To consider what grantor and grantee records mean for oil and gas companies, it is important to first understand the differences between them. A grantor is essentially the party “giving” a property. The grantee, on the other hand, is the party receiving the property. Typically, the grantor in oil and gas industry ventures is the owner of a resource deposit and the land it occupies. The grantee is the gas or oil company that wishes to explore and develop the land.
Grantor/grantee records are vital to gas and oil companies for several reasons. The grantor that owns mineral rights to their land will usually be entitled to a share of bonuses, royalties, and other financial incentives for development that takes place on their land. The grantee, or oil/gas company in these cases, will typically pay out a bonus for their initial entrance into a lease of the property.
Records Ensure Strong Grantor/Grantee Relationships
Any disputes that arise can typically be defused by referencing properly maintained and indexed grantor/grantee records. These records will outline the responsibilities of all involved parties and include a description of how the responsibilities and entitlements of a deed will pass to heirs – any changes such as this will be included in properly kept records.
If any modifications, restrictions, or addendums need to be made to a deed agreement, either the grantor or grantee can ask for these changes to be carried out. There are also some specific deeds that a grantor and grantee may use, including:
- General Warranty Deeds: This type of deed ensures that the grantor has no restrictions in terms of selling their property or rights to use it. The grantor is guaranteed to have a marketable title for the property.
- Special Warranty Deeds: These deeds protect the grantor from liability from any errors in the property title if they existed before the grantor took ownership.
- Grant Deeds: This type of deed is used to ensure that the grantor has not previously sold the property, and it also ensures the grantor isn’t responsible for defects in the property title.
- Quitclaim Deeds: These deeds are used if there’s any uncertainty or definitive defect with some aspect of the title. It will also transfer the same interest from the grantor to grantee.
With all of the variance in deeds that surround oil and gas industry ventures, the grantor/grantee records are vital to maintaining an understanding for each party’s responsibilities and entitlements in the agreement. These records are also crucial for anyone creating a chain of title for a property.
Understanding the requirements and roles of the involved parties provides insight into what the grantor allows and the scope of the grantee’s permissible actions upon the property through the agreement. The grantor/grantee records are also vital for ensuring that the proper entitlements, interest, and privileges are transferred correctly, and that royalties are calculated and distributed within the boundaries of the agreement.
Eliminating Uncertainty
The owner of the mineral interest, or the grantor, allows prospecting and development rights to the grantee for a predefined timeframe. The grantee will typically pay a cash bonus to the grantor for entering into a new lease, and royalties - or a share of the production revenue - will also be paid to the grantor for the term of the agreement.
Records are absolutely crucial for gas and oil landsmen to ensure they operate within the confines of the agreement and make good on their financial obligations to the landowner. These agreements will also define the responsibilities of both parties for any problems that occur and their level of liability, along with who can claim damages in certain circumstances.
Anyone pursuing an interest for a land parcel will need to consult the grantor/grantee records to review the terms of the existing agreement and to learn what they may expect if they were to assume ownership or become a new grantee. Fiduciary responsibilities of all involved parties become much clearer with thorough and properly maintained grantor/grantee records. These records will also provide a clear picture of how long royalty obligations last or if they are indefinite. In some situations, a grantor will be entitled to royalties indefinitely, regardless of changes in ownership between different grantees.
