PART 1 of A WHITE PAPER GUIDE TO HB724
INTRODUCTION hashtag #whitepaperhb724
UNCLAIMED MINERAL PROCEEDS COMMISSION IN ITS HISTORICAL MISSION
March 21, 2014 PART 1
BY MR. GEORGE FARIAS
TABLE OF CONTENTS
Click on the topic for the link, please note some supplements are scheduled for publication in the next few days
INTRODUCTION : INTRODUCTION TO THE LAWS, THE FUNDS, DUTIES AND HB724 INFO
Supplement #1 DEPOSITS OF MINERALS FROM UNCLAIMED WELLS
Supplement #3 ASSISTANCE TO THE UNCLAIMED LAND GRANT MINERALS
Supplement #4 PROPOSED DRAFT OF LEGISLATIVE REPORT
Supplement #6 PROPOSED DRAFT FOR UNCLAIMED MINERAL PROCEEDS COMMISSION
Supplement #7 WHICH FUNDS BELONG TO THE SPANISH LAND GRANT HEIRS?
INTRODUCTION TO THE LAWS, THE FUNDS, DUTIES AND HB724 INFO
TVOC Inserted Note: Please note we are breaking this supplement up into parts for easier understanding. Please note: these are Mr. Farias' personal presentations to the HB724 commission as a descendant/heir and do not reflect the opinions of anyone else. They are a matter of public record. Please note on Page 1 about acceptable forms of proof for deceased descendants we highlighted in Red. Interestingly the State is not accepting proof heirship from the heirs. This is the point of why HB724 was created to help us get the funds, they are withholding. Also you will see some boxes of information like this box, we have decided to break this article up in subtopics for easy digest. They are not part of the original document, they are notes to identify subtopics in the white paper.
The work and mission of the HB724 Unclaimed Mineral Proceeds Commission appear to be complex,
but in reality they are simple and attainable. Some general comments are provided first and then a
specific approach is outlined to comply with the mandates contained in House Bill 724 to study
unclaimed land grant mineral proceeds.
The descendants of Spanish and Mexican land grants in South Texas maintain that Common Law,
i.e. Texas Property Law, enacted in 1840, authorizes and gives them the right to file claims against
mineral proceeds from unclaimed oil and gas wells whose owners have never been found, which
are located in the respective land grants awarded their ancestors.
The most important conclusion for the commission to reach is a major legal one, confirming and
validating that these descendants do have a claim to those minerals under present law as written,
that is, that it is intrinsic in the law. For the commission to reach this consensus may require an
independent interpretation of the law because the law neither specifically authorizes this right, referring
to “unknown heirs,” who now have become “known” by virtue of a declaratory judgment in state district
court, nor does it specifically deny it. In a simplistic viewpoint, if the law does not prohibit something then
it must be legal. To be realistic, the validation of the law might require an official interpretation.
It is interesting to note the following statement in the state comptroller’s website, Window on State
Government, “Unclaimed Property and Mineral Proceeds,” Item (6) states, “If the owner is
deceased, you can provide the Unclaimed Property Division with documentation proving you
are an heir of the reported owner. Such documentation includes copies of wills, or, if there
is no will, a notarized Affidavit of Heirship is required for claims of less than $10,000 or less.
Claims that exceed $10,000 require a court’s Determination of Heirship or a Small Estates
Affidavit of Heirship, both of which require a judge’s signature.” (see Attachment A).
No doubt, the declaratory judgment meets this requirement.
TVOC Inserted Note: See http://www.window.state.tx.us/up/98-893_UP_Mineral_Proceeds.pdf and http://www.window.state.tx.us/up/gen_claims.html
This statement by the state comptroller indicates that her office has accepted formal legal heirship
documents to pay claims for unclaimed mineral proceeds. If so, a precedent has been established.
A review of payments by the comptroller for claims using legal heirship documents should confirm
the claims of descendants of Spanish and Mexican land grants.
Payment of such claims by the comptroller need not necessarily have been made to these
descendants but might have been paid to other Texas citizens. For example, a person in the
Permian Basin might have found out his great grandfather sold the land but not the minerals,
left no will, and never formally passed title to his descendants. With heirship court documents,
the person could claim his or her rights. It also seems very possible that a review of case law
would discover legal challenges ruled in favor of the heirs.
CLAIMS OF RIGHTS - HELP OF COMMISSION
Since this is a state matter the Texas Attorney General is the person to provide an opinion, which normally
takes six months to promulgate. I recommend that one or two lawyers from the attorney general’s office be
assigned to the commission to obtain this opinion and as liaison personnel to assist in expediting the legal
opinion process. This assignment of staff is in keeping with Section 2(h) of HB724 that states,
“On the commission’s request, the comptroller, or any other state agency,
department, or office shall provide any assistance this commission needs to perform the commission’s
duties.” These lawyers can also help scrutinize the related points of law for an opinion. The other legal points
to be clarified include laws about transference of mineral rights when the contract is silent, current statutes of
limitations, if any, the transference of minerals to owners under the Texas Constitution of 1866, the fiduciary
responsibility of the state for unclaimed funds and its rights to interest on those funds (but not the principal),
etc. It is not the job of the commission to do homework. That is the responsibility of staff. The idea of a
subcommittee to do limited study is a sound one, which I refer to as an executive committee if it includes
One of the other legal points bears clarification. It has been stated that prior to 1866 Texas landowners did
not own the mineral interests on the land, but many of the families of the original grantee were living on the
land. However, Appendix III of the New Guide to Spanish and Mexican Land Grants in South Texas, Texas
General land Office, 2009, “Sal del Rey” and Mineral Rights in Texas, pages 167-168, states,
“This prompted a substitute ordinance with a broad and contrary effect.
The substitute did not refer specifically to “Sal del Rey.’ Instead it proposed giving away the state’s
mineral interest to existing surface owners. The effect was retrospective. Owners of land granted
by the successive sovereigns (Spain, Mexico, Republic of Texas, and the state of Texas) before
adoption of this amendment, would be given complete ownership of the minerals on their land. “
(see Attachment B)
There seems to be confusion about what constitutes unclaimed mineral proceeds. I divide them into
two categories. The first I call Type One and are abandoned royalties of title holders who have
disappeared. These proceeds come back to the oil and gas companies, and every three years they
come back to the state with an amount and name or best description. This is the fund maintained by the
Texas Comptroller’s Unclaimed Property Division mixed in with traveler’s checks, bank accounts, and
other property. The analysis of these funds indicate that most of the persons named will never be able to
recover their property.
The other unclaimed mineral proceeds are those I categorize as Type Two, those produced from
unclaimed wells whose owners have never been found without a name attached. These funds
come to the state after three years such as the Type One proceeds to be kept in trust by the state.
If, as previously mentioned, the unclaimed wells have the initials of the original land grantee that
practice enforces descendants’ claims.
Oil and gas companies make extensive efforts to find rightful owners for obviously they need to
legally drill for all the benefits of current revenues and payment of royalties to lease holders. They
make exhaustive searches of county and other records. Failing there the oil and gas companies
desire to stake a claim by drilling an unclaimed well at great expense. It is an investment in the
future as they hope and pray that rightful owners will someday come forth.
DRILLING PERMITS / PROCESSES / MONEY RECORDING KEEPING
Drilling an unclaimed well requires a permit from a district judge representing the state, called a
receivership hearing. In granting the request, the judge may require the oil and gas company to
reserve 100% of the funds and pass them on to the state after three years or the
judge may require that the funds be deposited in a county bank account called a registry. If the rightful
owners show up in the future, the oil and gas company can recoup its investment. In one case I reviewed,
the petroleum company could keep 75% and grant the owners a 25% royalty. This ratio may not be uniform.
This process raises several questions. First, does all the money kept initially by the drilling company
or held by the county find its way ultimately to the state? Second, does the state monitor these wells,
their units and dollars of production, to insure all funds are paid in? Third, what controls does the
state have to insure that all the monies find their way to state coffers? As a former auditor, a major
part of my study was to determine if a company had what are called good internal controls. The
Texas Railroad Commission has all the records and an analysis of their data should show the
number of unclaimed wells and their units and dollars of production. From this data the state could
set up an accounts receivable for each oil company. Fourth, are the oil and gas companies
sending in reports as required to corroborate the Texas Railroad Commission figures? If the
state is accepting the money on faith, human nature will take the path of least resistance and retain the
Fifth, do state agencies have adequate staff to perform their duties, especially now with the
increased production from the Eagle Ford Shale and forthcoming new mineral discoveries?
Sixth, is the state enforcing the 1985 law and are the oil and gas companies meeting their
agreements to abide by the law?
HOW MUCH MONEY ARE WE TALKING ABOUT
The next important question to be raised here is to determine the amount of money that has
been submitted to the state since 1985. The oil and gas companies and the state absolved themselves
of all liabilities before then. The law mandates that these proceeds be deposited into the General
Revenue Fund. What we do not know is what happens after that.
Does the comptroller’s unclaimed property division handle these funds or do they go directly
to another department? Is there a large escrow account holding the fifty million dollars in trust
pledged by Getty Oil and it’s forty-nine fellow plaintiffs to start a new fund, in addition to thirty-three
years of production (since September 1, 1980 as per Compromise Settlement Agreement) or has
the state appropriated and budgeted the funds for other state needs? If so, it questions the
fiduciary responsibility of the state, which can be corrected currently by starting to deposit
Type Two mineral proceeds in a trust account that is visible to all.
WELLS WITH NO NAMES ATTACHED
The question then must arise as to why there are so many wells with no owner and no name attached.
The answer is simple. The land grantee and his or her family never sold or otherwise conveyed these
mineral interests. The possibility that someone will show up with title in hand registered in a county that
he or she is the owner of a certain unclaimed well is remote. In most cases, therefore, the descendant
heirs maintain that the ownership is still in the estate of the land grantee, that the rights are still in
the family, and the descendants are “de facto” owners. Webster defines de facto as ” in reality or
fact, serving a function without being legally or officially established, or in practice not necessarily
ordained by law.”
EXAMPLE OF FIRST DECLARATORY JUDGEMENT
On July 8, 2008, my first declaratory judgment was approved by the late 229th District
Judge Ricardo H. Garcia for the Jacinto de la Peña land grant in Zapata County.
During the proceedings Mrs. Eileen McKenzie Fowler, my attorney, asked Judge Garcia if, in his opinion,
the heirs had a right to these unclaimed minerals. He said, “There is no doubt about it.” It is in
the record. This was one judge’s opinion but from a distinguished jurist with a long résumé. This was
encouraging to me and confirmed what we had been told by Mrs. Fowler. As she mentioned in her
prior report, this was also the opinion of Houston 157th Civil District Court Judge Felix Salazar and
her former law partner, described posthumously as a “trailblazer.” He had a major role in kicking off
our campaign. Mrs. Fowler and Judge Salazar consulted with other Houston lawyers for assistance
in designing a workable plan to bring justice long-delayed and long-denied to South Texas families.
There are some misconceptions that need clarification about our cause:
- That our claim will infringe on the rights of title holders. That is incorrect as they have full
- legal rights and contracts with oil and gas companies, many of them generating lucrative royalties.
- Our HEIRS brochure on the front page states this very emphatically so that there is no misunderstanding.
- As previously stated, we have no claim on land as the state laws of adverse possession are clear about this.
- That our descendants will become wealthy by filing claims. Except for a lucky few that will not be the case
The basic formula will be based upon the amount of production and the personal percentage interest each
claimant has to the whole base of descendants of that grant. If I am one of a hundred living descendants
(called primaries), my declaratory judgment would show that I can only get 1%. If there are thousands of
descendants on my grant, my percentage goes down. I can only claim my share and no more. However,
we are claiming thirty-three years of back production and for future production,
so the sums received may be slightly more than modest. These funds would be important,
nonetheless, as many descendants are on retirement incomes or are unemployed.
6. That the state escrow funds will be compromised or depleted.
That will never happen. Oil and gas revenues are increasing and the funds will be stimulated.
More importantly, the majority of claimants , here also, will never come forward. Even though
thousands have joined our cause, there are hundreds of thousands and perhaps millions who
will never come forward. The monies are there in perpetuity, if and when any descendant comes
forward. Our experience is that most descendants do not know their ancestry, they have other
personal priorities, and many are simply not interested.
7. That the oil and gas companies are obligated to the heirs certified in court as
legitimate descendants by a declaratory judgment.
Not so. The oil and gas companies, under the law, are obligated to the state for deposits of unclaimed funds.
Their direct obligations are to title holders who have leases. Any noted problems are between them.
The state, in turn, under property law, is obligated to the descendants for payment of unclaimed minerals.
Descendants look to the State of Texas for justice.
I believe with the help of the commission a win-win situation can be achieved.
Descendants should have no adversaries in claiming their rights. The work of the commission
will guide the state to make improvements. It was correctly stated previously that it is not the commission’s
responsibility to audit or correct noted deficiencies in the state system. That is the work of state
agencies and the legislature. However, in the process of its work and hearing testimony from different
parties, the commission can make recommendations that will have substantial weight. The commission’s
ultimate work will benefit the state, the oil and gas companies, always in need of good public relations, the
title holders, and ultimately descendants who have been disenfranchised. All citizen of Texas will benefit
from the commissions deliberations and conscientious conclusions.
SOME HISTORY OF HB724
The HEIRS Committee under Mrs. Eileen McKenzie Fowler tried to amend the law in 2013 similar to the
HB2611 bill in 2011 spearheaded by Mr. Al Cisneros that did not pass. Representative Ryan Guillen
would not sponsor it again because he said he did not have the votes, and it would not pass. At the time
we found out that he and his staff had filed HB724. The HEIRS Committee had no input in writing the bill.
Representative Guillen said that if he sponsored a bill recommending a commission to independently
review the matter, it had a better chance of passing. At that point Mrs. Fowler’s clients mobilized to
support the bill and wrote their state representatives and senators in support. Her group of client
descendants (twenty thousand of whom perhaps twelve thousand are registered voters) is the
largest, and their letters, calls, and emails were a deciding factor in its passage. I am certain other
descendants perceived its value and advocated as well.
Mr. Al Cisneros and his colleague and friend, former Senator Hector Uribe, also had a significant
impact with their work and expert testimony getting it out of the state house of representatives committee.
There was a concerted effort in the Senate to kill the bill but was saved by District 21 Senator Judith
Zaffirini from Laredo. It was her skill, perseverance and long service to Texas which outmaneuvered
those bent on its destruction.
Our group also had the help of the HEIRS committee of clients headed by Mrs. Fowler,
Mrs. Rita Lopez Tice, business owner from Laredo, Mr. Miguel Alonso “Al’ Martinez,
business owner from Corpus Christi, Ms. Cecilia Gallardo Vallejo from San Antonio now
a case manager for Mrs. Fowler in La Porte, and our lobbyist Mr. Jimmy Willborn, all
descendants. Mr. Willborn was very instrumental in our success in his visits to Austin. He is
a former police officer, past president of the San Antonio Police Officers Association, and a
former Bexar County constable. He and his wife have worked tirelessly over the years in
support of legislation to benefit peace officers in their critical and dangerous work. He also
has the added distinction of having been Director of the Texas Narcotics Control Program
under former Governor Ann Richards. We are indebted also to the other sponsors of the
bill, Texas House of Representative members, Abel Herrero District 34, J.M. Lozano
District 43, Roberto D. Alonso District 104, Philip Cortez District 117 and in the Senate
20th District Senator Juan “ Chuy” Hinojosa.
The bill passed with one nay vote in the House of Representatives and three nay votes in the Senate.
Representative Guillen called this a “landmark” bill. It is, in my estimation, the most significant law
regarding property law and oil and gas legislation since 1985. It was a minor miracle. It is an old truism
that if you want to pass a bill In Austin, you need money and power. We had virtually no money,
but we did have power in the thousands who wrote their representatives and senators. For certain
there is some conflict and discord among the descendants regarding the progress and the avenues
being followed, but all are united in seeking the same remedy.
HB724 seems to have passed, I believe, because the legislature saw this commission as
coming into being at a very critical time. The commission’s work has higher implications
due to the revenues that are at stake with burgeoning oil and gas explorations. No doubt the
legislature felt it would be a great opportunity for a responsible and diverse professional group
to help move Texas forward into the 21st century.
TEXAS RAILROAD COMMISSION RECOMMENDATION
To review this matter and to have a broader picture, I recommend invited testimony from the
Texas Railroad Commission, The Texas Oil and Gas Association, a district judge who issues
unclaimed well permits, or, in the alternative, a lawyer who works full-time finding rightful
owners. Carroll Lake and Associates in Kenedy, Texas, employ fifty lawyers for this purpose,
mostly doing work for Marathon Oil Company. Perhaps one of their lawyers could testify.
To get to the heart of the matter I am listing the individual mandates of HB 724 and the
resource necessary to comply:
Section 3(1) the amount of unclaimed original land grant proceeds delivered to the comptroller
that remain unclaimed on December 1, 2014.
Source: The state comptroller’s office can verify the Type One unclaimed mineral proceeds
from their data base by breaking down how much are unclaimed mineral proceeds from title
holders separate from bank accounts, travelers checks and other property. This is for information
and has no significant bearing for most descendants. Type Two Unclaimed mineral proceeds
will be more difficult to determine since the law apparently only requires the state comptroller to
keep records for ten years. An analysis by the comptroller can be done on unclaimed mineral
proceeds that have been received from oil and gas sources from all property in Texas for the
period. Perhaps, they will be able to break down how much came from the land grants. However,
while not comprehensive it will provide an idea of what has been received and what should have
been deposited in an escrow account.
Section 3(2) recommendations for efficient and effective procedures under which the
state may be required to (A) determine the owners of the proceeds; (B) notify the
owners of the proceeds; and (C) distribute the proceeds to the owners.
Source: Title holder owners of the proceeds cannot be found as oil and gas companies
have been unable to do so. What the commission can do is validate that the
descendants of the original grantee have a vested right and are “ de facto” owners.
Notification can be done through their respective lawyers, but it will not be possible
to notify all eligible. The proceeds can be distributed in the same fashion.
Section 3(3) proposed legislation necessary to implement the recommendation
made in the final report.
Source: Mrs. Fowler in her report on February 28, 2014, included for the public record
proposed amendments to the Texas Property Law, if needed, to make the law more
inclusive but should not be necessary to validate claims.
Section 3(4) any administrative recommendations proposed by the commission.
Source: The testimony and facts gathered during its proceedings will result in natural recommendations to the state.
Section 3(5) a complete explanation of each of the commission’s recommendations
Source: A task of the writing of the report.
It is worthy to note in closing that payment of claims will, to some degree, stimulate the Texas
economy. The monies will come back to the government in federal Income taxes and state sales,
gasoline, and other taxes. The money will find its way back to Austin in the end.
Mr. Lance K. Bruun, commission chairman, stated correctly at the first meeting on January 31, 2014,
that it is not the responsibility of the commission to hear past grievances. However his patience and that
of the commission in allowing public testimony about past injuries to South Texas families was commendable
because it revealed that our cause is not a perfunctory one but deeply rooted in tragic events experienced
for over a century. Recognizing the past, the descendants look forward to the future and the great
opportunity this forum represents for relief.
In conclusion, the descendants seek accountability and justice by the equitable distribution of oil
and gas revenues. It is hoped that these facts, opinions, and ideas will guide the commission in
its very momentous task. I would be pleased to lend support as needed and appreciate the
willingness of the commissioners to serve and to undertake this historical mission.
Biographical Note: George Farias is a retired executive director of a community mental health center in Bexar County. His hobby is ancestral study and U.S. Borderlands history and is an online retailer of books in these subject categories. He is a writer of family history books and genealogical and historical essays. His ancestors had twelve grants in South Texas containing 97,918 acres. Six of these grants have good gas and oil production, and he has been certified for three of those as a legitimate heir by declaratory judgment. He joined Mrs. Eileen McKenzie Fowler’s program in 2006 and is member of her HEIRS committee. He is also vice president of The Land Grant Justice Association, Inc.
Author George Farías blogged and used by permission see our terms to request permission to publish
Please note: these are Mr. Farias' personal presentations to the HB724 commission as a descendant/heir and do not reflect the opinions of anyone else. They are a matter of public record.
Photo Credit: Source: the Voice of Change Network Copyright 2014 All Rights Reserved