UNIFICATION OF MINERAL RIGHTS



House Bill 4061 as enrolled

Public Act 117 of 1998

Second Analysis (8-31-98)


Sponsor: Rep. William Bobier

House Committee: Forestry

and Mineral Rights

Senate Committee: Economic

Development, International

Trade, and Regulatory Affairs



THE APPARENT PROBLEM:


For many years, the Department of Natural Resources (DNR) has followed a policy, when it sells or conveys a parcel of land, of reserving the mineral rights, which are the property rights associated with oil, gas, petroleum, or any other natural compound that can be removed using a mining process. The result is that the surface rights to the property are separated from the mineral rights, which are then referred to as "severed" mineral rights. Legally, the rights of the owner of a severed mineral right take precedence over those of the person who owns the property rights to the surface. That is, he or she has the authority to extract the minerals under the surface even if the owner of the surface rights does not want those minerals extracted. Consequently, problems sometimes arise: plans to develop minerals may not be compatible with a surface owner's use of the property. Also, in some cases, the person who purchased the property is unaware that the mineral rights have been severed. In recent hearings before the House Forestry and Mineral Rights Committee in Gaylord, Michigan, for example, property owners told of coming home to find bulldozers ploughing through their land -- their first knowledge that the mineral rights were to be developed. The state currently owns 2.1 million acres of severed mineral rights. It leases these rights and receives royalty interests, which are deposited in the Natural Resources Trust Fund. However, many believe that the confusion that occurs from having different parties hold the surface rights and the mineral rights could be avoided if the state would divest itself of these and reunite them with the surface holdings.




THE CONTENT OF THE BILL:


House Bill 4061 would add a new part, Part 610 (MCL 324.61001), to the Natural Resources and Environmental Protection Act (NREPA), to specify how the state should divest itself of subsurface oil or gas interests and reunite the severed mineral rights with the surface holdings. The bill would also establish new provisions for reserving mineral rights when state-owned land is sold (MCL 324.503 and 324.61001).


Reservation of Mineral Rights. Under the bill, the DNR would be required to implement procedures that would allow it -- after consultation with the Natural Resources Trust Fund Board and approval of the Natural Resource Commission -- to divest itself of severed oil and gas rights and reunite those rights with the surface rights. Also, when the DNR sold land that contained subsurface rights, a deed restriction would have to be included specifying that the mineral rights would revert to the state if a landowner severed them from the surface rights. Land that the DNR determined had unusual environmental features of exceptional sensitivity would not have to be sold, but would be maintained in an undeveloped state. In addition, the state would not have to divest itself of mineral rights on land that was in production. The bill would also delete the current requirement that mineral rights must be reserved when surplus land is sold.


Part 610. Part 610 would add provisions regarding unified surface and subsurface oil or gas ownership. The following are the major provisions of Part 610: