 2: A 'Runsheet' prepared during a title examination primarily serves to:
- List all outstanding mortgages on the property
- Chronologically document all instruments affecting title (Correct answer)
- Summarize the mineral ownership percentages
- Identify all surface easements and rights-of-way
Correct answer: Chronologically document all instruments affecting title
A runsheet is a chronological abstract of all recorded instruments affecting the property, used as the foundation for the title opinion.
Question 3: When a title opinion identifies a 'curative requirement,' this means:
- The title is unmarketable and cannot be cured
- A defect exists that must be corrected before the title can be relied upon (Correct answer)
- The opinion has been approved by all working interest owners
- The mineral rights have reverted to the surface owner
Correct answer: A defect exists that must be corrected before the title can be relied upon
A curative requirement identifies a specific title defect and the action needed to remedy it before the company can rely on the title.
Question 4: In a title opinion, which section typically outlines the conditions that must be met before the company can drill or operate?
- Ownership section
- Requirements section (Correct answer)
- Exceptions section
- Depth limitations section
Correct answer: Requirements section
The requirements section of a title opinion lists specific actions or documents needed to cure defects before operations can proceed.
Question 5: A 'skeleton title opinion' differs from a full title opinion in that it:
- Only covers surface rights, not mineral rights
- Provides a preliminary review based on limited records for early decision-making (Correct answer)
- Is prepared by a landman rather than an attorney
- Covers only the past 10 years of title history
Correct answer: Provides a preliminary review based on limited records for early decision-making
A skeleton opinion gives a quick preliminary assessment based on available records so the company can make early acquisition or leasing decisions before a full search.
Question 6: Which of the following BEST describes the 'Duhig Rule' as applied in title opinions?
- A rule requiring mineral interest owners to record their interests within 90 days
- A rule of construction where a grantor cannot convey more than they own, with shortages charged against the grantor's reservation (Correct answer)
- A rule that estops mineral owners from claiming interests adverse to their warranty
- A rule establishing priority of recorded liens over unrecorded mineral conveyances
Correct answer: A rule of construction where a grantor cannot convey more than they own, with shortages charged against the grantor's reservation
The Duhig Rule holds that when a grantor conveys land and attempts to reserve a fractional mineral interest, any shortage in title is charged against the reservation, not the grant.
Question 7: During due diligence on an acquisition, the landman discovers that a prior lease expired before production was established. This creates a concern about:
- Surface use rights under the prior lease
- Whether a new lease is needed to cover the acreage (Correct answer)
- The validity of the current surface owner's title
- Federal royalty obligations on prior production
Correct answer: Whether a new lease is needed to cover the acreage
Once a lease expires without production, the mineral rights revert to the lessor, so a new lease must be obtained to hold those rights.
CPL Due Diligence & Title Opinions 2
Which document is typically the starting point when examining oil and gas title in a new area with no prior production history?