RELATIVE PROPERTY INTERESTS ON THE FEDERAL OIL AND GAS LEASE
| Jurisdiction | United States |
(Feb 2008)
RELATIVE PROPERTY INTERESTS ON THE FEDERAL OIL AND GAS LEASE
U.S. Department of the Interior
Washington, D.C.
Table of Contents
I. Introduction
II. Property
A. Public and private interests
1. Rights and Powers
2. Privileges and Immunities
3. Ownership
B. Relative interests: reservations and conveyances
1. Mineral Interests
2. Leasehold interests
3. Royalty Interests
4. Other servitudes
III. Federalism
A. Enumerated power
1. Dual Federalism
2. Cooperative Federalism
3. Cooperative Conservation
B. National scope and significance
1. Energy supply & revenue
2. Resource nationalization
3. Principle & agent issues
a) Monopoly power
b) Information asymmetry
c) Mistakenly presumed fiduciary
d) Propensity for scandal
e) Patronage
f) Regional conflicts
4. Access to property law
C. Mending Constitutional fences
1. The Supremacy Clause
2. Takings and Expropriation
a) Fifth Amendment
b) Treaty Obligations
IV. Environment
A. Who owns the environment?
1. Land Reform Statutes
a) Consent statutes
b) Lapse statutes
c) Mining methods statutes
d) Reclamation statutes
e) Surface damage acts
2. Political decisions and vested legal rights
3. Federal protection of surface resources
a) Mineral Leasing Act of 1920
b) National Environmental Policy Act of 1969
c) Federal Land Policy and Management Act of 1976
B. Why is regulation necessary?
V. Conclusion
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I. Introduction
The United States has an inherent national interest in knowing, and declaring to others with specificity and certainty, the scope of interests conveyed under its oil and gas leases. Since demands to use public lands are generally increasing, surface uses will encroach on federally granted oil and gas property interests absent definitive federal laws and policies.
Bright lines and high walls are often necessary to define fundamental relationships within the rule of law. Legal fences promise to separate church and state, the powers among the branches of government, national and State sovereignty, and one's personal sovereignty from that of another. But building and mending fences is a continuing responsibility. Once property boundaries are established, a State may assert a socio-economic interest in using police power to change property boundaries. The purpose may be to maintain property values, while the effect is to benefit one class of private property owners over another. All of this generates controversy and calls into question some of our basic assumptions about private property interests in America.
Defining the lines and building the walls that promote stable property interests and a government that will work for as well as protect the liberties of its citizens continues to challenge national and State policymakers.1 And it is important to be up to the challenge because the continued interest of the United States in securing the nation's liberty and prosperity is bound to the resolution of these issues. The contribution that attorneys will make in this effort cannot be overstated. We can promote either the rule of law or the absolute rule by laws but not both.
James Madison once wrote that "In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself."2 This paper is based on two premises. First, all public and private interests can be described as rights, powers, privileges and immunities. Second, discretionary governmental decisions regarding public interests are
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political decisions entitled to judicial deference, but where a specific duty is assigned by law, and vested private interests depend upon the performance of that duty, the individual who considers himself injured has a right to resort to the laws of his country for a remedy.
II. Property
A. Public and private interests
Sovereign states possess an independent legal status analogous to that of persons, including personality before the law, and capacity to own property, make contracts, and pursue legal remedies for injury.3 In addition to proprietary capacity, sovereignty implies a state's lawful control over its territory generally to the exclusion of other states, authority to govern in that territory, and authority to apply law there.4 With respect to public land and minerals, the United States exercises both legislative and proprietary powers.5 In other words, the United States may possess both private and public property rights in the same parcel of land.6
Our federalist system of government is essentially concerned with the same subject as private property -- the relations of people and territory. The term property describes legal relations between people with respect to a thing.7 And specific property interests are rights, powers, privileges, or immunities.8 The amended U.S. Constitution uses the word property four times -- once in the Property Clause and three more times in the amendments. But the amended Constitution also contains 35 references to powers, 15 references to rights, four references to privileges and two references to immunities. It can be said that our sovereign governments and private property holders share a "fairly complex bundle of rights, powers, privileges and immunities vis-à-vis other persons with respect to the particular parcel of land."9
Complete property in land includes the totality of the rights, privileges, powers and immunities that are legally possible to have with regard to a given piece of land. But, this totality varies from time to time, and from place to place, either because of changes in the common law, or because of alterations by statute. Sovereignty includes an ability in the government to produce a
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change in a property owner's legal relations through police power, eminent domain, or other valid authority. At any one time and place, however, there is a maximum combination of rights, privileges, powers and immunities in the land that is legally possible, and which constitutes complete property in the land.10 A brief review of the basic interests is helpful to our analysis.
1. Rights and Powers
A right, as the word is used in the Restatement of Property, is a legally enforceable claim of one person against another, that the other shall do a given act or shall not do a given act.11 You know you own a property right if your interest imposes a correlative legal duty on another with respect to the thing. Reasonable economic expectations regarding the right are possible only if injury resulting from the breach of the correlative duty gives rise to damages.
A power, as the word is used in the Restatement of Property, is an ability of a person to produce a change in a given legal relation by doing or not doing a given act.12 The terms power of attorney, power of sale, and power of appointment are common to property law. In each case, the private property owner has transferred to someone else the power to change his legal relations. It is normal for the property owner to retain a right that the power be exercised in a certain way. If it is not, then the person wrongfully exercising the power may be forced to compensate the property owner for breaching a correlative duty.
2. Privileges and Immunities
A property right is valuable because it enables one to enforce a claim against another for breaching a duty, including someone who has wrongfully exercised a power. In practical terms, a property right allows its owner to sue. Privileges and immunities, on the other hand, secure actual freedom. Privilege is freedom from legal obligation to do something and immunity is freedom from adverse power. Privileges and immunities are therefore experienced as liberty interests even thought they relate to property. When applied to land ownership, they extend personal sovereignty to geography. The ability to control possession, use and disposition of land can only be secured with privileges and immunities.
A privilege, as the word is used in the Restatement of Property, is a legal freedom on the part of one person as against another to do a given act or a legal freedom not to do a given act.13 You know you possess a privilege if there is a correlative absence of right. In other words, you have no duty to do or not to do something. Where the Fifth and Fourteenth Amendments acknowledge sovereign power to take land for public uses, the Constitution nevertheless denies that there is an absolute state property right to take the land. In other words, the state has a duty to pay compensation to the owner when the exercise of power causes the disposition of property. The eminent domain power allows the state to extinguish the private right, but in so doing the
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state is subject to the correlative duty to compensate the landowner.
While it is presently the policy of the United States to protect the interests of Americans to their private property,14 the United States has relatively broad ability to take property pursuant to its power of eminent domain. It can accomplish the taking either by entering into physical possession without a court order or by instituting condemnation proceedings under various acts of Congress, and, under certain federal statutes, even condemn land at the request of a state even though the state itself cannot condemn such lands.15
The owner of a surface estate normally has a right against the world to exclusive possession of his surface estate free from disturbance. And, generally, each non-owner has a correlative, legally enforceable obligation, or duty, not to trespass on or disturb the owner's surface estate. This general duty imposed on the world is, of course, not...
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