CHAPTER 14 MINING TITLE "DUE DILIGENCE": THE BASICS
| Jurisdiction | United States |
(Apr 2010)
MINING TITLE "DUE DILIGENCE": THE BASICS
Stoel Rives LLP
Anchorage, Alaska
JOSEPH J. PERKINS, JR. is a partner in the law firm of Stoel Rives LLP. He lives in Anchorage, Alaska, where he practices all aspects of natural resources law and public land law. In his practice Joe primarily assists mining companies, oil and gas companies, Native corporations, and financial institutions in connection with their transactions, agreements, and properties. He also has served as an expert witness in mining and oil and gas matters and in matters involving questions of profes-sional responsibility. Joe also volunteers for the Alaska Bar Association as an arbitrator in fee dis-putes between lawyers and their clients. Prior to joining Stoel Rives LLP in October 2008 when it opened its Anchorage office, Joe practiced with Guess & Rudd P.C. From January 2007 through May 2007, Joe was the E. George Rudolph Distinguished Visiting Professor of Law at the University of Wyoming College of Law, where he taught Oil and Gas Law. Throughout his career Joe has been active in the Rocky Mountain Mineral Law Foundation. He served on the Program Committee for this special institute on Due Diligence in Mining and Oil and Gas Transactions and was co-chair of the Foundation's recent special institute on Mineral Title Examination (Sept. 2007). He also is the author or co-author of two previous annual institute papers: "Liability of Lawyers To Third Parties for Negligent or Questionable Advice or Opinions--Exposure, Defenses, Current Judicial Views, and Ethical Considerations," 43 Rocky Mt. Min. L. Inst. 7 1 (1997), reprinted in 47 Def. L.J. 719 (1998), then revised and reprinted as Paper 11A in Mineral Title Examination (Sept. 2007); and "The Great Land Divided But Not Conquered: The Effects of Statehood, ANCSA, and ANILCA on Alaska," 34 Rocky Mt. Min. L. Inst. 6 1 (1988). He also is co-author of "Alaska Lands and Mineral Interests," Title VI (ch. 70 73), American Law of Mining (2d ed. 1984). He has served as the Foundation's Secretary (2001-2002), as a Trustee At-Large and Member of the Executive Committee (1998-2000), and as an organizational Trustee (1988-1997). In 2003 he served as Public Lands Co-Chair for the Foundation's annual institute, and in 2000 he served as Program Chair for the Foundation's special institute on Ethics and Professional Responsibility. Since 1991 he also has chaired the Scholarship Committee of the Foundation. Joe has lived and practiced law in Alaska since receiving his law degree from the University of Denver College of Law in 1979. He received his undergraduate degree (B.S.E., Geological Engineering, with high honors) from Princeton University in 1976. He and his spouse Rebecca Graham have two sons in college.
Outline
Introduction
Goals of this paper and presentation
A Simple Hypothetical Proposed Mineral Project
Plan View
Cross-Section
Key
A note about the form of this paper
Some general references (some on RMMLF Digital Database, some not)
I. Fundamental legal concepts relevant to mineral title
A. Statutory interpretation
1. Plain meaning
2. Congressional (legislative) intent
3. Regulations
B. Conveyance and contract interpretation
1. Statutory interpretation
2. Rules for interpreting conveyances and contracts
C. Dominant and servient estates
II. What is a "mineral" (under the law, conveyance, or reservation at hand)?
A. Common industry classifications
B. Classifications under federal public land law
C. Classifications in chemistry or geology
1. Chemical element classifications
2. Combinations of chemical elements
3. Relevance of the foregoing to title
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D. Examples (not all-encompassing, as there are far too many public land laws to note here) of terminology used in public land laws of the United States and how the courts have construed such laws
1. Land Ordinance of 1785 (Continental Congress, May 18, 1785)
2. Mining Law of 1872 ["locatable minerals"]
3. Coal Lands Acts of 1909 and 1910
4. Pickett Act
5. Agricultural Entry Act of 1914
6. Stock-Raising Homestead Act (SRHA), as amended
7. Pittman Underground Water Act of 1919
8. Mineral [Lands] Leasing Act ["leasable minerals"]
9. Act of March 8, 1922, as amended
10. Materials Act of 1947, as amended ["saleable minerals"]
11. Surface Resources (Common Varieties) Act of 1955
12. Alaska Native Claims Settlement Act of 1971 (ANCSA), § 14(f)-(g) ["subsurface estate"]
E. Examples of terminology used in conveyances (in either the grant clause or a reservation) of Blackacre
1. Classic mineral reservations, and some of the pitfalls associated with using similar language
2. Examples of much broader reservations of all or some minerals in and under Blackacre
F. Additional references regarding severed mineral estates, what constitutes a "mineral", federal mineral reservations, and cross-mining rights
III. The typical interests in real property encountered in mining transactions--and the continuing relevance of public land law, the common law, and state statutes to the "due diligence" inquiry
A. Blackacre (with desired minerals not severed but instead part of the "primary" fee simple estate): What is the nature and scope of rights typically owned by a proposed mineral developer?
1. Common fee simple and other estates
2. Mining leases
3. Nonpossessory (less than fee) interests
B. Blackacre (comprising a severed mineral estate)
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C. Ownership of Blackacre (a fee simple interest therein, a severed mineral estate therein, or a mineral leasehold of either) by multiple persons
1. Tenancy by the entirety; joint tenancy
2. Tenancy-in-common
IV. Title due diligence tasks common to all or most interests in minerals
A. Ascertaining and confirming ownership of all relevant interests
1. Government-maintained records
2. In-house records
3. Field inspection
4. Relevant legal concepts to bear in mind (whether one is a preparer of a title opinion or the addressee of a title opinion)
5. Ways, other than title opinions, of confirming adequate title (depending on the state and the involved properties)
B. Ascertaining and determining good standing of particular interests
1. Government-maintained records
2. In-house records
3. Other approaches to addressing the good standing issue
C. Ascertaining and determining transferability
1. Government-maintained records
2. In-house records
3. Other ways of determining or confirming transferability
D. Developability of involved assets
V. Due diligence respecting interests in federal minerals
A. Federal mining locations (patented and unpatented, though not all questions will be relevant to patented locations)
1. Due diligence in the field
2. Due diligence in the government-maintained records
3. Due diligence in in-house records
B. Unique aspects of title due diligence respecting federal mineral leases
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VI. Unique aspects of title due diligence respecting Native American mineral interests
A. Indian (tribal and individual) mineral leases
B. ANCSA mineral interests
VII. Unique aspects of title due diligence respecting water rights
VIII. Looking at mineral title due diligence from one step back--so we are reminded of some common but very important questions and additional areas of inquiry
IX. Requiring, preparing, providing, and using due diligence "deliverables" (including but not limited to title opinions, due organization and authorization opinions, and enforceability opinions) in different types of transactions
Appendix: On the merits of checklists--an excerpt from Atul Gawande, "Annals of Medicine: The Checklist," The New Yorker (Dec. 10, 2007)
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Introduction
Mining title "due diligence" means, for purposes of this paper, the primary and essential issues, questions, and tasks relating to title that typically need to be addressed, resolved, and completed in connection with an intelligent legal and business evaluation of any proposed transaction involving some or all the following:
(1) interests in real property that are valuable or potentially valuable for minerals other than oil or gas (though, of course, "due diligence" respecting interests in oil and gas presents substantial similarities and areas of overlap);
(2) additional rights appurtenant to or otherwise held in connection with such interests in real property (e.g., access rights or water rights);
(3) personal property owned or held in connection with such interests in real property (e.g., fixtures, equipment, contract rights, etc.) or derived from such interests in real property (e.g., as-extracted collateral);
(4) interests in the entities (e.g., shares of stock, partnership interests, venture interests, membership interests) that own such interests in real property.
Goals of this paper and presentation
• To identify and discuss some of the fundamental issues, questions, and tasks that typically need to be addressed, resolved, and completed as part of any "due diligence" investigation relating to the title to mineral properties (while leaving some issues and tasks for others to identify and discuss);
• To provide the foundation and framework upon which each attendee--using all that he or she learns at this Institute--may build not only his or her own practices, procedures, and checklists for conducting "due diligence" but also his or her own intellectual understanding of the role and value of "due diligence"--especially as it relates to title;
• To help each attendee to develop his or her own answers to the "who, what, where, when, why," and--of course--the "how" of mining title "due diligence".
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A Simple...
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