By: James B. Aird
If you own real estate in the State of Minnesota, you might be surprised to learn that you may not actually own the mineral rights underneath it.
Historically, the law provided that a property owner was said to own their land “ad caelum ad inferum” (Latin for “to the sky and to the depths”) which is a shorthand legal maxim to suggest that an owner’s title extended vertically, both into the air rights above the land, and to the subsurface rights below the land.
However, throughout the State of Minnesota, and most particularly on the Iron Range in St. Louis and Itasca Counties, it is not uncommon for real estate ownership to be “severed” into two separate and distinct “estates” in land – the title to the surface, and the title the minerals underneath that surface, which generally includes the right to mine and remove such minerals.
What is a mineral, anyway? The word ‘mineral’ is not a term susceptible of one precise, all-encompassing definition. Clearly, iron ore and nonferrous metallics have been historically understood to be minerals in our State. Minnesota is also promulgating rules regarding gas, oil, and “minerals other than iron ore” and both “hydrocarbon and nonhydrocarbon gases.” At the same time, sand and gravel are generally assumed not to be minerals, unless an intention to treat them as such is expressed in a conveyance.
Additionally, the dirt and ground underneath the surface is not itself a mineral, only the distinct pockets or layers of minerals within that soil is considered a mineral. If one could theoretically prove no minerals exist underneath a given tract of land, any separate mineral estate would terminate and the whole estate would revert to the owner of the surface.
If you don’t own the mineral rights under your land, it can be increasingly difficult to discover who does. Mineral reservations are often quite old and are found in ancient county records that require costly and time consuming searches to locate – sometimes back to before Minnesota became a State. Additionally, and particularly where mineral rights were likely to be valuable, mine owners frequently reserved mineral rights in conveyances, hoping for a future payday when the precious minerals like iron ore were discovered under the surface. In many cases, these owners waited quite a long time, passing this separate and distinct estate down to their heirs, many times in increasingly complex and smaller and smaller percentages of fractional ownership.
Over time, mineral ownership became so fractionated and convoluted that in 1969 the State of Minnesota passed the Severed Minerals Ownership Act. The stated goal of the Act was to “identify and clarify the obscure and divided ownership condition of severed mineral interests in this state” by requiring owners to file a separate “statement of severed mineral interests” for mineral rights, or else forfeit that interest to the State. Unfortunately, the Act did not solve the problem, as additional filings of separate “statements of severed mineral interests” simply created “two tiers” of records to review, which often did not match each other, and the Act simply led to more confusion. Rather, the unstated purpose of the Severed Minerals Ownership Act was to enable to the taxation of mineral estates, and in this respect, at least, the Act has been successful.
The State of Minnesota is by far the biggest owner of mineral rights in Minnesota. Minnesota Statues authorize the DNR to execute leases to prospect for iron ore and other minerals. In 2000, the state received approximately five million dollars in royalties; by 2011, those revenues had increased to thirty-three million.
The State’s ownership of severed minerals is always growing. Not only does the State have a right claim forfeiture of severed minerals from owners who did not comply with the Severed Minerals Ownership Act, but the State also routinely keeps all the mineral rights to any property that it has again acquired through property tax forfeiture. Once the State receives the minerals back, it is usually prohibited by statute from conveying them out again.
For many real estate transactions, a lack of ownership of mineral rights can be safely disregarded. Generally, the owner of the mineral estate has a duty to compensate the owner of the surface estate for damages caused by the exercise of removal of the minerals. Where active mining is unlikely, and where there are no onerous repurchase rights or clauses allowing destruction of the surface estate without payment of compensation, the lack of ownership of mineral rights is often unobjectionable. A prospective buyer of a residential home in Duluth likely does not have to worry about active mining any time soon.
However, a prospective homebuyer on the Iron Range may be rightly concerned about the mining that might occur under their property some day the future. For mining companies on the Iron Range, the ownership of the mineral estate is of utmost importance, and the owners of the severed minerals often wait decades for the right opportunity to obtain a favorable lease with a prospective mining operation.
Title insurance cannot often be obtained for mineral rights. Accordingly, where ownership of mineral rights may be a concern, it is important to consult with competent legal counsel to understand the unique legal issues and risks that arise when mineral ownership is severed from the ownership of the surface.
James Aird is an attorney with Fryberger, Buchanan, Smith & Frederick, P.A., practicing in the areas of Real Estate and Estate Planning. This article is not intended to provide legal advice. You should always consult with an attorney about your specific circumstances.
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