Real property boundaries are much more than fences, walls, ditches, streams, roads or property lines drawn on maps
By Kim Colton
Property boundaries have multiple markers, but those markers don’t always appear on top of the ground. The surface of any parcel may be owned separately from minerals under the surface. And minerals can be owned separately from each other and in multiple variations. Mineral ownership includes the right to extract those minerals.
Severed ownership sometimes surprises Utah landowners seeking to benefit from the minerals associated with their property, whether silver in Park City, oil and gas in Duchesne, coal in Price, copper in South Jordan or gold in Tooele. Property owners may be restricted from mineral production or profit because they do not own the minerals but only own the surface.
Split Estates
Real property law always has recognized that owners can transfer their rights in whole or in part. When owners transfer less than their whole bundle of property rights, then the estate has been split.
Split mineral estates generally are severed through either reservation or grant language in patents or deeds. For example, “an undivided interest in and to all of the oil, gas and other minerals in and under and that may be produced from the following described parcel of real property.” That standard language invites many potential boundary issues, as “other minerals” can mean a lot of different things.
For Utah’s sovereign lands, the Division of Forestry, Fire and State Lands defines at least 14 types of minerals that the state can lease to drillers, processers, miners or other mineral extractors (Utah Admin. Code R652-20-200 2018). Each type of mineral may be owned separately from the others.
Mineral rights are usually described as an ownership percentage. Over time and across generations, mineral ownership can be substantially diluted, resulting in very small percentages. Mineral title examiners generally determine title to the eighth decimal place (i.e. 0.00000001); accordingly, boundaries among mineral owners for the same parcel may be very small and often difficult to determine.
A quick review of a deed may or may not tell property owners whether they own the mineral rights. A mineral title examination and opinion is the only sure way of determining mineral ownership. Qualified attorneys examine mineral title and determine if and what types of mineral rights have been severed through prior conveyances.
Mineral estates may also be severed by depth levels or stratigraphy of the earth. For example, minerals in the interval from 5,000 to 10,000 feet below the surface of the ground may be conveyed separately from other minerals. Geologic formations also may provide boundaries for mineral ownership. A conveyance may describe a particular percentage of minerals lying within “that space from the top of the Lower Green River formation (TGR3 marker) to the base of the Green River formations.” Mineral estates for any parcel may be bounded in multiple ways and described in very small fractions.
Thus, potential for boundary disputes resulting from split estate issues is not limited to ownership of the surface versus ownership of the minerals. Ownership percentages and boundaries by type of mineral are often more difficult to determine, describe and maintain.
Utah Surface Owner Protection Act
Because the law generally recognizes the mineral estate as the dominant estate, mineral owners have an implied easement to use the surface to access their minerals. That means mineral owners (or their lessees) can use as much of the surface estate as is reasonably necessary to explore and develop their minerals, including construction of drilling pads, access roads, pipelines, power lines and other improvements. This fact often shocks surface owners who have no idea that they don’t own the mineral estate and that their surface estate may be disturbed and permanently occupied for mineral development purposes.
The harsh rule of mineral dominance has been softened by judicial decisions about what kinds of surface disturbance by operators are “reasonable.” The trend is toward requiring mineral owners to conduct operations in a way that allows the greatest possible use of the surface and toward requiring pursuit of reasonable alternatives to minimize damages to the surface.
It is now a common practice for mineral lessees to enter into a surface use agreement with surface owners that spells out the sorts of uses that will be conducted in exchange for a promise to pay for such uses. Surface owners get compensation that they are not otherwise legally entitled to receive (as well as indemnification and other contractual benefits), while mineral lessees get protection from being held in trespass because of possible unreasonable use of the land, knowing instead exactly what can and can’t be done on the property.
For a long time, Utah followed the common law accommodation doctrine that allowed operators access to the surface estate so long as such access and use were reasonably necessary and still allowed the surface owner the greatest possible use of the property. This common-law rule often left surface owners disputing boundaries with mineral owners. The Utah Surface Owner Protection Act (SOPA) addresses this often-contentious problem (Utah Code Ann. §§ 40-6-20, 21 2018)
The act does not chan.ge the well-established rule of mineral estate dominance, but it codifies some relevant common-law principles and requires good-faith efforts to reach an agreement with the surface owner before oil and gas operations can begin. The regulations implementing SOPA require that an operator use reasonable efforts to establish a surface use agreement prior to drilling a new well.
Compensation required by SOPA is limited to compensation for “the unreasonable loss of a surface land owner’s crops on surface land; and permanent damage to surface land.” The act, however, addresses only oil and gas operations and not development of other kinds of minerals from split estates. Perhaps more importantly, the act does not apply to the most common instances of split estate ownership: private surface and federal or state minerals. It applies only to instances of private surface and private minerals.
Reputable mineral extractors will enter into surface use agreements with surface owners and will exercise care to ensure that their operations do not unreasonably interfere with the rights of surface owners as well as those of users of any unrecorded rights-of-way, easements or other surface improvements.
Such agreements can explicitly limit the use of the surface and can give surface owners some protection for potential damage to their property. Surface use agreements can also address the use and reclamation of surface land and can provide compensation to the surface owner for damage caused by operations that result in loss of crops, loss of value of existing improvements or permanent damage.
Prudent surface owners should know that everything, other than their name and the legal description of their property, is negotiable. Prudent mineral extractors will enter into surface use agreements and will record those agreements in the appropriate county recorder’s office.
Conclusion
Real property boundaries are much more than fences, walls, ditches, streams, roads or property lines drawn on maps. In Utah, mineral estates are frequently severed from surface estates and can be severed in multiple ways for multiple minerals. Fences below the surface can be difficult to find, difficult to mend and difficult to move. Owners may want to consider the extent of their property boundaries and whether those boundaries extend below the surface.
Kim Colton is an attorney at the Salt Lake City office of Snell & Wilmer, where he focuses his practice on corporate, real estate and natural resources matters.