The Legal Characterization of Overriding Royalty Interests in Oil and Gas

Abstract

The question of whether overriding royalties are interests in land or interests in pure personalty, question which has not been decisively answered by the Canadian courts, forms the core of Mr. Davies' article. The author submits that an overriding royalty can be considered an interest in land only if it can be classified as belonging to one of three categories: reservation or exception of title to fraction of the oil and gas in place, or; profit prendre in itself, or at least tenancy in common in profit prendre, or; rent or an interest analogous to rent After examining Canadian and American authorities lending support to each of the three categories the author, extending to overriding royalties the principles presently applied by Canadian courts to lessor's royalties, concludes that, despite some conceptual difficulties, policy considerations favor the cate gorization of overriding royalties as rents or interests analogous to rents. The author submits that such categorization is necessary in order to extend to over riding royalties the protection afforded interests in land.