UTAH OIL AND GAS SURFACE RIGHTS – SPLIT ESTATES

Effective May 8, 2012, Utah enacted the Surface Owner Protection Act, known as S.B. 77, as Utah Code Ann. § 40-6-20 and § 40-6-21 (the “Act”).  The Act has been in the works for several years, with several failed attempts at passage. The purpose of the Act was to resolve tensions between split estate owners (we’ll define that below!) This series of posts will explain how split estate works, the legal limits of mineral development in Utah, and proper negotiation of oil and gas leases and surface use agreements.

This is a big subject, so we are going to break it out into several posts.  To start, let’s talk about split estate and how to figure out the mineral ownership on a tract.

What is Split Estate? In Utah, the surface and mineral rights on the same tract of land can be owned separately. For example, let’s say that Fred sold his farm to Relma, but retained the minerals.  Relma could farm, hunt, exclude others, construct a home, etc.  While Fred, the mineral owner, could drill an oil well and keep all of the production. Relma would have to put up with Fred’s mineral development.  Each owns rights in the same tract of land, one has rights to the surface and the other has rights to the minerals.  This is called “split estate.”

How is a split estate created?  Split estate is created through a reservation of the mineral rights in a real estate conveyance.  This reservation could occur when the government patents (conveys) a tract or when the minerals are reserved during a real estate transaction.  For example, under the Stock Raising Homestead Act of 1916 the federal government patented the surface to qualifying individuals, but reserved the minerals.  In this situation, the individual owns the land, but not the minerals.  (Note that prior homestead acts conveyed the minerals along with the surface).

Do you own your minerals?  First, check with the General Land Office for a copy of the patent to your land.  If the government reserved the minerals, it will say so right on the patent (there are some exceptions).  You can search for your patent online, here:http://www.glorecords.blm.gov/.

Let’s assume that the government did not retain the mineral rights on your land.  The next step is a search of the county records.  Head down to the county recorder’s office.  You’ll need to read every deed from the patent through to your ownership.  You are looking for a mineral reservation by a prior owner.

This is a complicated process for several reasons.  First, most counties do not keep track of mineral ownership, only the surface ownership (one county that does, is Mesa County, Colorado).  Second, most title companies will not write a policy for minerals (check your title policy, it will “exclude” any coverage for minerals).  Third, mineral reservations and mineral rights are quirky and complicated.  There are hundreds of mineral rights decisions in reported court cases.  You’ll need to read and understand these cases and how they may apply to your situation.

Clear as mud?  We are always happy to answer questions, you can contact us anytime! We have oil and gas attorneys licensed in Utah, Wyoming, Colorado and Nebraska.

In the next post, we’ll discuss the rights of surface and mineral owner rights on split estate tracts.

    Chad Nicol

    Chad Nicol, Salt Lake City, UT

    Designer for web and print based in Salt Lake City, Utah.