CHAPTER 4 DORMANT MINERAL ACTS: POSSIBLE GAME CHANGERS?
| Jurisdiction | United States |
(May 2014)
DORMANT MINERAL ACTS: POSSIBLE GAME CHANGERS?
Professor Emeritus of Law
Louisiana State University
Baton Rouge, Louisiana
Sheraton Station Square Hotel, Pittsburgh, PA
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PATRICK H. MARTIN is Director of the Mineral Law Institute, Emeritus and the Campanile Professor of Mineral Law, Emeritus at the Louisiana State University Law Center. Professor Martin taught at the LSU Law Center from 1977 to 2011, including courses in Jurisprudence, Contracts, and Mineral Law. From 1982 to 1984, he served as the Commissioner of Conservation for the State of Louisiana. Prior to joining the faculty at LSU, Professor Martin taught at the University of Tulsa Law School. Before entering teaching, he was a staff attorney with Gulf Oil Corporation in New Orleans. Professor Martin holds the B.A., M.A., and Ph. D. degrees from Louisiana State University and the J. D. degree from Duke University Law School. His publications include Pooling and Unitization (with B. Kramer) and Williams & Meyers Oil and Gas Law (update and revision author with B. Kramer) and three casebooks, Jurisprudence: Text and Readings on the Philosophy of Law (with Christie), Oil and Gas Cases and Materials (with Maxwell and Kramer), and Economic Regulation: Energy, Transportation, and Utilities (with Pierce and Allison, 1980), as well as numerous articles on oil and gas law and energy regulation. He is an Honorary Trustee of the Rocky Mountain Mineral Law Foundation and a member of the Board of Editors of the Oil & Gas Reporter. Professor Martin has also served as an arbitrator, mediator, and consultant in the oil and gas industry. He was a Commissioner, Amite River Basin Drainage and Water Conservation District.
Severed Mineral Interests: The Problem Identified
The owner of land in fee simple absolute was said at common law to own the land to an indefinite extent, upwards as well as downwards: "cujus est solum, ejus est usque ad coelum et ad inferos." The landowner alone was entitled to prospect for, sever and remove from the land anything found on or beneath the surface. The owner may grant to others certain interests in the land. In general, the types of interests which the landowner may create by grant or reservation in oil, gas and other minerals are leasehold interests, mineral interests, and royalty interests. Severed interests may be expressly limited in duration, whether definite (I reserve all oil and gas for 10 years) or indefinite (I reserve all oil and gas for 10 years and as long thereafter as either of them is produced from said land). Although most leases are expressly limited in duration, more often grants or reservations of mineral interests and royalty interests are perpetual. Land from which mineral interests have been severed are often referred to as "split estates."
As a result of severance, land in many states is burdened by clouds on title and impediments to development arising from ancient grants and reservations of mineral, royalty or leasehold interests. If a party wishing development cannot locate one or more of the record owners, then development may be difficult or impossible. Surface owners may be impeded in the use of their land by the prospect of a claimant to a mineral right recorded many years earlier coming forward to assert a dominant right to use the land for mineral exploration and production.1
The states are of two minds on what to about old mineral interests while facilitating development: terminate them or protect them. Special mineral statutes then fall into two broad categories: lapse statutes and trust statutes; a few states combine both approaches. The lapse statutes provide that old severed interests in minerals can be extinguished by the passage of time without use or other efforts to preserve them. The trust statutes allow judicial procedures for the appointment of a trustee to permit leasing of the severed rights and escrowing of monies attributable thereto.
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Classification and Consequences: Abandonment in Common Law
In the early period of the development of the law of oil and gas, the courts and lawyers were troubled in their attempts to classify the nature of the interest of the landowner in the minerals in and under his land. By virtue of their uncertainty of the nature of a producing formation, many persons formerly believed that oil and gas were as migratory as birds in the air or at least as migratory in character as underground waters. Partly as a result of this misapprehension the courts differed in their description or classification of the interest of the landowner in the oil and gas which might be produced from a well located on his land. Many early court decisions did not view the owner as being capable of owning "fugitive" or "fugacious" minerals until such time as they were captured. Several theories or classifications have evolved, namely, the nonownership theory, the qualified ownership theory, the ownership in place theory, and the ownership of the strata theory.
In essence, under the so-called nonownership theory no person owns oil and gas until it is produced and any person may "capture" the oil and gas if able to do so. Of course one may not go upon the land of another to effect the capture, so it is necessary to have such an interest in the land as will authorize the drilling of a well for the purpose of capturing the fugitive minerals.
The theory of the nature of the landowner's interests in the oil and gas which has gained the most adherents is the ownership in place theory. Some commentators and courts refer to this theory as the absolute ownership theory. This theory appears to have been adopted in Arkansas, Colorado, Kansas, Maryland, Michigan, Mississippi, Montana, New Mexico, North Dakota, Pennsylvania, Tennessee, Texas, Washington, and West Virginia. In states accepting this theory the nature of the interest of the landowner in oil and gas contained in his land is essentially the same as his interest in solid minerals.
A related classification: whether interests which the landowner creates in the oil and gas are corporeal or incorporeal. One consequence of the theory adopted by a state as to the nature of the landowner's interest in oil and gas is that in jurisdictions adopting the ownership in place theory it may be possible for the landowner to sever from the ownership of the land a separate corporeal estate in the minerals, but under the nonownership or qualified ownership theories, a separate corporeal estate in the minerals may not be severed from the ownership of the land. Thus in states adopting the nonownership or qualified ownership theories, the working interest under an oil and gas lease and severed mineral and royalty interests are incorporeal in character. This incorporeal interest is usually described as a profit à prendre.
In the states which have adopted the ownership in place theory it is possible for a working interest under a lease or a mineral interest to be classified as corporeal. Thus, in Texas severed mineral interests and the interest of an oil and gas lessee are viewed as
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corporeal estates. The owners of royalty interests lack the right to enter upon the premises for the purpose of exploration and development (although they may be given certain easements of ingress and egress for the purpose of informing themselves concerning the conduct of such operations) and hence such interests are incorporeal. Several states which adopt the ownership in place theory differentiate between severed mineral interests and the interests of an oil and gas lessee, classifying the former as corporeal and the latter as incorporeal. Others view both types of interests as corporeal or both as incorporeal.
The only significant consequence of the corporeal/incorporeal distinction is whether the interest may be abandoned; if corporeal it may not be abandoned, if incorporeal it may be. In a limited number of states, remedies available to the owner of the interest may turn upon the local classification of the interest as corporeal or incorporeal.
It is well established at common law that an incorporeal interest such as an easement or profit a prendre may be extinguished by abandonment,2 which is usually defined as nonuser for a period of time coupled with an intent on the part of the owner to give up or extinguish the interest.3 Although intent is a necessary element in abandonment, such intent may be implied in appropriate cases from long continued nonuser.4 In states which classify a mineral interest or leasehold interest as incorporeal in character, it has been held that such interest may be extinguished by abandonment.5
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On the other hand the common law did not recognize the possibility of losing a corporeal estate by abandonment however long-continued the nonuser and whatever the intent of the owner of such an estate.6 Logically it would follow that in a jurisdiction which classifies a severed mineral interest or a lessee's estate as corporeal in character, such interest could not be lost by abandonment, however long continued the period of nonuser. However, some cases have declared that leasehold interests may be terminated by abandonment. These leasehold abandonment cases will not be treated upon further here.
The abandonment concept, when applied, frequently serves the very useful purpose of clearing title to land of mineral interests of long standing, the existence of which may impede exploration or development of the premises by reason of difficulty of ascertainment of present owners or of difficulty of obtaining the joinder of such owners. If no effort has been made for a long period of time to produce minerals from the land, the court may find (or allow a jury to find) abandonment. But common law abandonment lacks clear standards and results vary from case to case.
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Louisiana's Unique Approach: Liberative...
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