Understanding orphaned mineral rights claims | TSLN.com

Understanding orphaned mineral rights claims

With the anticipated expansion of oil exploration and development into the greater Williston Basin area, understanding a property owner’s mineral rights and claims is of growing importance.

A review of the landowner or surface owner’s legal rights to these natural resources, however, brings up a number mineral law issues, including the issue of abandoned or dormant mineral rights. I call the issue of abandoned or dormant mineral rights, “The Quest for Orphaned Minerals.” This problem, simply put, is: Who owns the mineral rights, the surface landowner or some claimant who may have obtained the rights from another source?

Under the South Dakota Dormant Mineral Rights Act, for example, the term “minerals” include oil, gas, coal, clay, gravel, uranium and all other minerals of any kind and nature. The law treats these minerals as a separate “property” from the land under which they exist, so it is possible to have claimant Mr. Smith or claimant Company XYZ hold ownership to minerals that are located on rancher George Bush’s land. Importantly, because of mineral rights laws, the owners of the mineral rights can use the landowner’s land for purposes relating to the removal of the minerals. This could mean of course the construction of oil wells on one’s property.

Under the South Dakota Mineral Rights act [the North Dakota act is similar] if the mineral claimant does not take certain acts in development of his claim or, for example, file a statement of claim within a 23 year period, then Mr. Smith or Company XYZ would theoretically lose their legal rights to access, remove and develop the mineral. This inactivity means that the mineral rights become dormant or abandoned. I like to say they are orphaned. As a result, rancher George Bush (the landowner) will then have an opportunity to gain or regain ownership rights over the abandoned mineral claim.

To actually acquire ownership rights over the minerals on one’s property once the previous owner’s interest lapses, the landowner must take certain legal steps in order to “adopt” the orphaned minerals. The landowner must undertake a research project attempting to locate and identify the mineral rights claimants and also give public notice of the lapse of claim by publication in a local newspaper. If it is reasonably possible to determine the whereabouts of the mineral rights owner, the landowner is required to take further steps to give notice of an intention to claim abandoned mineral rights. The notice given must contain a description of the land where the mineral is located, the name of the record owner of the mineral interest, and the name of the person giving notice. If an active and actual mineral rights owner does not exist after taking the required steps under the Dormant Mineral Rights Act, the landowner can then claim ownership to the mineral rights.

When confronted with the possibility of losing ownership rights to a mineral rights claim, the mineral rights claimant can try to show that he or she legally “used” the mineral rights. Typically this means that the person asserting the ownership rights would provide evidence that he or she is conducting operations to remove, store or produce the minerals. Ownership can also be shown by the existence of a valid and enforceable legal document, like a conveyance, a lease, a mortgage, or a judgment or decree that specifically references the mineral rights. Mineral rights ownership may also be shown through taxes paid on the behalf the owners. In all, there are nine criteria under the South Dakota law to determine a mineral claimant’s use and ownership.

It is important to recognize and understand how the law treats mineral rights owners and landowners as it can have a profound effect on a property owner’s surface rights, property values and utility. These comments are not a complete review of the law on orphaned minerals and of course legal advice should be obtained when dealing with this question.

David Ganje is an attorney with Ganje Law Offices in Rapid City, SD and practices law in the area of natural resources and oil and gas law. Contact him at d.ganje@ganjelaw.com or 605-385-0330.