CHAPTER 3 REPRESENTING THE LANDOWNER IN A MINERAL TRANSACTION -- SOME FURTHER THOUGHTS
| Jurisdiction | United States |
(Nov 1976)
REPRESENTING THE LANDOWNER IN A MINERAL TRANSACTION -- SOME FURTHER THOUGHTS
Burgess & Davis
Sheridan, Wyoming
At the 22nd Rocky Mountain Mineral Law Institute held at Sun Valley in July of 1976 Henry Burgess of our firm presented a paper entitled, "Representing a Landowner in a Mineral or Surface Lease or Sales Transaction". For the reason that many of the observations made by him are relevant to a conference devoted to uranium exploration and development, the Institute was kind enough and we were very flattered, to have been asked to present that paper again.
With the consent of the Institute, therefore, substantial portions of his paper are reprinted herein, and the only additions and changes which I have made are to conform his comments to the subject matter of this Institute. A few portions which I felt related solely to coal transactions have been deleted and I have dwelled a little more on questions of negotiating access, discussed the bonding provisions of the Stock Raising Homestead Act, and some of the royalty and tax consequences peculiar to uranium transactions.
At the outset, I refer you to the introductory remarks of Mr. Burgess' paper relative to the impact of surface mining on landowners' ranching and agricultural operations. Only to the extent impact from coal development may exceed that of uranium development in area are those comments any less valid for uranium operations. From our observations the initial contact and exploration work may be just as extensive if not more extensive for uranium prospecting than for coal.
I believe the significance of those observations is for lawyers who concentrate on representing landowners in mineral transactions it is extremely important to have some appreciation for and knowledge of the general nature of the clients' ranching operations and specific knowledge regarding the location of the different surface and mineral estates. By location I do not mean just as they are found on a map or plat, but a real knowledge of the topography and how they lie in relationship to the entire ranching operation. In most cases a trip to the ranch is an absolute necessity.
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LANDOWNER'S CONSENT ACCESS NEGOTIATE OR LITIGATE
A problem facing the mineral developer whether he is in the coal or uranium business is the question of negotiating access and landowner's consent. Some observations were made by Mr. Burgess in his paper and the specific subject of access has been dealt with in other articles and papers presented to the Institute. Except where claims are staked on federally owned surface and minerals with readily available public access, a situation which perhaps may be more prevalent in uranium exploration than coal, these problems arise with regularity and I would like to point out some of the practical problems which should be considered by the miner intent on obtaining access.
As a firm which concentrates on representing landowners we have taken the position that a mining company is well advised to obtain landowner's consent either for mining the underlying minerals or for access to adjoining lands. It hardly ever fails that very early in the discussions with the miner we are reminded of various federal and state statutes which appear to grant all sorts of powers to the miners and seem to place the landowner in a very unfavorable position. We have found however, that after consideration of some of the problems the miner may face if he uses these avenues he generally comes to the conclusion that it would be in his best interest to deal with the landowner. Certainly it is much faster and all it costs is money.
By that last statement I have obviously excluded from this discussion the landowner who denies access and absolutely refuses to negotiate under any circumstances. My assumption, and from our experience I think it is a valid one, is that most people are willing to deal if the price is right.
Therefore, being perfectly cognizant of the provisions in the patent reservations, the Stock Raising Homestead Act, the regulations generally contained in Title 43 of the Code of Federal Regulations, and the various state statutory provisions granting access, powers of condemnation and ways of necessity, let me suggest a few of the practical arguments we utilize in pursuading the miner to negotiate rather than litigate.
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Discussed later are some of the provisions of the Stock Raising Homestead Act, but before utilizing the bonding procedures the miner may run into trouble. In the area of coal development there have been many occasions where the company, at the time it desired to acquire the surface, did not have any coal lease or prospecting permit giving them access. Undoubtedly the prospect of competitive bidding and the desire to acquire a better position have been incentives to dealing with the landowner in these situations. But also persuasive is the question of whether or not absent such permits they have the right to come on the surface at all.
In the case of uranium, the locator has under both federal and state laws the statutory right to go upon the land to make his locations without permits and before obtaining a bond for development, but what happens after he stakes his claims? He must come back each year to do his assessment work, 30 U.S.C.A. § 28, Wyo. Stat. § 30-11 (1957 as amended), and may have to look forward to an irate landowner each time. Certainly this chore of annual assessment work would be easier if he had made peace with the landowner.
Wyoming and some other states have specific statutory procedures for staking and filing claims (Wyo. Stat. §30-1, 1957 as amended) and both federal and state (Wyoming) require a "discovery" of a valuable mineral before a valid location can be made. United States Vs. Zweifel, 508 F.2d 1150 (10th Cir. 1975). Without getting into a lengthy discussion of the cases dealing with this subject we are all aware that although perhaps not as blatantly as Mr. Zweifel, substantial numbers of claims and affidavits of annual assessments are filed each year for claims which if challenged might not meet the "discovery" test. The importance of this is if the miner has ignored the landowner he may be leaving himself wide open to a challenge to the validity of his claims as well as contant harassment.
Other factors to be considered by the miner are recent state environmental protection acts. Wyoming has a landowner consent provision (Wyo. Stat. § 35-402 .24, 1957 as amended) and other states will have or are in the process of passing similar provisions. We can argue all we want to as to the constitutionality of some of these provisions
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and whether they are incompatible with the patent reservation, but in most cases the miner is more interested in securing the right to mine quickly than he is in getting hung up in the Courts.
It should also be noted that most of these acts require mining permits supported by mini-environmental impact statements, which are sometimes not so mini. The Wyoming Act requires notice to all parties who have any interest in water, surface or minerals within a half mile of the mining plan. Here is another opportunity for the landowner who feels slighted to jam up the process with objections to the proposed mining plan and the environmental protections. In Wyoming these hearings are conducted before the Environmental Quality Council and pursuant to our state Administrative Procedure Act (Wyo. Stat. § 9-276 .19, 1957 as amended) and having been involved in a couple of them I can assure you that objections may result in considerable delay and sometimes embarrassment to the miner.
If your mining venture involves more than just taking the ore you may be faced with other permits and licenses for plants or other industrial installations, many of which also have hearing requirements. Where there is no opposition, these permits and licenses are generally easy to obtain.
Additionally, there is the National Environmental Protection Act (NEPA) and the requirement of obtaining mining permits from the Geological Survey which also requires the filing of an environmental impact statement by the federal government. Here again the aggrieved landowner may have an opportunity to cause difficulty to the miner.
Other practical problems which may not be readily apparent at the outset of negotiations sometime come to light in the pattern of land and mineral ownership. This is why it is extremely important for the attorney representing a landowner to have some familiarity with the lay of the land, for even assuming the right to prospect and mine particular claims, the miner may be faced with utilizing adjoining lands for part of the mining venture. It is not uncommon to find blocks of private ownership of both surface and minerals along the best transportation routes and in areas which may not be valuable for mining but become important for access
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or for industrial development attendant to the mining operation. Recognizing this value in his position gives the landowner a greater opportunity of negotiating a favorable contract with the miner.
Where the fee surface owner of an adjoining tract does not own the underlying minerals there is the question of whether the patent reservations carries with it the right to haul minerals mined from an adjoining tract. Or stated differently, can the surface of one patentee be utilized for the development of minerals from an adjoining patentee? Mr. Burgess referred to the case of Mountain Fuel Supply Company vs. Smith, 471...
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