The Mineral Lien: Part One

The Mineral Lien: Part One

Chapter 56 of the Texas Property Code provides a way for a mineral contractor or mineral subcontractor to recover on debt owed him or her without resorting to filing a lawsuit. Instead, the mineral contractor or subcontractor may file a mineral lien when mineral property owners fail to pay for labor or services provided by mineral contractors or subcontractors.[1] In such cases, the mineral contractor or subcontractor may place the lien on “the land, leasehold, oil or gas well…, and lease for oil and gas purposes for which the…material, machinery, or supplies were furnished or hauled, and the buildings and appurtenances on this property.”[2]

Who may file a mineral lien?

A mineral contractor or subcontractor may file a mineral lien. Section 56.001(2) defines a mineral contractor as “a person who performs labor or furnishes or hauls material, machinery, or supplies used in mineral activities under an express or implied contract with a mineral property owner” or agent of that property owner.[3] A mineral subcontractor is a person who furnishes or hauls materials and/or performs labor under a contract with a mineral contractor, including day laborers.[4]

Interpreting the mineral lien statute, courts have repeatedly found that the “mineral lien statute is ‘designed to protect laborers and materialmen’ and should therefore be liberally construed.”[5]

What is the purpose of the lien?

Section 56.002 of the Texas Property Code tells us that the lien exists “to secure payment for labor or services related to the mineral activities” on which the contractor or subcontractor has been working.[6] In other words, if you are a mineral contractor or subcontractor and you have not gotten paid according to your express or implied contract, you can file a statutory mineral lien.

When you have a lien on someone else’s property, you have a legal interest in that property, or, put differently, a right to that property. Your right will equal the amount you are owed under the express or implied contract you have with the mineral property owner. The mineral property owner will not be able to convey clean title to its interest in the property that has a lien without addressing the lien. Therefore, a lien limits what a mineral property owner can do with his or her property, providing an incentive to the mineral property owner to pay his or her debt(s) to the mineral contractor or subcontractor.

To what property does the lien attach?

Section 56.003 of the Texas Property Code says that a lien can attach to material, machinery, and supplies furnished or hauled by the claimant (the mineral contractor or subcontractor who has not been paid); the land, well(s), pipeline(s); the lease; the building(s) or appurtenances on the property covered by the lease; and other property used for mineral activities that the owner of the lease or land owns.[7] In other words, a mineral contractor or subcontractor can file a lien against property used in the production of oil and gas even if that property is not on the lease where the contractor or subcontractor worked, as long as it is owned by the same mineral property owner and used for mineral activities.

Importantly, the lien does not attach to the fee title of the mineral interest owner.[8] Also, the lien does not affect any prior lien unless it is a lien for material, machinery, or supplies.[9] In that case, the lien will take priority over prior liens that have attached to the land or leasehold where those materials are located.

“Perfecting a lien” is a fancy way of referring to the process of making a lien valid. A lien will become valid, or enforceable, when the procedure for perfecting a lien, found in Chapter 56 of the Texas Property Code, is followed precisely:

  1. Notice. If you are a mineral contractor, you do not need to send notice to the mineral property owner(s), but if you are a mineral subcontractor, you must send notice to the mineral property owner(s) at least ten days before you file your lien.[10]
  2. Time Limit. A claimant has six months from the date the indebtedness accrues to file its lien in the county where the property is located.[11] This is a strict deadline, and the guidance on when indebtedness accrues will depend on the facts of your case.
  3. Filing. The claimant will need to give an Affidavit of Mineral Lien, have it notarized, and file it in the appropriate county.[12] Along with other information, the Affidavit must include an adequate description of the mineral property to which the lien will attach.

Read The Mineral Lien: Part Two and The Mineral Lien: Part Three for more information on the mineral lien in Texas.

DISCLAIMER: The foregoing information is not legal advice. It is general in nature and not applicable to all situations. The reader should not rely on these general statements and should consult with knowledgeable persons before taking any actions.

[1] Tex. Prop. Code § 56.002.

[2] Tex. Prop. Code § 56.003(a)(2). See also In re Reichmann Petroleum Corp., 373 Fed. Appx. 497, 502 (2010), stating mineral liens will be “applicable to the entire lease as provided by Section 56.003(a)(2) because the information provided helped to identify the nucleus of information that would identify relevant leases….”

[3] Tex. Prop. Code § 56.001(2).

[4] Tex. Prop. Code § 56.001(4).

[5] In re Heritage Consol., L.L.C., 765 F.3d 507, 511 (2014). See also Bandera Drilling Co., Inc. v. Lavino, 824 S.W.2d 782, 784 (Tex. App.—Eastland 1992, no writ).

[6] Tex. Prop. Code § 56.002.

[7] Tex. Prop. Code § 56.003.

[8] Tex. Prop. Code § 56.003(b).

[9] Tex. Prop. Code § 56.004.

[10] Tex. Prop. Code § 56.021(b).

[11] Tex. Prop. Code § 56.021(a).

[12] Tex. Prop. Code § 56.022.


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