Texas Oil and Gas Attorney Blog
The question of “fractional royalty” vs “fraction of royalties” has historically been the source of enormous confusion for Texas mineral owners and oil and gas attorneys. The Texas Supreme Court recently provided more guidance on the question in the case of Hysaw v. Dawkins, 483 SW 3d 1 (2016). This case involved a will written in 1947, but the lessons of the case apply equally to deeds, oil and gas leases and other forms of conveyance.
The teaching provided by Hysaw concerning these “1/8th royalty” clauses is that courts and lawyers must use a case-by-case and fact specific approach to resolving questions of fractional vs. fraction of royalty questions. The courts are to effectuate the intent of the drafters; not apply a mechanistic “multiplication of double fractions” formula.
Why is This an Issue?
For decades, the standard mineral/oil royalty in Texas was one-eighth. Many landowners erroneously believed the royalty would never be greater than that. The belief was so widespread that the words “one-eighth” or “one-eighth royalty” came to be synonymous with, or a proxy for, “the total royalty interest.” Saying “I got my 1/8th” was like saying “I got my royalty.” The confusion occurs when the situation involves royalty that is larger than 1/8. For example, let’s say that property was conveyed which is now subject to a lease in which the royalty is 1/4. Does the recipient of a deed that conveyed “1/2 of 1/8 royalty” get 1/2 times 1/8, (which would be 1/16), or 1/2 times the current royalty of 1/4, which would be 1/8. If the phrase “1/8 royalty” in the deed was used as a proxy for whatever the actual royalty was, then the recipient would get 1/8 of all royalties even if they were greater than 1/8 (a “fraction of royalty”). If the deed specifically meant 1/2 of 1/8, then the recipient would get 1/16 of all royalties (a “fractional royalty”). The Hysaw case is one where the Court held that the words “1/8 royalty” was used in this historical manner to mean the “total of the royalty”, i.e., a fraction of royalty.
The Hysaw Facts
Ethel Hysaw died in 1949. When she drafted her will in 1947, she devised her surface acreage in different amounts to her three children, but gave them each “an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands, the same being a non-participating royalty interest …” Under a mechanistic approach, that would give each of the heirs a 1/24th (1/3 times 1/8) fixed share of gross production (a fixed or fractional royalty).
However, the Hysaw Court took notice of the historical backdrop discussed above. Because of that history and use of the words “1/8 royalty,” the Court looked to the “four corners” of the will in order to understand Ethel’s intention. The Supreme Court emphasized that it is important to harmonize all of the provisions of a document and not to give preeminence to one clause or paragraph over another. The Court also examined other evidence presented in the case, such as land transfers made prior to Ethel’s death. From examination of all the provisions of the will and the other facts, the Court held that Ethel Hysaw intended to leave one-third of the total royalties to her three children (a floating or fraction of royalty). The Court rejected the “mechanical approach” that required “rote multiplication of double fractions” in this case.
Do You Need Help? Contact us Today
Obviously, the interpretation of deeds and wills regarding royalty fractions can be complex and confusing. If you have royalties that flow from a vintage will, lease, deed or other document or conveyance that has this type of “1/8 royalty” language, you might be receiving less royalty than you should be receiving. Contact our office for a consultation if you have questions like this.