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Mineral Estates - Caves, Oil and Fossils

Determining the extent of a mineral estate as described in a grant or reservation is a tricky proposition. The same material may be considered a mineral in one location but not in a different state or region. One key issue is the perceived value of the material and its prevalence or rarity in a given area.

Not all materials below the surface are recognized as part of a typical mineral estate - exceptions may include water, stalactites and stalagmites, or cave-dwelling animals.

Individual state standards are sometimes unique; Pennsylvania is one of the minority of states that does not include oil and gas in a deed conveying "all minerals."

One of the best cases I've seen for defining the limits of a mineral estate is the Colorado ruling Mccormick v. Union Pacific Resources: 14 P.3d 346; 2000, quoted below:

A reservation is a vehicle by which a grantor creates and reserves to the grantor some right or interest in the estate conveyed, which interest had no previous existence. See Lincoln Sav. & Loan Ass’n v. State, 768 P.2d 733, 735 (Colo. App. 1988). The grantor may reserve a wide variety of interests, such as easements, profits, timber, water rights, or mineral rights. As one commentator notes: “The grantor conveys away an estate and receives back, in the classic metaphor of property law, one of the sticks in the bundle of ownership.” Thompson on Real Property Law § 82.09, at 596 (David A. Thomas ed., 1994).

The reservation of a mineral estate necessarily severs it from the surface estate, creating multiple estates in the same land. See Smith v. Moore, 172 Colo. 440,

The word “mineral” can be used in different senses, depending upon the context. For example, “the scientific division of all matter into the animal, vegetable or mineral kingdoms would be absurd as applied to a grant of lands, since all lands belong to the mineral kingdom[,]” and, thus, could not be excepted from the grant without being destructive of it. Watt v. Western Nuclear, Inc., ... 462 U.S. 36, 43, 76 L. Ed. 2d 400, 103 S. Ct. 2218, 2223 (1983). Thus, the term “minerals” “is not capable of a definition of universal application.” Lin Patterson, A Survey of Problems Associated with Ascertaining the Ownership of “Other Minerals”, 25 Rocky Mtn. Min. L. Inst. 21-1, 21-8 (1980).

We uphold the trial court’s determination that summary judgment was appropriate in this case. Although the term “minerals” is not inherently unambiguous and extrinsic evidence may be required to ascertain the parties’ intent in certain circumstances, our study of Colorado legal precedent, custom, and usage convinces us that Colorado adheres to the majority rule that deed reservation language reserving “other minerals” reserves oil and gas. Leading Colorado commentators are in agreement:

Barring the unusual case where ambiguities exist in the language of [a] grant or reservation and parol evidence is allowed to prove what was really intended in a given conveyance, the law is basically settled … Now, almost universally in mineral-producing jurisdictions, including Colorado, minerals can be separated and severed from surface ownership. Barring other factors, most courts today will hold or have held that a general grant or reservation of “minerals” or of “all minerals” will be inclusive of oil and gas and all constituent hydrocarbons. Generally, too, a grant or reservation of “oil and gas” will include all associated hydrocarbons and probably at least some non-hydrocarbons that are normally produced as part of the oil and gas stream.

An interesting question is presented under the Stock-Raising Homestead Act, or other acts containing similar mineral reservation language, as to just what substances are to be classified as “minerals” under a reservation of “all the coal and other minerals.” It appears to be settled law that those words are adequate to reserve oil, gas, and related hydrocarbons.

A leading treatise summarizes the precedent and states the oil and gas mineral reservation majority rule as follows:

The courts are practically unanimous in holding that oil and gas are minerals in the broad and general sense in which that term is used. These decisions would seem to fix a common standard of meaning of the term, and it is a general rule, adhered to by a majority of the courts, that a conveyance or exception of minerals includes oil and gas, unless from the language of the instrument, or from the facts and circumstances surrounding the parties at the time of its execution, it is found that the term was used in a more restricted sense.

“Today only a few jurisdictions in the eastern United States take the position that oil and gas are not included within the term ‘minerals’ when used alone. The majority position is to construe a general reference to ‘minerals’ to include oil and gas unless there was a demonstrated intention to the contrary.” 2 Robert G. Pruitt, Jr., Mineral Terms--Some Problems in Their Use and Definition, 11 Rocky Mtn. Min. L. Inst. 1, 12 (1966).

Other Minerals

As to other minerals, Carpenter points out in his comment that the inclusion of substances other than oil and gas in the deed reservation term “other minerals” is not so settled. See Carpenter, supra, at 481. This was the situation in Farrell v. Sayre, 129 Colo. 368, 270 P.2d 190 (1954), where we approved the use of two criteria for determining whether a substance is a “mineral” for purposes of a deed reservation, when ambiguity arises from the language of the deed itself or the surrounding circumstances regarding that substance's inclusion within the term "minerals." In Farrell, we held that (1) the word “minerals” when found in a reservation out of a grant of land means substances exceptional in use, in value, and in character, and does not mean ordinary soil which if reserved would practically nullify the grant; and (2) in deciding whether exceptional substances are "minerals," the true test is what that word means in the vernacular of the mining world, the commercial world, and landowners at the time of the grant, and whether the particular substance was so regarded as a “mineral.”

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