2023 New Mexico Statutes › Chapter 70 - Oil and Gas › Article 1 - Assignments and Leases › Section 70-1-1 - [Production of oil, gas or other minerals; assignments of royalties to be recorded.]

That all assignments and other instruments of transfer of royalties in the production of oil, gas or other minerals on any lands in this state, including lands operated under lease or contract from the United States and from the state of New Mexico, shall be recorded in the office of the county clerk of the county where the lands are situated.
History:
Laws 1927, ch. 76, § 1; C.S. 1929, § 97-501; 1941 Comp., § 69-101; 1953 Comp., § 65-2-1.
ANNOTATIONS
Cross references.
— For recording deeds,
see
14-9-1 NMSA 1978.
For recording contracts relating to oil and gas rights in state lands,
see
19-10-33 NMSA 1978.
Interpretation of ambiguous assignment.
— Where, in dispute over the meaning of an ambiguous conveyance of interests in oil wells in a well spacing unit, the assignor claimed that the conveyance was a wellbore assignment of only one well in the unit and the assignee claimed that the conveyance was a conveyance of all of the assignor's operating interest in the unit which consisted of two wells; the first version of the conveyance, which was prepared by the assignee, conveyed all of the assignor's operating rights in the unit to the assignor; a second conveyance, which the parties signed and which was ambiguous, was prepared by the assignor with the intent to convey only the wellbore of one well to the assignee; the assignor did not inform the assignee that the assignor intended to convey only the wellbore of one well; the assignor was not aware that there was more than one well in the unit; and wellbore assignments were uncommon, because the assignor was aware of the assignee's intent, but the assignee was not aware of the assignor's intent, the district court's finding of fact that the conveyance conveyed all of the assignor's operating interest in the two wells in the unit was supported by substantial evidence.
Chisos, Ltd. v. JKM Energy, LLC
, 2011-NMCA-026, 150 N.M. 315, 258 P.3d 1107.
Substantial evidence of bad faith.
— Where plaintiff and defendant disputed the ownership of a fifty percent interest in an oil well that was subject to a joint operating agreement; the agreement provided a procedure for parties to elect to participate in the reworking of the well and required thirty-days' notice of operations on the property; when plaintiff received notice from the state that the well had shown no production for a year, plaintiff determined to rework the well to bring it back into production; when defendant claimed that plaintiff was trespassing on defendant's well, plaintiff obtained a limited term assignment from the other fifty per cent owner in the well to continue reworking the well; for two months, plaintiff did not give defendant notice of the operation; plaintiff sent an election letter to defendant which gave defendant forty-eight hours to commit $176,000 or elect not to participate in the reworking of the well; the forty-eight hour deadline was based on a provision of the joint operating agreement that allowed a reduced deadline if a drilling rig was on the property; plaintiff claimed that a "drilling/workover" rig was on the property; and plaintiff knew that the rig was not a drilling rig, substantial evidence supported the district court's finding that plaintiff acted in bad faith.
Chisos, Ltd. v. JKM Energy, LLC
, 2011-NMCA-026, 150 N.M. 315, 258 P.3d 1107.
Commencement clauses in the context of oil and gas lease agreements construed.
— Unless the parties include language in their contract indicating otherwise, to prove than an operator has actually commenced drilling operations, actual drilling is conclusive proof, but is not necessary, obtaining a permit is not essential, activities such as leveling the well location, digging a slush pit, or other good-faith commitment of resources at the drilling site will suffice as evidence of the parties' present intent to diligently carry on drilling activities until completion, and the off-site commitment of resources, such as entering into an enforceable drilling contract requiring the diligent completion of the well, will also suffice as evidence that the operator actually commenced drilling operations.
Enduro Operating LLC v. Echo Prod., Inc.
, 2018-NMSC-016,
rev'g
2017-NMCA-018, 388 P.3d 990.
Interpretation of a commencement clause provision in a joint operating agreement for development of an oil well.
— Where the parties entered into a joint operating agreement (JOA) for development of an oil and gas property, requiring that a party to the JOA who desired to drill an oil well provide written notice of its proposed operation to the other JOA parties, giving the parties an opportunity to become consent parties that are able to participate in the drilling operation, and requiring that the party providing notice commence drilling within 120 days, or if that party does not commence the proposed operation within 120 days but still desires to conduct the operation, then the party wishing to proceed must re-propose the operation to the non-consenting parties as if no prior proposal had been made, and where defendant issued a proposal to drill a well, to which plaintiff's predecessor in interest elected to not participate, and where defendant surveyed and staked the well site, entered into a contract for drilling services, prepared and submitted a drilling permit, consulted with a geologist regarding the design of the well, and obtained a commitment for fracking services, and where plaintiff, a non-consent party, filed suit, asserting that defendant failed to commence drilling operations and was therefore required to resubmit the proposal, thereby providing plaintiff an opportunity to consent to defendant's proposal and receive proceeds from the well, summary judgment was improper because if defendant entered into a binding drilling contract before the 120-day deadline, defendant would have commenced drilling operations as a matter of law, but whether defendant entered into a binding contract before the 120-day deadline was a genuine issue of material fact, and summary judgment should not be granted if there is a genuine issue of material fact in dispute.
Enduro Operating LLC v. Echo Prod., Inc.
, 2018-NMSC-016,
rev'g
2017-NMCA-018, 388 P.3d 990.
Interpretation of a non-consent provision in a joint operating agreement for development of an oil well.
— Where defendant entered into a joint operating agreement (JOA) with a number of parties, including plaintiff, for development of an oil and gas property, requiring that a party to the JOA who desired to drill an oil well provide written notice of its proposed operation to the other JOA parties, giving the parties an opportunity to become consent parties that are able to participate in the drilling operation, and requiring that the party providing notice commence drilling within 120 days, and where defendant issued a proposal to drill a well, but did not take any on-site action other than conducting surveys and staking the site, and where plaintiff, a non-consent party, filed suit, asserting that defendant failed to commence operations and was therefore required to resubmit the proposal, thereby providing plaintiff an opportunity to consent to defendant's proposal and receive proceeds from the well, the district court erred in granting defendant's motion for summary judgment, because the lack of any on-site activity during the 120-day period did not, as a matter of law, constitute commencement sufficient to satisfy a commencement clause in a JOA.
Enduro Operating LLC v. Echo Production, Inc.
, 2017-NMCA-018, cert. granted.
Constructive notice of prior assignment of federal leases.
— Plaintiff was an innocent purchaser for value, under 14-9-1 to 14-9-3 NMSA 1978, of oil and gas lease interests since the records at federal land office did not constitute constructive notice to purchaser of a prior assignment; rather, to constitute such notice, this section requires assignments of interests and royalties in federal oil and gas leases to be recorded in the appropriate county clerk's office.
Bolack v. Underwood
, 340 F.2d 816 (10th Cir. 1965).
Severance of mineral estate from surface property.
— A grant or reservation of underlying oil and gas, or royalty rights therein, is a grant or reservation of real property that may be severed from the surface. Such severance may be effected by a conveyance of mineral estate, or by a reservation or exception of the mineral estate, or by a conveyance, reservation or exception of the surface estate, or it may be accomplished by judgment.
Johnson v. Gray
, 1966-NMSC-020, 75 N.M. 726, 410 P.2d 948.
A conveyance or reservation of a fractional interest in the minerals by the owner of a fee simple estate will only effect a severance of the fractional interest so conveyed or reserved.
Johnson v. Gray
, 1966-NMSC-020, 75 N.M. 726, 410 P.2d 948.
Recording of assignment of oil or gas lease is necessary
under New Mexico law in order to be effective against subsequent assignees or purchasers. 1980 Op. Att'y Gen. No. 80-12.
Am. Jur. 2d, A.L.R. and C.J.S. references.
— 38 Am. Jur. 2d Gas and Oil § 19; 53A Am. Jur. 2d Mines and Minerals § 197.
What constitutes oil or gas "royalty" or "royalties" within language of conveyance, exception, reservation, device or assignment, 4 A.L.R.2d 492.
Necessity that mortgage covering oil and gas lease be recorded as real estate mortgage, and/or filed or recorded as chattel mortgage, 34 A.L.R.2d 902.
Production on one tract as extending term on other tract, where one mineral deed conveys oil or gas in separate tracts for as long as oil or gas is produced, 9 A.L.R.4th 1121.
Meaning of, and proper method for determining, market value or market price in oil and gas lease requiring royalty to be paid on standard measured by such terms, 10 A.L.R.4th 732.
Oil and gas royalty as real or personal property, 56 A.L.R.4th 539.
58 C.J.S. Mines and Minerals §§ 193, 221.