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The Dominant Mineral Estate: What Every Rancher Should Know

It was a long, long time ago, shortly after the advent of private property, that a landowner sold the surface of his land to a gentleman rancher and reserved the minerals thereby creating the first “severed estate.” Prior to that severance, the estate (surface and minerals) was “unified.”

My history isn’t too good so this could have happened before modern private property came into being. There was the time when the Monarch just decided who owned what and it stayed that way until he changed his mind or a new Monarch came along. That might have been called “an estate in property at the will of the King.” There were instances when the King would give the “land” to Lord A but give Lord B the right to remove stone from the quarry on the land. The King had to give Lord B access (ingress and egress) across the land in order to remove the stone, lest the ownership of the stone would be worthless and the stone could not be quarried (unless Lord A agreed). Also, Lord A, who owned the surface, had to endure the scarring that quarrying caused to his surface.

The point is that once the surface and the minerals were severed (and both were recognized as property) it was only logical that the ownership of minerals had to include the right to access those minerals. Otherwise, absent the consent of the surface owner (whether friendly or by coercion or for money) the minerals would be stranded and worthless to the owner and of no good use to the Kingdom.

Common law therefore recognizes the dominant mineral estate and grants the mineral owner the right to use as much of the surface as is reasonably necessary to mine the mineral whether it be gold or black gold, such as crude oil. Necessary use of the surface includes roads, tank batteries, pipelines, pump jacks, trees and water. However, in spite of the common law, oil operators have long since been paying the surface owner for “damages” and for the right to use water and restoring the surface after use. In fact the surface owners have generally been paid quite generously, usually multiples of the actual monetary damages. However, money for damages pales in comparison to money from royalty.

But here we begin to see the makings of a conflict. The surface owner is inconvenienced (and the surface “damaged”) and receives a modest amount of cash then has to look at the pump jack and have oil workers on his property regularly while the mineral owner lives in town or on another ranch and gets magnitudes more money in the mail for the production.

Folks, as a rule, don’t like to look at ugly things or be inconvenienced unless those ugly things (pump jacks for example) are making them money. If they own the minerals and get the royalty that pump jack is a thing of beauty; if not, it is a rusty, noisy, ugly nuisance. The worst case is when the surface owner owns none of the minerals. The situation is much, much more tolerable if the surface owner also owns some of the minerals and gets some of the royalty money.

For the surface owner to completely control the surface he must own 100% of the minerals. Obviously, the more of the minerals the surface owner owns, the less offensive the pump jacks are. But remember, in many jurisdictions, even if you own 75% of the minerals you probably will be unable to prevent use of the surface by the 25% owner.

Certainly, restrictions on surface use may be included in the deed to limit the dominance of the mineral estate, but this needs to be done at the first severance of the property or it will not bind the mineral owner who first reserved. Absent a deed restriction on surface use, the common law will apply. Both parties to a transfer of property need to consider the mineral ownership in their evaluation and understand how the surface may be shared.

In spite of being dominant, there are real limits to the use of the surface by the mineral owner. The doctrine of accommodation was established in a case called Getty v. Jones in Texas in 1971 in which it was held that the oil operator must reasonably accommodate other surface uses, particularly those uses already established. In Getty, Mr. Jones had a circular irrigation system. It seems that Getty’s pump jacks were so tall as to block the irrigation system from going in its circle. Getty said, “gosh we’re sorry but it’s not our problem.” The court disagreed and ordered Getty to go to each well site, remove and reinstall each pump jack after digging up enough dirt so that when it reinstalled the pump jacks in the newly created “cellar” they were low enough that the irrigation system could pass overhead freely. So the dominance of the mineral estate is not absolute.

But the surface owner has to be reasonable too. There is an old Montana case where the surface owner was not happy with the damages offered by the oil company so he met them at the gate, shotgun in hand, and prohibited entrance of the drilling rig and equipment. Of course, the oil company proceeded to get a restraining order against the surface owner and entered the land. Later they sued and countersued. The rancher was awarded $25 for a broken fence and the oil company was awarded $25,000 for having the drilling rig and equipment (for which it was being charged) delayed from entering.

If it is at all possible a purchaser of the surface should obtain some percentage of the minerals. This will greatly reduce the otherwise natural conflict. If one chooses to acquire the surface with no minerals, he must be prepared to share his surface with the mineral owner as prescribed by the common law.

Landowners, being pretty smart, soon learned that they could sell land reserving all or some of the minerals. So minerals began to be reserved a hundred years ago and still are today. The problem grows and grows – if you consider severed minerals to be a problem.

As we consider the purchase or sale of any property today, we must consider severed minerals and how to best negotiate a deal satisfactory to the buyer and seller. We must think about owning less than 100% of the minerals (which is going to be the case most of the time) and understand the consequences thereof. In addition to lack of surface control (which remember happens anytime you get ownership of less than 100% of the minerals) you are giving up a proportionate part of future lease bonuses and royalty. In many cases today, since shale-gas and shale-oil drilling was perfected, the minerals are worth much more than the surface – multiples, in fact. So we need to be sure we’re comparing apples to apples or dirt to dirt in our negotiations. Land isn’t just land anymore, if it ever was.

Out West, and by that I mean west of the border between Kansas and Colorado (extended north and south) there is a fair chance the mineral owner will be the U.S government – which owns about 700,000,000 acres of minerals, the vast majority of which are in the West.

So just beware of the facts. My Mother shared with me long ago the saying “you can’t have everything” which doesn’t exactly apply to my message until we modify it a bit: you can’t have everything – unless you buy it. And that means it must be for sale. In today’s world 100% of the minerals are hardly ever going to be for sale.

The best solution was suggested in the play “Oklahoma!” There it was said “the rancher and the farmer should be friends.” So perhaps we should say “the rancher and the mineral owner should be friends.”

But certainly we say the dominance of the mineral estate should be given careful consideration when buying your farm or ranch.


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