Assignment Of Overriding Royalty Interest

Assignment Of Overriding Royalty Interest-62
Of course this remains to be definitively determined.One argument in support of the proposition that ORIs should be subject to the lessee’s unilateral pooling power is that exercise of such authority is simply industry custom and practice.Samson, in that case, had proposed a second exception which would empower courts to declare that pooling authority could exist when (a) the relevant transaction is between oil companies or persons active in the industry, and (b) surrounding circumstances reflect an underlying intent of the parties to allow pooling.

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To the contrary, ORIs are almost always subject to the lessee’s power and authority to pool.Subsequently, the lessee (“Predecessor”) assigned the lease to a company (“Successor”), with the reservation of an overriding royalty interest.The assignment did not address pooling, but instead simply assigned “all right, title and interest in and to the [lease] together with the rights incident thereto or used or obtained in connection therewith.” The court concluded the overriding royalty was subject to the unilateral ability to pool by the Successor, even though consent was not directly and expressly given in the assignment.It is illustrative to examine how Texas has treated the rule that an ORI carved out of a lease with pooling authority, is subject to the lessee’s authority to pool without further consent of the ORI owner.This rule was discussed and recognized within power to pool the leased interest.I’d love to hear your thoughts in the comments below! However, many states look to Texas law for guidance in oil and gas issues, simply due to the vast number of reported oil and gas cases in Texas over the last 100 years. In Texas, the general rule is that a lessee has no power to pool any type of royalty interest without consent of the owner.Therefore, in order to pool an overriding royalty interest, a working interest owner will need to either (1) obtain consent of the overriding royalty interest owner, or (2) fit into an exception to this general rule.In the Wyoming Supreme Court first explained that Wyoming follows a similar general rule as adopted in Texas: a lessee is without authority to unitize royalty interests, including overriding royalty interests, without consent of the interest owner. The only ‘power’ granted to the lessee was the ability to withhold consent to the lessor’s power to pool.The lessee argued that the overriding royalty interest owner constructively gave consent to pooling, due to the inclusion of pooling language in the underlying lease.court then applied this rule to the State of Wyoming lease, concluding that the phrase allowing the lessee to withhold consent to pooling should be characterized as a lessee protection, because it was was intended to protect the lessee from pooling court reasoned that the ORI owner should also be afforded this protection, thereby allowing him to withhold consent from pooling.As stated above, I believe this holding does not have general, wide-reaching applicability.


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