Mineral Rights May Be Lost In Seven
(7) Years
By: Hugh Wood
Mineral rights in Georgia are lost if the minerals are not
worked (mined) and/or specific taxes on the minerals are not paid within seven
(7) years. This loss does not apply
to written mineral leases or licensed mining companies.
I was recently asked to opine concerning any other a
minerals reservation in a deed was of such concern so as to generate a specific
title exception.
The conveyance in question concerned 300 acres of land
for development in north Georgia. The
title is completely clear; however, there is a well defined reservation of the
minerals and minerals rights for mining.
No mining had been conducted on the property since, at least 1919, and
the question arose whether the mineral and mining reservation constituted an
objection to clear and marketable title.
The specific reservation of mining
rights in the deed reads:
All reservation of minerals, mining
rights, mineral privileges and rights associated with dams in the Etowah River,
including those contained in warranty deeds from [redacted] Trustees for
Standard Pyrites Company to [redacted] all being recorded in Cherokee County,
Georgia records.
Quick Summary:
Since no mining has occurred for
more than seven (7) years prior to the conveyance of the property and since no specific
ad valorem taxes have been paid to
keep the mineral interest alive as a separate fee interest, the mineral
interest has been lost (actually lapsed).
The mineral fee has merged (by lapse or adverse possession/prescription)
into the surface fee. OCGA § 44‑5‑168(a). Because the right to dam the Etowah River is
“incidental,” to mining (which has now been lost), the right to dam (and build
earthworks) has also been lost. OCGA §
44-9-73.
That is all the explanation needed for
the CliffsNotes® summary.
The extended backstory is as
follows:
Owners, who seek development in the future, are concerned
about whether their 300 acre acquisition in Cherokee County, Georgia is clear,
given that the conveyancing deeds (1919) contain a very specific and very well
defined reservation of all minerals for mining.
Additionally, the mineral conveyance contains a reservation to the
mining owner to build “dams upon the Etowah River,” which includes by law the
building of earthworks, and other structures incidental to mining.
The title question then became: For current and present
surface development, does the severance of the mineral rights and mineral title
pose a title exception? Stated another
way, does the owners of the surface fee expose his or her commercial developer
to risk of mining (or interference) by the owner of the mineral rights fee?
PROPERTY
LOCATION:
While I don't think that the owners know the background
of their property, they walked into one of the more colorful conveyances of
minerals in the history of Georgia.
It appears that the property the owners acquired is a sub‑portion
of the old “Standard Mine,” and/or the “Rich Mine” in Cherokee County, Georgia. Both mines were active pyrite mines in the
early part of the 20th Century.
A statement about the property,
no doubt unknown to the owners, reads as follows:
[T]he Standard Pyrites Company owns 170 forty acre lots, a total of
about 6800 acres of land, lying on the Third District First Section
Forsythe County; and in the Third District Second Section Cherokee County. About 4600 acres of this area is held in
fee simple and 2200 acres of the mineral rights are in another
company. The mine is a lot 462 Third
District Second Section Cherokee County, 7.3 miles by road southeast of
Ball Green, a station of the Louisville & Nashville Railroad. This property is the site of the Old Franklin
or Crighton Goldmine, which was operated for about 75 years. The goldmining operations have been described
in two previous bulletins of the survey.
The last goldmining was done by the Crighton Goldmining Company and the
Franklin Gold, Pyrites and Pyrite Company, under the management of Barry
Searle. These companies were reorganized
form in the standard Pyrites Company, which has worked the Pyrites. [1]
The owner’s deed contains Land Lots in ranges that
overlap the old Standard Mine.
The Standard Mine initially mined gold (in the mid to
late 1800s) and then later pyrites. Land
lots overlapping and near the current conveyance appear in documents associated
with the Standard Mine. Id.
After the gold worked out of the
area in question, mining commenced (with significant intensity) in
pyrites. [2] The current land can be mined for
pyrite. One might wonder why pyrites
would be mined at all. In the era at
and before World War I pyrites were mined and worked for the purpose of
obtaining sulphur and sulphuric acid (H2S04).
Sulphuric acid, at that time, was a main ingredient in agriculture
fertilizer. The largest amount of
sulfuric acid – mined in this are in the early 1900s -- was used to make
phosphoric acid. That, in turn, was used
to make the phosphate fertilizer. Thus,
the demand for pyrite mining, particularly after World War I was used, in part,
to serve the agriculture needs of the United States.
With regard to clearing the title to
the surface, the issue concerns whether this very real mineral presents a
problem to conveyance of the surface fee.
It probably does not. The
current Georgia statute in question concerning the loss of the mineral or
mineral interest in land is OCGA § 44-5-168.
It provides that if the minerals have not been mined or “worked” within
seven (7) years prior to conveyance and no specific ad valorem taxes have been
paid (specifically set aside by the tax commissioner for the severed mineral
interest) the mineral interest is lost (lapsed). It is
deemed to have merged with the surface fee and the surface fee now owns the
entire fee, being both the surface fee and mineral fee.
The statute reads:
OCGA § 44-5-168. Presumptive adverse
possession for certain classes of property
(a) Whenever mineral rights are
conveyed or whenever real property is conveyed in fee simple but the mineral
rights to such property are reserved by the grantor, the owner of the real
property in fee simple or his heirs or assigns may gain title to such mineral
rights by adverse possession if the owner of the mineral rights or his heirs or
assigns have neither worked nor attempted to work the mineral rights nor paid
any taxes due on them for a period of seven years since the date of the
conveyance and for seven years immediately preceding the filing of the petition
provided for in subsection (b) of this Code section.
(b) In order to obtain absolute title
to mineral rights in the circumstances described in subsection (a) of this Code
section:
(1) The owner of the real property in
fee simple or his heirs or assigns may file in the superior court for the
county where the land is located a petition requesting relief in the nature of
declaratory judgment. The petition:
(A) Shall contain all essential,
required paragraphs, including jurisdiction;
(B) Shall contain the name and last
known address of the grantor of the property reserving the mineral rights and
the names and last known addresses of his heirs or assigns or any other person
known by the plaintiff to have an interest in the mineral rights;
(C) Shall show:
(i) That the plaintiff or his
predecessors in title were granted and obtained a deed for the property in
question;
(ii) That the conveyance reserved
mineral rights or that the plaintiff or his predecessors in title conveyed the
mineral rights and reserved or retained the fee simple title to the real
property; and
(iii) That, for a period of seven
years preceding the filing of the petition after the conveyance, the owner of
the mineral rights or his heirs or assigns have neither worked nor attempted to
work the mineral rights nor paid taxes on them; and
(D) Shall include any and all prayers
regarding the land that the plaintiff may desire. Specifically, the petition
may pray that the court find that the plaintiff has obtained title to the
mineral rights through adverse possession and that the plaintiff be granted
title to mineral rights;
(2) Upon a finding in the plaintiff's
favor, the court shall issue a judgment and decree declaring that the mineral
rights involved have been lost and that the plaintiff has gained absolute title
to such mineral rights; and
(3) Service shall be perfected in the
same manner as service on defendants in an in rem proceeding, including service
by publication.
(c) Nothing in this Code section shall
restrict the court from granting further plenary relief, whether legal or
equitable; and the failure of the petition in the plaintiff's favor shall not
affect the right of the plaintiff to any other relief, legal or equitable, to
which he may be entitled.
(d) Any person named in the petition
or any person having an interest in the mineral rights shall have the right to
intervene in a case brought under this Code section.
(e) In order to maintain the status
quo pending the adjudication of the questions or to preserve equitable rights,
the court may grant injunctions and other interlocutory extraordinary relief.
(f) Nothing in this Code section shall
apply to a lease for a specific number of years nor to an owner of mineral
rights who has leased the mineral rights in writing to a licensed mining
operator as defined in Part 3 of Article 2 of Chapter 4 of Title 12.
Since the owners state there was no segregated mineral ad valorem tax and a search of the tax
records confirms same, we can eliminate the possibility of the mineral fee
survival based on the payment of mineral ad valorem taxes. And, since pyrite has not been mined on the
property since, at least 1926, we can determine that the mineral fee cannot
have survived by mining or “working,” the minerals.
Thus, pursuant to OCGA § 44‑5‑168(a), it is somewhat
conclusive that the titles have merged. [3]
This type of loss or taking has been upheld as constitutional. [4] This taking also happens automatically. The surface owner does not need to do
anything for the mineral fee to merge into the surface fee. [5] It
would appear that (absent additional facts) the surface fee can be commercially
developed without worrying whether the owner would face some future economic
threat from the “owner” of the mineral fee.
The owner posed a more nuanced title question. Does the reservation to build dams on the
Etowah River pose a separate or additional exception to title? The prior deeds contain the right to build a
dam on the Etowah River. [6] That is, does the reservation of the right to
create a dam or earthworks on the Etowah River in any way change the analysis
of the merger of the mineral fee into the surface fee? It would seem to be “no” for a different
reason.
In Georgia law as far back as 1868, the General Assembly determined
that the right to mine shall carry with it the incidental right to dam nearby
waterways for use in the mine or cut ditches and canals or tunnels necessary
for mining. It is clear though that the
creation of dams or earthworks is "incidental" to actual mining. The statute in question is OCGA § 44‑9‑73. It concerns: Privileges incidental to
mining: canals; tunnels, flumes and
dams.
It reads in its entirety as follows:
OCGA § 44-9-73.
Privileges incidental to mining; canals; tunnels; flumes; dams
(a) The owner of any
mine shall have the right to enter upon any land between the mine and the water
power upon which the mine is dependent and to cut thereon such ditch, canal, or
tunnel or to construct such flume or other aqueduct and to build such dam as
may be necessary to control the water power; provided, however, that the mine
owner shall first have the damages assessed arising to the owner of the
intervening land or to the owner of the land on which the dam is to be erected
and shall pay such damages to the owner of the land so intervening or on which
such dam is to be erected.
(b) After giving the owner of the land to be
entered upon at least five days' notice of his intention to make such
application, the owner of the mine shall present to the judge of the probate
court of the county his written application for the right and privilege of
cutting such ditch, canal, or tunnel or constructing such flume or aqueduct or
erecting such dam.
Thus the reservation to erect dams on the property does
not change the analysis that the mineral fee merged into the surface fee that
caused the election of dams, canals, flumes is incidental to mining. When the mineral fee was lost the former
owner of the minerals also lost the right to dam the Etowah River.
While this author believes that the loss of the mineral
fee by the former owner is so clear as not require the further complication of
obtaining a Judge’s Order confirming same.
However, if the grantee or owner needs a further level of confidence in
the title and/or the commercial title insurance company will not insure ever
this opinion, then and in that event the statute provides a solution. That method is that the Superior Court in
which the property is located may issue "a judgment and decree declaring
that the mineral rights involved have been lost and the plaintiff is deemed
absolute title to such mineral rights" OCGA § 44‑5‑168(d). [7]
The action for the judgment concerning the mineral rights
is fundamentally petitioned for as a declaratory judgment on the title. The petition declares jurisdiction; all of
the former owners that can be found and title (relevant title) are served (good
luck with that when your base title is 1919) a Lis Pendens is filed against the
property. A hearing is eventually held
by the Superior Court concerning whether the mineral fee has merged with the
surface fee. If the Court finds the fees
have merges it issues a Court Order to that effect and the Order is recorded in
the case and upon the land records of the County. The cross-reference of that Order into the
title chain forever eliminates the risk of hostile activity by the mineral
owner.
CONCLUSION:
The development of 300 Acres in Cherokee County, Georgia
seems to be free from any risk of the mineral fee. The mineral fee conveyance has been lost by
the former mineral owner by its failure to mine or pay taxes on the mineral
interest for seven (7) years prior to the conveyance. Additionally, all rights to build earthworks
and dams on the property have been lost, because they are deemed to be only
“incidental,” to the working of mines.
The property seems to be free and clear of the severed mineral fee.
Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068
[1]
Shearer, H.K.
and Hull, J.P.D. The Pyrites Deposits of
Georgia, Index Printing Company, State Printers, Atlanta, Georgia (1918) at
164.
[2]
The gold
worked out and is presently not economical to mine.
[3]
See also,
Hinkle, Daniel F., 2Ga. Real Estate Law
& Procedure § 12:68 (7th Ed.) (2016).
[4]
This type of
a statutory taking has been held constitutional. Many years ago multiple cases arose over
whether this type of loss of mineral rights was a “taking” without due
process. In a case arising out of the 20‑year
lapse statute in Indiana, Ind. Code 32‑5‑11‑1 through 8 reached the United
States Supreme Court. In that case, Texaco, Inc. v. Short, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738
(1982), the United States Supreme Court upheld the constitutionality of
(fundamentally) all mineral loss statutes across the United States. While Georgia refers to its mineral rights
statute as “adverse possession” or prescription, much of the remainder of the
country refers to these acts as the "dormant mineral" acts. They are constitutional.
[5]
The owner of
the surface fee does not need to take any act or do anything for the mineral
fee to merge into the surface fee.
"[The] surface owner who conveyed mineral rights did not have to
assert any acts of dominion over the surface estate in order to make claim
under the statute, but only allege that he had to deed the property an issue,
the mineral rights had been severed from the fee simple estate, and make the
requirement of non‑use and non‑pay of taxes had been satisfied." Headnote.
Mixon v. One Newco, Inc., 863
F.2d. 846 (1989). “[N]otwithstanding
these references to “adverse possession,” our analysis of OCGA § 44-5-168 and
Georgia cases construing it convinces us that the statute actually is a “lapse”
statute rather than a traditional “adverse possession” law.” Mixon,
supra at 848. Thus, in our current
analysis the owner of the Cherokee fee need only assert that he held the
surface fee for more than 7 years. (And that may be extended by tacking to a
prior owner).
[6]
No doubt the
drafters in 1919 were unaware of the problems this would present in the modern
age of getting approval to build a dam from the US Army Corps of Engineers, EPA
and the Georgia Dept. of Natural Resources.
[7]
Note: If the minerals are owned by a “licensed
mining company,” in Georgia there are special exceptions to loss of mineral
rights which go beyond the scope of this note.
Also, a recorded mining lease changes this analysis and stops the loss
of minerals as described in this note.
End
