CHAPTER 8 MINERAL TITLE UNDER WATER BODIES, RAILROADS, STREETS AND HIGHWAYS

• Jurisdiction: United States

Mineral Title Examination
(Feb 2012)
CHAPTER 8
MINERAL TITLE UNDER WATER BODIES, RAILROADS, STREETS AND HIGHWAYS
Heidi Hande
Amy M. Mowry
Beatty & Wozniak PC
Denver, Colorado

HEIDI HANDE is an attorney with Beatty & Wozniak, P.C., in Denver, Colorado. Her practice focuses on title and regulatory matters on federal, fee, Tribal and state lands for operators in the Rockies. She takes a practical and cost-conscious approach to title work. Her experience includes examining lands in the Powder River, Niobrara, DJ Basin, Piceance, Uinta, Bakken/Three Forks and various Wildcat plays in preparation of title opinions and for purchase and sale transactions as well as financings. Her regulatory experience includes compliance and environmental reporting for upstream facilities and pipeline systems as well as representing operators before oil and gas commissions. She also provides support in operational, access, royalty and general litigation matters when such issues arise. Heidi attended the University of Wyoming, first obtaining an interdisciplinary education in Environment and Natural Resources and later returning for law school. In law school, she achieved a Best Oralist distinction at the Pace National Environmental Moot Court Competition and published a water permitting piece in the Wyoming Law Review. Prior to law school, she worked in her home state of North Dakota as a coordinator and facilitator for stakeholder projects involving public lands and energy, among other issues. In her free time, she is active in her community, likes to cook and enjoys the Colorado outdoors with her husband and two dogs.

AMY MOWRY is an attorney with Beatty & Wozniak PC in Denver. Her interest in real property and public lands use began while growing up on her family's cattle ranch in Wyoming. After college, Amy spent many years teaching writing and literature before pursuing a law degree and focusing on her lifelong concerns for natural resources issues in the west. Amy's work at Beatty & Wozniak centers around mineral title examination in the Rocky Mountain region, with an emphasis on oil and gas. She is an experienced title examiner, having worked on lands in Colorado, Utah, Wyoming, North Dakota and Kansas, with licenses in Colorado, Wyoming and North Dakota. She is experienced in all phases and types of title examination and title opinion rendering, and she has worked in all stages of the due diligence process for minerals acquisitions and sales. She is also an experienced drafter of contracts, leases, conveyances and numerous other instruments affecting real property. Amy is an active member of the Denver Association of Oil and Gas Title Lawyers, the Denver Association of Petroleum Landmen, the Colorado Bar Association Natural Resources and Environmental Law Section, and the Rocky Mountain Mineral Law Foundation. She has attended a number of RMMLF institutes and other professional education programs centering on the energy industry. Amy is actively involved in Beatty & Wozniak's Renewable Energy Group and is particularly attuned to ongoing developments in innovative energy technologies.

TABLE OF CONTENTS

I. Navigable Rivers

A. Federal Test for Navigability

B. The Missouri, Clark Fork and Madison Riverbeds in Montana

C. Navigable Rivers on Established Reservations

D. Whether the Missouri River in North Dakota is an Exception to the Equal Footing Doctrine

E. The Bathtub Ring

F. The Disputed Bathtub Ring

II. Non-Navigable Rivers

A. Movement by Accretion and Reliction or Avulsion

B. Effect of Movement by Accretion and Reliction or Avulsion on Severed Minerals

III. Lakes

IV. Islands

V. A Red Herring: The Right to Float Upon the Water Itself

VI. Railroads, Highways and Platted Townships

A. The Pacific Railroad Acts

B. Post-1871 Policy Shift

C. Patent Title Issue: Railroad Patents

D. Leasing Title Issue: A Senior Railroad Right-of-Way Leasable Under the 1930 Act

E. Fee Deeds to Railroads

F. Grants of Railroad Easements

G. Mineral Title Issue: Easement or Fee?

H. Deeds for Highway Purposes

I. Plats, Streets and Alleys

VII. Drilling Title Issue: Competing Claims and Protective Leases

A. Navigable Rivers

B. Non-Navigable Rivers

VIII. Division Order Title Issue: A Moving River and Different Royalty Rates

IX. Curative Requirements for Boundary Line Disputes

X. Curative Requirements for Agreements Among Partners

XI. Conclusion

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Horizontal drilling, directional drilling and higher commodity prices have created novel opportunities to develop minerals in the Rocky Mountains. Bringing these innovative development plans to fruition creates a new set of challenges for landmen and mineral title examiners who now must routinely examine title to lands under water bodies, railroads and platted townsites. This paper provides an overview of the legal framework relevant to these basic issues and suggests curative options for key leasing, drilling and division order issues in mineral title examination.¹

As discussed herein, county records, lease provisions and deed language, as well as prevailing cases and statutes can complicate ownership determinations. Avoiding the pitfalls set by peculiar surface features requires a title examiner's careful analysis of the particular issue and its legal framework. A wrongly leased, pooled or paid royalty owner could argue trespass or seek to be paid on a full lease basis, as opposed to being paid as diluted by their prorata share of the well, and bring an action under the state's royalty payment act for additional interest and attorneys fees. A rich fabric of resources is available to landmen and mineral title examiners seeking to protect their company or client in resolving uncertain mineral ownership issues, many of which we have consulted for purposes of preparing this paper and in our practice.²

I. Navigable Rivers

A. Federal Test for Navigability

As explained by the United States Supreme Court in U.S. v. State of Oregon in 1935, "[s]ince the effect upon such lands is the result of a federal action in admitting a state to the Union, the question, whether the waters within the state under which the lands lie are navigable or non-navigable, is a federal, not a local, one."³ "If the waters were navigable in fact, title passed to the state upon her admission to the Union."⁴ The federal government holds title to navigable rivers in trust for the states so that they may enter the Union on equal footing.⁵ "But, if the waters [were] not navigable in fact, the title of the United States to land underlying them remains unaffected by the creation of the new state."⁶ The federal test for navigability, from which state case law on the subject tends to flow, was first stated by the United States Supreme Court in The Daniel Ball. The Court explained:

[t]hose Rivers must be regarded as public navigable rivers in law which are navigable in fact. And they are navigable in fact when they are used or are susceptible of being used in their ordinary condition, as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel over water.⁷

Navigability case law has changed since The Daniel Ball to find increasing less trade and travel activities necessary to fulfill the requirement. The Ninth Circuit, for example, has been so generous as to accommodate a finding of navigability based on the intermittent transportation of logs.⁸

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As discussed below in greater detail, with regard to leasing, unless thorough research reveals that the river under examination, at the point it traverses the lands under examination, has been judicially determined to be navigable or non-navigable, landmen and mineral title examiners should seek protective leases.

One additional note of caution: states can and do "flip-flop" on their positions of navigability.⁹ Reliance on an attorney general's opinion, IBLA decision, years of industry custom or dicta does not prohibit a state from later asserting title to riverbeds based on navigability claims.¹⁰ While at one time, commentators suggested for the most expedient result, landmen and mineral examiners should inquire of the state land board whether they claim the riverbed lands.¹¹ Conservative landmen or mineral title examiners should also consult with the company or client before deciding to make such contact as there may be a larger business strategy at play.

B. The Missouri, Clark Fork and Madison Riverbeds in Montana

One area of great debate is mineral title to the beds and banks below the Missouri River in North Dakota, Montana and the Fort Berthold Indian Reservation. There is no judicial determination as to the mineral title ownership. On December 7, 2011, the United States Supreme Court heard oral arguments in the case of PPL Montana v. Montana,¹² to determine whether to uphold the Montana Supreme Court's 2010 ruling that the State of Montana had the superior claims to 500 miles of portions of the Missouri, Clark Fork and Madison Rivers in Montana. PPL Montana operates 10 hydroelectric projects on five falls on the rivers and had secured easements from the fee owners to conduct its operations. The State of Montana sought to collect rent from the power company on the basis of its ownership in the river. Both the State of Montana and PPL Montana based their arguments, in part, upon the 1805 journals of Meriwether Lewis and William Clark to support or refute navigability on the rivers. The case may be significant in the line of cases regarding whether rivers with obstacles and portages can still be navigable. Relevant to this industry, if the Court upholds the Supreme Court of Montana to find the waters navigable, the holding may be significant in that protective leasing, or other methods of obtaining the ability to drill through potentially navigable streams, even in the most remote possibility of navigability become part of the operating procedure.

C. Navigable

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