Split Estate Information
This page includes information on the split estate issue. All of the information comes from Chapter 2 of OGAP's landowner guide Oil and Gas at Your Door - a landowner's guide to oil and gas development.
- How are mineral rights severed from surface rights
- Other split estate considerations
- Reconnecting the surface and mineral estates
What is meant by "split estate"?
In many states, the owners of the land are not necessarily the owners of the minerals. When the surface and subsurface estates are owned by different parties, they are referred to as split estate or severed estate lands.
When you buy a piece of land, it is not always evident whether or not you own the minerals, because mineral estate owners do not have to inform a new surface owner that the mineral rights have been severed. There are ways of finding out whether or not the minerals and land are split estates.
The separation of surface and subsurface rights occurs through: 1) a mineral deed, or 2) mineral reservation.
- Severance by mineral deed occurs when someone who owns both the surface and mineral rights chooses to sell all or a portion of the mineral rights to another party. Another scenario is when the owner of both the surface and mineral rights sells the land to one party and the minerals to a different party. In either case, the proof of the sale is known as a mineral deed, which is recorded in government land title offices (most often with the county governments).
- Severance by mineral reservation may occur if a party owning both surface and mineral rights sells the land, but retains (or reserves) all or a portion of the mineral rights. All the mineral owner has to do to preserve title to the subsurface estate is record his or her mineral reservation with the county clerk and recorders office or other government land title office.
Mineral reservation has been widely practiced by individuals, land-grant railroads, lending institutions, and federal and state governments. For example, one of the largest private mineral owners in Montana is Ag America. That company acquired its minerals through mortgage foreclosures on ranches during the 1930s and 1940s. When the company sold the land, it would reserve half of the minerals. Mineral reservations also often occurred when lands were originally patented (i.e., the federal government sold the land but held on to the mineral rights).
- The mineral estate, like the surface property, can be subdivided. The mineral rights can be split so that there may be numerous parties who own a portion of the minerals beneath your land.
- Mineral rights can be divided by specific mineral commodities. For example, one company can own the mineral rights to coal, while another company owns the oil and gas rights. Consequently, it is important to know which minerals are included in a mineral deed. Some deeds specify that "all minerals" are included. Others use the phrase "oil and gas," which means that only the rights to develop oil and gas are included in that deed. The general rule is that unless specifically defined, the term "mineral" refers to oil, gas, coal, metals and precious or semi-precious stones.
- In some states, there is a third estate that can be severed. In Pennsylvania, a state rich in coal resources, there are three separate estates: the surface estate, the mineral estate and the support estate. If the surface owner also owns the support estate, the mineral owner may mine the coal but must leave enough of it there to support the surface estate, i.e., if the mineral owner mines too much coal, and the surface owner's house falls into the mine, the surface owner's rights have been violated. If, on the other hand, the mineral owner also owns the support estate, the surface owner has no legal right to have his or her property supported by anything.
- Who owns coalbed methane? For the past 50 years, when the mineral rights to the gas and coal beneath a tract of land have been owned by different parties, disagreements have occurred over who owns the coalbed methane. In some states, such as Pennsylvania, Alabama, and Montana, courts have ruled that coalbed methane is part of the coal formation in which it is found.375 In 1999, however, the U.S. Supreme Court ruled that coal, as defined in the 1909 and 1910 Coal Lands Acts, does not include the methane gas found within the formation, and therefore, a coal owner has no right to extract coalbed methane for profit. (Amoco Production Co. v. Southern Ute Indian Tribe)
- Who owns the groundwater rights? Water quality and quantity issues could become important depending on who owns the rights to the groundwater, there may be an opportunity for landowners to influence the development of oil or gas on their property. In some states, the groundwater belongs to the state (i.e., it's a public resource), and so companies must apply for permits to extract and remove the groundwater that accompanies oil and gas development. In other states, however, the groundwater rights belong to the surface owner.
In some states, mineral rights revert to the surface owner under certain conditions such as death, failure to obtain production, or passage of a specified period of time. It is important to be aware that these types of laws may exist in your state, and they may provide surface owners with the opportunity to take possession of the mineral rights beneath their land. Several states have laws to this effect.
- In Louisiana, if the minerals are not used (e.g., no exploration or production has occurred) within 10 years, the surface owner becomes the owner of the minerals.
- In North Dakota and Ohio, if minerals have been dormant, i.e., the minerals have not been explored or exploited, for 20 years the surface owner can claim them.
- In Michigan, a law that passed in 1998 provides landowners with the opportunity to petition the state to purchase the state-owned minerals beneath their land. They can do this only if there is no pending lease or development. Upon request from surface owners, the state must sell the minerals to them at fair market value, unless the state wants to reserve minerals to prevent damage in environmentally sensitive areas, or there is some other legitimate reason to keep the minerals in state ownership. A deed restriction then will be added to the property that prohibits the minerals from being severed in the future.
- Recent attempts to pass similar laws in Colorado and Montana have failed.