Mineral Reservation Clause Allowing Mining Did Not Constrain Surface Owner’s Public Opposition

A New Mexico state court judge has rejected a mineral estate owner’s attempt to constrain a surface owner from publicly opposing its mining project on the basis of a strongly worded mineral reservation that expressly reserved mining rights and attendant surface rights.  See Lone Mountain Ranch, LLC, et al. v. Santa Fe Gold Corp., et al., First Jud. Dist. Ct. Case No. D-101-CV-2013-02581 (Summary Judgment Order of Sept. 20, 2016) (no appeal taken).  According to the court’s Order, to prohibit a surface owner from participating in public processes and expressing objections or opposition to mining on split estate lands resulting from a mineral reservation, “the reservation itself must include specific covenantal language prohibiting such conduct.”  Id., p. 4.

The high-profile land involved in the litigation was part of the 27,000 acre Ortiz Grant in the Galisteo Basin of Santa Fe County.  In 1947, the owners of the Ortiz Grant deeded part of the surface estate to Lone Mountain Ranch, LLC in fee simple absolute, but expressly reserved all “oil, gas, coal, metals and minerals, in, on or under the surface of the lands and real estate hereby conveyed,” as well as “the right and license of exploring, mining, developing or operating, for any, or all of said products, upon said lands, and of erecting thereon all necessary buildings, pipe lines machinery and equipment necessary in and about the business of mining, developing, or operating, for any of said products, to the same extent and with the full rights of an owner operating on his own lands.”  Id., pp. 2-3.

In 1947, of course, the myriad public comment and hearing opportunities that today are afforded members of the public under numerous environmental and mine permitting regimes at the federal, state and—in the case of Santa Fe County, local—levels did not exist.  The question the court clearly had to grapple with, accordingly, was whether the parties to the 1947 deed intended, or could be thought of as having hypothetically intended, that the surface owner grantee would be able to utilize such as yet non-existent public participation processes to effectively stymie the mining rights expressly reserved by the grantor “to the same extent and with the full rights of an owner operating on his own lands.”  Id. (emphasis added).  Inasmuch as many lands throughout New Mexico were severed into split estates by similarly worded—albeit typically not as strongly worded—mineral reservation clauses that predated the public participation processes placed in issue by this case, the First Judicial District Court’s decision potentially has broad-ranging implications throughout the state.

Although not addressed by the court given the reservation clause’s express reservation of surface rights, the case by logical extension also probably limits the existing doctrine of implied surface rights recognized under New Mexico law.  That line of authority affords mineral estate owners—even mineral estate owners whose interest derived from mineral reservation clauses that are silent as to surface rights—an implied right to use so much of the surface as is reasonably necessary to explore for, develop and mine the minerals that are part of the reserved mineral estate.  Fairly clearly those implied rights likely do not include rights to prohibit a surface owner’s public participation opposition after the Lone Mountain Ranch decision, at least in the First Judicial District.

At first blush, by coming down on the side of a surface owner’s public participation rights in the absence of “specific covenantal language prohibiting such conduct,” the court’s decision might be viewed as having suggested a possible drafting fix for mineral estate owners, who generally are deemed to hold the “dominant” estate under existing New Mexico authorities.  Upon closer consideration, however, where a mineral estate title derived from pre-existing mineral reservation clauses, after Lone Mountain Ranch, those holding the mineral estate likely are powerless to hereafter employ careful drafting and recording of additional instruments as means of expressly prohibiting a surface owners’ public participation opposition. The reason is fairly simple: for existing mineral estate owners, the Lone Mountain Ranch decision effectively stands for the proposition that the right to prohibit a surface owner’s public opposition is not one of the property right “sticks” it received when the bundle of sticks were apportioned between the surface and mineral estates by the pre-existing mineral reservation clause.

In other words, the only drafting queue and comfort provided by the court’s implicit acknowledgment that a reservation clause might include “specific covenantal language” would be in situations where the current owner of an entire fee estate hereafter deeds its land and creates a new severance of its wholly-owned real estate through a carefully drafted reservation clause that includes such an express restraint on the surface owner’s public participation.  Even then, however, there may still be an open question about the enforceability of such an attempt to restrict the surface owner’s public process participation; the Lone Mountain Ranch court was presented with, but did not reach, the intriguing constitutional question of whether such a prohibition in a real property instrument would be a violation of the surface estate owner’s free speech rights under the First Amendment.  That issue is one that looms for the future.

For more information, please contact Stuart Butzier at stuart.butzier@modrall.com or by calling (505) 848-1800.

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