CHAPTER 17 SURFACE ACCESS FOR MINING USES
| Jurisdiction | United States |
(Apr 2010)
SURFACE ACCESS FOR MINING USES
Wyatt, Tarrant & Combs LLP
Lexington, Kentucky
KAREN J. GREENWELL is a member of the Executive Committee and Natural Resources & Environmental Service Team at Wyatt, Tarrant & Combs, LLP, and is based in Lexington, Kentucky. She concentrates her practice in the areas of mineral, energy and property law, and commercial litigation In addition to litigating business tort, property and contract disputes, Ms. Greenwell has negotiated and prepared mineral leases and been involved in mineral-related acquisitions and lending transactions.
A significant part of any diligence investigation relating the acquisition of mineral properties or mineral-related businesses relates to the evaluation of the mineral reserves to be acquired. That evaluation frequently involves the examination and verification of reserve tonnage estimates, mineability and quality data, title examinations, and other similar matters. As important as those inquiries are, mineral reserves, no matter how stellar in quality and ample in quantity, are of little value if they can not be accessed, mined, transported and processed. Those activities which are critical to the value of the minerals, require the use of the surface overlying the minerals, and sometimes the use of the surface of adjoining properties. Consequently, any diligence investigation relating to mineral assets must include an evaluation of whether the Seller possesses sufficient surface rights to develop the minerals.1
The relationship between the owners of severed surface and mineral estates, and the issues attendant to that relationship, have been the subject of many previous articles, some scholarly and technical, and others highly practical in orientation.2
[Page 17-2]
This paper will attempt a "middle-of-the-road" approach by providing a brief substantive examination of the property law concepts which form the relationship between surface and mineral owners. It will then turn to an examination of some of the recurring areas of conflict and some of the cases in which courts have addressed those conflicts.
To evaluate the sufficiency of the surface rights for mineral development on any particular property, it is necessary to understand the possible sources of surface rights for development of severed minerals and the scope of the rights associated with each of those sources. Even if the severing document (be it a deed or a lease) contains no mention of rights to use the surface for development of the underlying minerals, certain surface uses will be implied as being appurtenant to the minerals. The scope of those implied surface rights varies from jurisdiction to jurisdiction based, in large measure, on whether that jurisdiction ascribes to the common law dominant/subservient estate analysis or has adopted the more modern "reasonable accommodation" approach.
The conflicts between mineral and surface owners stem from the right provided in all jurisdictions to a fee owner to divide his property horizontally by severing the ownership of those two estates. Once the minerals have been severed from the surface, it
[Page 17-3]
is apparent that development of the minerals will require the use of the surface for a variety of purposes. The most common of those uses include: access to the underlying minerals via mine portals or surface pits; haulroads for transportation; utility easements; surface facilities such as stockpiles, preparation plants, and employee housing; and destructive effects on the surface resulting from strip mining or subsidence.
In evaluating the sufficiency of surface rights during a diligence investigation, the investigator must consider this broad range of potential uses and determine what surface uses would be required for the development of any particular tract of minerals. Frequently, the Seller is already engaged in surface uses, having installed haulroads, mine portals, or other surface facilities. The investigator's role in that case is to evaluate the sufficiency of the rights on which those existing uses are predicated. In other cases, more imagination may be required of the investigator (or input from business people involved in the development plans) to know what properties may be critical for future surface uses to develop the minerals in question. This frequently involves understanding the current operations, including details such as the location of the mine portals or pits, the transportation plan for moving the minerals, the processing facilities used for each reserve tract and the existing and planned road access to those facilities. It also requires an understanding of future mining plans, including the location of planned future mining, and the planned location of any surface facilities necessary for that mining.
Frequently, the temporal and economic constraints of a diligence investigation do not permit a full-scale evaluation of the status of the surface rights on every single piece of property. Thus, one role of the investigator is often to assist the Buyer in identifying the properties which warrant a full-scale investigation.
[Page 17-4]
Once the investigator has identified the tracts for which an evaluation of surface rights is necessary, the actual examination can begin. In the case of properties where the surface is currently being used for mining related activities, the first step may be simply to identify for each relevant tract the source of the Seller's claimed right to conduct those activities. Assuming the Seller can and does provide that information, then the investigator's task with regard to those properties is simply to verify that the claimed surface use right exists and is sufficient to encompass the existing or contemplated activities. Depending on the source of those surface rights, there may be a continuing cost associated with the surface use which, depending on its magnitude, may be significant to the economic evaluation of the deal.
I. COMMON LAW IMPLIED/APPURTENANT SURFACE RIGHTS
A. The Dominate/Subservient Approach
The notion that the owner of a severed mineral interest has the right to use the surface to some degree for development of the minerals is a product of the ancient common law dating back to the Earl of Northumberland's Case.3 That case stemmed from the royal prerogative pursuant to which the crown owned all gold and silver in the realm. The issue was the relationship between the implementation of that prerogative and the rights of the owner of the surface and the other ores on the relevant property. Without citation, the court asserted that the royal ownership of the gold and silver was "with liberty to dig and carry away the ores thereof, and with other incidents thereto as are
[Page 17-5]
necessary to be used for the getting of the ore."4 Subsequent cases, both English and American, sought to provide supporting legal theories and to determine the scope of the surface rights thus proclaimed. These surface rights eventually became to be viewed as an easement in the surface that was appurtenant to the minerals.
These surface easements were sometimes characterized as being implied easements or implied easements by necessity in order to fit the surface use within an existing category of property rights. However, the requirements for an implied easement or an implied easement by necessity are rarely fully met by the surface rights which are appurtenant to the ownership of minerals. Regardless of the technical sufficiency of these easements, the courts developed a relatively expansive jurisprudence which both affirmed and placed some limitations on the scope of such an implied easement.
One such case was the much-cited opinion in Chartiers Block Coal Co. v. Mellon.5 Although the primary conflict in that case was between the owner of the coal and the owner of the oil and gas, the court also addressed the relationship between the various mineral owners and the owner of the surface, saying:
As against the owner of the surface, each of the several purchasers would have the right, without any express words or grants for that purpose, to go upon the surface to open a way by shaft, or drift, or well, as might be necessary to operate his estate, and to remove the product thereof. This is a right to be exercised with due regard to the owner of the surface, and its exercise will be restrained within proper limits by a court of equity, if this becomes necessary; but, subject to this limitation, it is a right growing out of the
[Page 17-6]
contract of sale, the position of the stratum sold, and the impossibility of reaching it in any other manner.6
Thus, even if a severance is silent as to any surface rights, the mineral owner will have the right to use the surface as necessary to remove the minerals.
Subsequent cases established some parameters for the implied surface easement to develop severed minerals. Generally, the surface use based on an implied easement must be reasonably necessary to the development of the minerals. Notwithstanding the broad scope of the general articulation of the easement, the courts developed a number of limitations. First, any use of the surface made pursuant to the implied easement must be reasonable. A use may be unreasonable if it exceeds what is necessary to mine the relevant minerals. In evaluating whether a use is "necessary" or "reasonable" the courts do not necessarily take a strict view of necessity. Rather, the inquiry seems to be typically whether the use is within the scope of activities that would normally be expected for an operation of that type.
In addition to being reasonably necessary, any use of an implied easement must not be negligent. Thus, even though an activity may be acceptable as far as the scope of the use, if the activity is negligently conducted, the mineral owner may be liable for damages. In addition, in many...
To continue reading
Request your trial