ULC

Dormant Mineral Interests Act, Model Summary

Ownership of real estate means ownership of interests and rights in an actual piece of geography. But the law is more concerned with the interests and rights than it is with the geography, and must always be thought of in terms of rights and interests as opposed to boundaries. The term "fee simple" denotes ownership of all the rights and interests the law permits anyone to have. But rights and interests in real estate can be divided in a number of ways. A common division involves a separation of surface interests from mineral interests. That is, the same geography, the same bounded and described piece of land, may be subject to the surface interest of one person and the mineral interest of another person.   

Such division of interests is common in the United States. Railroads in the West, for example, commonly sold land grants, while reserving mineral interests in the land sold. The surface owner uses the surface of the land for whatever purpose he desires -homes, ranches, farms, commercial or industrial structures, whatever suits the time and place. But the surface owner cannot explore for, or take any minerals from, the land ­oil, gas, coal, iron ore. These remain in the ownership of the railroad. The railroad gets the benefit of the mineral inter­ests, which can be pursued even though the surface interests are disrupted.

This kind of mineral interest is called a "severance" in the language of property law and lawyers. It is a fee simple interest -all the rights and interests the owner can have under the law. It runs perpetually, and cannot be extinguished or merged with the surface interest unless the owner of the mineral interest volunteers to merge it with the surface interest by sale, gift or inheritance. 

 

What happens if mineral interests (severances) continue over generations beyond the initial grant? Sometimes their owners are lost. (Railroads do not generally fall into this category.) People die, corporations are extinguished, and successors can't be traced. But a "severance" can't be extin­guished. A fee simple interest never dies, even if all its owners have died or disappeared.

What happens if mineral interests (severances) continue over generations beyond the initial grant? Sometimes their owners are lost. (Railroads do not generally fall into this category.) People die, corporations are extinguished, and successors can't be traced. But a "severance" can't be extin­guished. A fee simple interest never dies, even if all its owners have died or disappeared.

The result is a cloud on the title of the surface owner that assures full value for the land will never be realized. If there are valuable minerals to be removed, nobody can, because the owner is unknown. Leases, therefore, for explora­tion and taking minerals can't be established. What is needed is a statutory remedy that performs two tasks: (1) provides clear indicia of uses and events that maintain mineral inter­ests, and, (2) provides a procedure to terminate mineral interests that are, in fact, dormant. 

 

The Uniform Dormant Mineral Interests Act (UDMIA) provides the remedy that is needed. It, initially, defines a dormant mineral estate in terms of time, of use, and of legal notice.

First time dormancy is dependent upon the passage of time during which a mineral interest is not used. No explora­tion for minerals or taking of them takes place. For twenty years after mineral interests are severed, there can be no dormancy. But, after that, the issue of dormancy can arise.  

 

What is use? Use includes "production, geophysical exploration, exploratory or developmental drilling, mining, exploitation, development, or other active mineral opera­tions…." No mineral interest can be considered dormant if any of these activities have taken place within a prior twenty years.

There are legal uses, so defined, as well, that are not related to actual use of a mineral interest in specific land. Paying taxes on mineral interests is one of them. Recordation of an instrument in the land records pertaining to a mineral interest is another. Anything recorded that "creates, re­serves, or otherwise evidences a claim" will do. Recordation of a judgment specifically referring to a mineral interest is, also, a defined use that keeps the interest from becoming dormant. 

 

Section 5 of UDMIA provides for preservation of a mineral interest even beyond these uses. A mineral interest may be preserved simply by recording a "notice of intent to preserve" on the property records. This is effective for 20 years, even if no other defined "use" otherwise preserves the interest. Owners who watch over their mineral interests have a simple means for preserving them.

If a mineral interest passes twenty years without a "use" or recordation of a "notice of intent to preserve," it may be terminated and merged with the surface interest by the surface owner or owners in a judicial proceeding. The action is treated as any action to quiet title is treated, with the same notice requirements.  

 

If an owner of a mineral interest turns up during the pendency of such an action, a late "notice of intent to pre­serve" may be filed as a condition for dismissal of the action. The owner of the mineral interest has to reimburse the surface owner for his or her litigation costs. If a mineral interest is dormant for more than forty years, however, such a late filing is not permitted.

If UDMIA is enacted, it applies to all mineral interests, no matter when created. However, no dormant mineral interest can be terminated and merged with the surface interest for at least two years after the passage of the Act. This moratorium permits owners of mineral interests to assert their rights, even though they have been de facto dormant.

UDMIA will remedy the difficulties presented by archaic severances. States that adopt it will ease problems of land ownership for all of its residents.