West Texas Mineral Classifications Explained

Much of far-West Texas is ‘mineral classified’. This important feature of land ownership is a major reason why West Texas ranches are such great investments.

Enacted in 1919, the Relinquishment Act, as interpreted by the Courts, reserves all minerals to the State in those lands sold with a mineral classification between September 1, 1895 and June 29, 1931. Under the Relinquishment Act the, “owner of the soil”, also commonly known as the surface owner, acts as the agent for the State of Texas in negotiating and executing oil and gas leases on Relinquishment Act Lands (RAL). The State surrenders to the surface owner one-half (1⁄2) of any bonus, rental and royalty as compensation for acting as its agent, and in lieu of surface damages.

NOTE: This article initially appeared on OilandGasLawyerBlog.com in 2009

Conveyances of minerals in Texas usually describe the interest conveyed or reserved as an interest in “oil, gas or other minerals.”

Texas courts have struggled mightily to try to discern what the parties meant by the term “other minerals.” If the parties did not specifically name a particular mineral, such as coal or uranium, did they intend that substance to be included in their reference to “other minerals”?

Making the matter more complicated, the Texas Supreme Court has changed its mind on how to approach the problem. At one point, the Court adopted a “surface destruction test” to determine whether a substance was intended to be a “mineral.” Under this rule, the Court reasoned that the parties would not intend to sever ownership of a substance from the surface estate if the commercial way to mine the mineral was by strip mining, so a near-surface substance would not be considered a “mineral.” Then the Court decided that such a test was not workable, and it adopted (but only for reservations or conveyances of “other minerals” after the date of its opinion) a different test, the “ordinary and natural meaning” test. Under this test, a substance is a mineral if it is within the “ordinary and natural meaning” of the word “mineral.” In effect, each substance must be tested by litigation to determine if it is a “mineral” within the ordinary and natural meaning of that term. Once a court has decided that a particular substance is a mineral under this test, it is a mineral for all reservations and conveyances of “oil, gas and other minerals” to which the test applies..

Because of all of the confusion about the term, I have created a short-hand decision tree to use when looking at a conveyance or reservation, to help me remember how to apply these tests. My decision tree is below.

THE MEANING OF “OTHER MINERALS”

Rules applying to an instrument that severs a mineral (or a royalty interest in a mineral) from the surface estate:

1. Does the grant or reservation describe a specific mineral?

(a) If so, then the substance is a “mineral” for purposes of that grant or reservation, and the rules relating to the right of the owner of the mineral to use the surface estate for the exploration for and extraction of that mineral apply.

(b) If not, then different rules apply depending on whether the instrument severing the minerals was executed before or after June 8, 1983:

2. If the instrument severing the mineral from the surface was executed prior to June 8, 1983, then the “surface-destruction test” applies:

(a) If the substance is at or near the surface so that any reasonable method of extraction requires the destruction of the surface, the substance is a part of the surface estate as a matter of law.

(b) Deposits of lignite within 200 feet of the surface are “near surface” as a matter of law.

(c) If a any deposit of a substance is “near surface,” then additional deposits of the same substance found at other depths are also deemed part of the surface.

(d) In determining whether the method of mining would destroy the surface, the availability of restoration is immaterial.

(e) The owner of the mineral has no obligation to compensate the surface owner for damage to or destruction of the surface caused by removal of the mineral.

3. If the instrument severing the mineral from the surface was executed after June 8, 1983, then (except for iron ore and lignite — see below) the “ordinary and natural meaning” test applies (Moser v. U.S. Steel):

(a) A substance is a mineral if it is within the ordinary and natural meaning of the word “mineral.”

(b) the mineral owner will be required to compensate the surface owner for destruction of the surface unless the substance removed was expressly granted or reserved in the instrument.

(c) Building stone, limestone, caliche, surface shale, water, sand, and gravel are a part of the surface estate as a matter of law. Uranium is a mineral, regardless of its depth.

4. Special rule for iron ore and lignite: As to iron ore and lignite, the surface-destruction test still applies to instruments executed after June 8, 1983 (see above): if any deposit of lignite or iron ore is within 200 feet of the surface, or if not within 200 feet then shallow enough that any reasonable method of extraction would destroy the surface, then the substance is not a mineral.

Posted by Chris Gill

Ranching, wildlife management, finance, oil & gas, real estate development and management.

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