ELECTRONIC DOCUMENT IMAGING CAN IMPROVE LAND RECORDS MANAGEMENT

Susan L. Cisco
Cisco & Associates
Austin

Electronic document imaging can streamline land records management, giving oil companies faster, more accurate, and more reliable access to millions of records.

These imaging systems can preserve deteriorating files and facilitate recovery from disasters like flooding or fire.

Other benefits include the elimination of unnecessary records, easier duplication of necessary records, and reduced storage costs. Land records are a large volume of a company's overall collection of documents, and storing paper records takes up much of a company's premises or requires off-site storage at commercial facilities.

Most of these documents are legal instruments on letter and legal-size paper and are retrieved frequently by various departments in the company. Land administration in the oil and gas industry depends on accurate and accessible records.

With millions of pages of documents in storage, petroleum companies are eager for faster ways to retrieve files, more accurate records management systems, and space-efficient storage. For many companies, paper is simply no longer adequate because age and handling cause damage.

Some land professionals can spend up to 30% of their work time searching for a relevant piece of paper.

Cisco & Associates surveyed 15 upstream petroleum companies to investigate how they manage active and inactive land records (Table 1) (8961 bytes). The companies surveyed are either considering or in the process of redesigning their land administration departments.

Two of the companies have installed electronic document imaging systems for land records; both systems run on ViewStar. One company is in the process of implementing an imaging system, and the remaining 12 rely predominantly on paper as the storage medium for land records.

LEGAL RECORDS

Quality land administration is pivotal for oil and gas corporations. The legal rights to explore, drill, and produce hydrocarbons are spelled out in a wide variety of land records (leases, royalty agreements, checks, prospects, etc.).

Leases are the most voluminous type of land record, and they are legal instruments granting the right to exploit the land for minerals. The next most common records are agreements, division orders, and contracts, all of which are legal instruments. Correspondence, right-of-way records, and property sales are other frequently used land records.

Oil and gas companies maintain huge volumes of records. Each company in this study stores between 500,000 and 62.7 million pages or images. (This article refers to records stored on paper, microforms, and optical disks, not those on magnetic media.) The 15 companies in Table 1 (8961 bytes) store a total of 249.4 million pages or images of land records.

To exacerbate the problem of volume, the overwhelming majority (88% in the survey) of records are stored on paper, most of which are letter or legal size. About 11% of land records are kept on optical disk, while only 1% are on microforms. Fewer land records are maintained on site (44%) than off site (56%), such as at company and commercial records storage facilities.

Most land records (around 76%) are in good condition, but the rest are in poor shape from a lack of organization, loose bindings, or rain damage. Even some records classified in good condition show signs of overuse, like torn pages and holes from stapling.

The oldest land documents date from the 1880s to the 1940s; many are considered active records because the land still produces oil or gas. About 45% of land records are dated before 1969 and only 17% after 1990.

ADMINISTRATION

Land administration requires precise organization because operations involve paperwork and legwork at headquarter offices and in field sites.

Seven of the companies in the study organize the land administration function by combining centralized and decentralized management structures. The most prevalent tendency is to separate domestic and international operations. In domestic operations, land records frequently are centralized in headquarter offices, and the individuals who negotiate the rights with landowners are located (decentralized) in field offices.

Each company has its own organizational traditions. One company commented that its records are centralized, with working copies stored in the field offices. Another said that deals are made at the division level by the negotiators (landmen) and that records are sent in to headquarters from these divisions. Another company has centralized records for exploration land, but decentralizes records for its production land.

ln 13 of the companies, the land administration departments have been restructured at least once since 1990. The land records workload decreased in five companies, stayed the same in four, and increased in three. The staff in charge of the land records was cut in ten companies, some by as much two thirds.

The employees also underwent upheavals in their workload. The records staff at one company, for example, now has to address training issues as well as its regular work.

DATA USERS

Petroleum companies exchange land information and records with a wide variety of entities. The most frequent user is another department of the company, such as accounting, exploration, or operations. Other customers include other petroleum companies, government agencies, law firms, and title companies.

The U.S. Department of the Interior's Bureau of Land Management, considered a land records customer, is currently automating its administrative, land, and mineral records. The prime contractor for the 10-year project is Computer Services Corp., and IBM will supply up to 7,000 RS/6000 workstations.

Most land records are used on a daily basis by at least one of the customer groups. When a property no longer has value, a petroleum company will sell, farm out, or abandon it. Such properties are released weekly in four of the companies, and even daily in four others. The remaining companies release properties only from time to time.

Most of the companies duplicate records when a property is sold or released. The methods include in-house duplication with company or contract personnel or duplication off site with a contractor. Companies with imaging systems give the new owners of the property the original records, if those are retained, or paper prints made from images on the optical disks.

For these large companies, property acquisition occurs less frequently than does a sale or release of land. Five of the companies said they acquired property infrequently, and four said they did so on a monthly basis. Only one acquired new property weekly.

Companies have established procedures to access new land records. The properties are entered in a computerized lease data base and each is assigned a unique identifying number. Documents are arranged into file folders. Several companies use bar or color coding to facilitate filing and retrieval of hard copy or physical records.

HANDLING RECORDS

Nearly all petroleum companies have established procedures for handling land records. The procedures differ from organization to organization and range from records management manuals with detailed instructions to simple informal memos.

Changes are made to land records daily in 12 of the companies. The changes include accounting functions, name and address changes, and activities based on individuals' lives (such as marriage or death). Other changes result from legal actions.

Changes generally are made to a computerized land administration data base, and new hard copy documents are printed, then filed. No formal audit requirements seem to exist for making changes to the records, although audits are held. Internal auditors may look at hard copy documents, for example to verify rental checks against payment schedules.

Most companies have retention schedules for documents because laws require that certain documents be retained for prescribed periods. The requirements determining retention vary by state, according to contract laws: in Alabama, 11 years; in Florida, 21; in Arkansas, 6; in Louisiana, 11; in Mississippi, 7; in Texas, 5; in Virginia, 20; in South Carolina, 21; and in Maryland, 20 years.

Most companies retain a document for 10 years after the termination of the lease although there are exceptions. Some companies keep certain records for as long as 30 years because the records themselves are considered real property. Others send their records for inactive properties off site, and destroy them after 10 years. One company retains an optical disk copy of the records after the physical files are released or sold.

For a large number of businesses, the bulk of the action involving records takes place soon after they are received, typically within the first 90 days. As time passes, requests dwindle. Four of the petroleum companies in the survey followed this pattern of activity with land records.

For four other companies, the activity level remained steady for as long as 10 years, while the remaining respondents said records activity fluctuates with activity on the property itself. For auditing purposes, divestitures, and address changes, old files need to be pulled.

Some old leases may be active because of lawsuits for environmental problems or property sales.

VITAL RECORDS

Certain records are considered vital records-those that a company absolutely must have to resume business after a disaster. Normally, vital records form only a small portion (3-5%) of a company's total collection of records. For some companies, 100% of the documents are considered vital. For others, only those documents containing original signatures and involved in a sale are considered vital. Leases and key files which contain complete information on property owners also are vital.

One company, however, considers no documents vital because the legal instruments can be obtained from courthouses where the contracts or leases were processed. This company did acknowledge that reconstructing files in this manner would be a major effort.

One company is working with an attorney on vital records to verify the legality of optical disk storage. The problem record type is a division order because the original document contains signatures.

DUPLICATES

Duplicates of land records, including vital records, are stored in other company locations as well as in central storage by 11 of the 15 respondents. Six of the companies keep duplicates in field or regional offices.

One of the companies with an imaging system exchanges backup optical disks with its division in another state. Duplicates also are maintained in non-company locations, such as with commercial records storage facilities, clerks of court, title companies, the Minerals Management Service, and even individual landowners.

Because most companies still rely on paper-based records, an efficient classification and indexing system is essential to locate and retrieve documents. Ten of the companies studied use a numeric classification system, usually incorporating a geographic code and a unique lease or contract number. The other five companies use an alphanumeric system.

The petroleum companies using numeric systems index documents by a number of parameters:

Lease number
State code and base number
Offshore lease number
State number plus lease number plus subnumber (10 digit code)
Sequence of numbers representing geographic area, division, state, and registration number
Land department file number.
The alphanumeric classifications use the following parameters for indexing:
Area name then lease or division order number
State code then lease number
State code then property number
State code then numerically within each state
State and county then numerically by lease or contract number.

Most of the companies have some sort of index to look up land records. Five of them rely on their computerized property administration data base. If the property is listed in the data base, it is assumed there must be a corresponding file. Another five companies have data bases which index hard copy land records at the file level. One company can index by record type. The two companies capable of indexing at the document level use imaging systems.

MISPLACED RECORDS

Many petroleum companies have difficulty with lost records. Once a record leaves the file room, the users sometimes pass it on to someone else or to another department. Another problem occurs when employees take files without checking them out properly. In land records work, people often have to hold files and wait for additional records to arrive. Sometimes landmen negotiate leases, and the leases enter the lease system without the original having reached central files.

The companies generally agreed that management must instill a greater sense of responsibility for records among records users. One company suggested that a full-time person assigned to the file room would provide tighter security. Also, it should be easy for users to notify central files when a document is being transferred.

Optical disks reduce the problem of misplaced files, and many companies are moving to imaging technology. Some companies believe that the margin for human error remains and that typographical errors and mistakes in transcribing numbers also are a possibility.

DOCUMENT IMAGING SYSTEMS

Three of the petroleum companies in the survey have implemented or are in the process of setting up imaging systems for their land records. Table 2 (7240 bytes) shows the date the systems began operating and the number of users.

Three other companies already have investigated imaging technology within the last year, and four others plan to analyze systems and compare vendors (small vendors and large vendors such as FileNet, IBM, and Wang) within the next 24 months.

At another company, land personnel are trying to justify electronic document imaging technology to management-a new imaging system would cost about the same as updating the existing microfiche system.

The remaining five petroleum companies studied do not plan to evaluate vendors of imaging technology. They stated several problems, such as a high cost for imaging technology when budget restrictions hamper additional spending or a reshuffling of staff within the company that changed previous plans to implement imaging systems. One company investigated optical disks because of a merger of the division order/title department with the land records department, but decided it was cheaper to assign temporary staff to the task for the next 25 years than to install imaging technology. Other perceived obstacles were operational, such as the difficulty of flipping from one file to the next when accessing multiple files.

The companies converting to imaging technology have generally set up a committee to investigate the various vendors and systems. The multidiscipline committees often include land representatives, local information systems people, exploration and production staff, customers from the land business unit, data base managers, and consultants.

The indexing scheme (indexing parameters such as document type and document date) is typically chosen by a committee of people who use land records: landmen, land records staff, and people who handle units. In one company's index for example, each land agreement is tied to the agreement number in a small table. When the user pulls up the land information system, that number is the key.

Several system attributes are very important in analyzing and comparing optical disk storage and imaging technology (Table 3) (12008 bytes). The most highly rated factors in selecting a document imaging system are price and processing speed, and the least important factor for oil companies is compatibility of the system with UNIX. The most popular features of document imaging systems are faster access to land records and improved accuracy of data.