## Facts

- A single oil and gas lease executed in 1936 covered 114 acres owned by one lessor, consisting of a 74-acre tract and a separate 40-acre tract.
- The lease contained no royalty-proration, pooling, or “entirety” clause allocating royalties among separate tract owners by acreage.
- In 1938, the lessor conveyed the land to her children in separate parcels (reserving a life estate), and the tracts later became owned by different successors in interest.
- Wells were drilled only on the 74-acre tract in 1945, and oil was produced and sold; no wells were drilled on the 40-acre tract.
- A purchaser of the oil held $4,726.95 in accrued royalty payments and filed an equitable interpleader to determine ownership of the impounded funds and entitlement to future royalties.
- Owners of the 74-acre producing tract claimed all royalties from production on that tract; owners of the 40-acre nonproducing tract claimed a proportionate share based on the original 114-acre lease.

## Issues

1. Whether, absent a royalty-proration or pooling clause, owners of a nonproducing tract covered by a single multi-tract lease are entitled to share in royalties generated solely from production on a separate producing tract.

## Decision

- The Illinois Supreme Court affirmed the decree awarding the impounded royalties and future royalties from the 74-acre tract solely to the owners of the producing tract.
- The court rejected acreage-based apportionment of royalties across the entire 114-acre leased premises where the lease did not expressly provide for proration.
- The court held that subsequent division of the fee after execution of the lease did not create an implied right for owners of nonproducing tracts to share in royalties from producing tracts.

## Legal Principles

- Absent clear contractual language to the contrary, unaccrued oil and gas royalties are incidents of the realty and run with the land on which production occurs.
- A single lease covering multiple tracts does not, by itself, create a pooled or “entirety” royalty interest among later separate tract owners.
- Courts will not impose royalty proration by acreage where the lease contains no proration or pooling provision, because doing so would alter the parties’ agreement and transfer royalty value from the producing tract to nonproducing land.

## Conclusion

The court held that, without an express proration or pooling clause, royalties from oil produced on one tract covered by a multi-tract lease belong exclusively to the owners of the producing tract, and owners of separate nonproducing tracts are not entitled to an acreage-proportionate share.


Central Pipe Line Co. v. Hutson, 401 Ill. 447, 82 N.E.2d 624 (Ill. 1948)