CHAPTER 12 MINING LOCATIONS AND MINERAL LEASES ON STATE LANDS

• Jurisdiction: United States

Advanced Mineral Title Examination
(Jan 2014)
CHAPTER 12
MINING LOCATIONS AND MINERAL LEASES ON STATE LANDS
Karol L Kahalley ¹
Holland & Hart LLP
Denver
Greenwood Village, Colorado

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KAROL KAHALLEY is Of Counsel with the firm of Holland 85 Hart LLP in Denver, Colorado where she has practiced law for 18 years. With extensive experience in natural resources law, particularly U.S. mining law, Ms. Kahalley engages in transactional, regulatory, and litigation work. She has successfully represented clients on a variety of issues related to mineral development on public land and tribal lands in such areas as regulatory compliance, environmental remediation, and the acquisition of property rights. She has negotiated, drafted, and interpreted a variety of agreements relating to the sale, acquisition, exploration, and development of minerals, including joint ventures, leases, royalties, and the formation of LLCs. She also has successfully defended clients in disputes with the Department of Interior regarding lease termination, mineral royalty valuation, and NEPA compliance. Ms. Kahalley examines title to mineral properties and conducts and manages title due diligence and title curative work. She has been a lecturer and has published numerous articles for the Rocky Mountain Mineral Law Foundation. She is an adjunct professor at the Sturm College of Law at Denver University and teaches the International & Comparative Mining Law course. Prior to attending law school, Ms. Kahalley was a senior research analyst with the Morrison Institute for Public Policy at Arizona State University.

I. Introduction

This paper discusses the relevant issues and unique problems that impact examination of title to state land and mineral rights and the sufficiency of state conveyances of such property rights through leases, locations, permits and other means. The starting point for determining title to state lands and state authority to convey land and mineral rights is the examination of how states acquired ownership through land grants, enabling acts, patents, selections and land exchanges. States are authorized to dispose of their lands in various ways, through patents, sales, exchanges, permits, leases and mineral locations. Once title to state land and mineral rights is established, the title examiner of state leases, locations, permits and access rights must confirm the legal sufficiency of such conveyances and compliance with specific state requirements to keep the grant in effect. This paper suggests a state-by-step approach for the title examination of a state mineral lease. Finally, the paper highlights areas of practical concern to the holders of state issued land and mineral rights, such as access rights, pre-existing rights on state acquired lands and multiple mineral development on state lands.

II. How States Got Their Lands

The states comprising the United States of America acquired ownership of lands and minerals from a myriad of sources. How they acquired such rights, from whom, and in what form defines the rights states possess to dispose of, and manage, state-owned land and minerals and the limitations on such rights.

The earliest acquisitions of state title to land and minerals originated by succession or acquisition of ownership from another sovereign, in direct grants from the federal government, and from land ceded by other states. Upon securing their independence from Great Britain, the original thirteen colonies assumed sovereign ownership and control over all vacant, unsold and other inappropriate lands within their borders.² After the initial states were formed, subsequent states were created by a variety of formations. In many instances, states were carved out of other jurisdictions. Vermont was formed from part of the territory of New York. Utah was formed out of land ceded to the United States by Mexico. Tennessee was formed from land ceded by North Carolina. Wyoming was created from land gained in the Louisiana Purchase and as part of the Mexican acquisition of 1848.³ Colorado's formation illustrates the typical composite of sources

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in the Western United States. Colorado lands were acquired from grants made by former sovereigns and governments and land grants and patents from the United States based on surveys, including lands from the Louisiana Purchase and lands ceded by Texas to the United States. States such as Texas owned lands both before and after their admission to the Union, by virtue of prior independent sovereignty.⁴

Most states acquired their land and minerals upon admission to the Union through territorial and enabling act grants, patents, school land grants, direct grants, state indemnity selections, Congressional directives in statutes, and land exchanges all of which form the basis for the rights granted to the states.⁵ In addition, states acquired lands by gift, purchase, condemnation, dedication, prescription, and adverse possession.⁶

A. General Land Ordinance of 1785 (Section 16 Lands)

Among the first efforts of the federal government to grant lands to the states was conceived by the Continental Congress. With an eye to settling new territorial properties and enticing settlers to the West, Congress was intent on granting lands to the new states with order and purpose.⁷ Before undertaking such grants, Congress determined that it would be necessary to inventory federal land ownership.

The Land Ordinance of 1785⁸ authorized the initiation of the township and range rectangular survey, under which all federal territorial lands were to be surveyed and divided into townships six miles square. The Ordinance calls for the establishment of north-south lines called principal meridians and for east-west lines called base lines. After such lines were established, each township was then subdivided into thirty-six numbered sections of one square mile (640 acres) and further divided into fourths, and again into fourths until the land was divided into forty-acre sections. The Ordinance specified uses for particular sections of each township. Most notably, in all townships those sections numbered 16 were reserved "for the maintenance of public schools within the said township."⁹

After completion of the surveys, the groundwork for the organization of land into territories was laid, paving the way for the disposition of land to territorial governments, with the ultimate goal of creating new states. The surveys became an essential part of the federal government's land disposition to the states since all permanent dispositions of public land were to be made

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according to the survey.¹⁰ The rectangular system of survey established under the Land Ordinance of 1785 is still in use today.

B. Northwest Ordinance of 1787 (Equal Footing)

In addition to ordering the disposition of public land through the survey system, Congress sought to order the formation of states. Congress passed the Northwest Ordinance of 1787 to provide a way for residents of the newly settled Western lands to establish territorial governments and make the transition into statehood and to do so on equal footing with the original thirteen states.¹¹

Article V of the Northwest Ordinance provides:

And whenever any of the said States shall have sixty thousand free inhabitants therein, such State shall be admitted, by its delegates into the Congress of the United States, on an equal footing with the original States, in all respects whatever; and shall be at liberty to form a permanent constitution and State government. . .¹²

With this directive, the Northwest Ordinance laid a roadmap for territories to follow in gaining statehood, outlining the following process: (1) a territory with a population of 60,000 could petition Congress for statehood; (2) if Congress approved the petition, it would pass an enabling act for the territory; (3) the enabling act set the framework that allowed that particular territory to convene a constitutional convention and draft a state constitution; and (4) a constitution, once accepted by Congress, enabled a territory to be admitted as a state. Thus, along with the Land Ordinance of 1785, the Northwest Ordinance of 1787 laid the foundation for granting land to the states.

C. Land Grants to the States

The following section discusses the numerous types of land grants made to the states from the United States. To illustrate, Iowa received its land from the following sources: the original grant in the act of state admission; grant of each 16th section as school lands; "in lieu" lands in place of all sections previously disposed of; 70 sections for a state university; five sections for completion of an agricultural college; a grant for improvement of the Des Moines River; a swamp land grant, grants to aid in the construction of railroads within its borders and grants to aid in the construction of railroads.¹³ These and other types of land grants to the states are discussed below.

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1. Enabling Acts

State enabling acts were the main vehicles by which Congress made systematic and significant land grants to the states. Each enabling act was a separate piece of Congressional legislation that constituted a negotiated agreement under which territories accepted the terms and conditions for admission to the Union, including the acceptance of the rights and obligations associated with the land ownership of a sovereign government. The lands that states received under their enabling acts carried conditions for use and disposal, many of which were subsequently reflected in state constitutions and state laws.

Beginning with Ohio's enabling act in 1802, Congress granted each new state ownership rights in Section 16 in every township at the time of admission. Such lands were granted for the maintenance of public schools.¹⁴ Thereafter, with the admission of Oregon in 1859, states received two sections per township: Sections 16 and 36.¹⁵ Then, in...