Who Owns the Oil and Gas?

natural-gas-well-pennsylvaniaRecently, the Pennsylvania Superior Court emphasized the difference between a “reservation” and an “exception” in a deed.   The court explained that a reservation is a way for a person who conveys property to hold certain rights in things that do not yet exist (e.g. future gas royalties). Importantly, a reservation generally ends when the person who conveyed the property dies.  On the other hand, an exception can last beyond the death of the person who made the conveyance.  Typically, the deed will show whether the grantor intended to “reserve” or “except” something.  Sometimes that determination can come down to only a few words in a deed.  Those few words can determine who owns the Oil and Gas rights to a property.

In Steiminger v. Leopold, the Stevensons sold a 157 acre parcel of land in 1905.  They included language stating that if Oil and Gas would be developed, the Royalties would be divided equally between the grantor and the grantee.  The deed also stated that any bonus would  be paid 1/3 to the grantor and 2/3 to the grantee.  There was no Oil or Gas produced during the Stevensons’ lives.  Therefore, no royalties were paid.

In 1986, Joseph and Marjorie Steiminger acquired a 72 acre portion of the property.  They filed a lawsuit to determine that they owned the Oil and Gas rights.  The court sided with the Steimingers.

The court determined that the deed included a reservation, which ended when the Stevensons died.  The court explained that deed only referred to “future hypothetical oil and gas proceeds.”  Furthermore, the deed did not use “words of inheritance.”  The court also compared the language relating to Oil and Gas to other language in the deed.


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