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In Louisiana, real property ownership may be divided in many ways. One example of this is that the mineral rights to a parcel of property which include the rights to explore the property for oil, gas or other minerals may be separated from the ownership of the land itself. (i.e. the dirt, trees, buildings, etc.) When the ownership of the mineral rights is divided from the ownership of the land itself, issues may arise between the owners regarding how and when the mineral right owner may use the surface of the land (i.e. the dirt) to explore for the minerals below the surface. Often, an Act of Sale where the owner of the land acquires the land (the Buyer) and the owner of the minerals (often Seller) retains the minerals, is silent as to what surface rights the mineral owner will enjoy.
Can the mineral rights owner dig on the property? Can the mineral rights owner erect a well? These are the types of questions that often arise in these situations. Unfortunately, the parties may not address these issues when the property is transferred. The Louisiana legislature and the Louisiana Real Estate Commission have recently attempted to remedy this problem.
LEGISLATION:
In 2006, the legislature revised the law on the use of the surface by the owner of the mineral rights in an attempt to clarify the respective and sometimes competing rights.
LA R.S. 31§11. provides:
A. The owner of land burdened by a mineral right or rights and the owner of a mineral right must exercise their respective rights with reasonable regard for those of the other. Similarly the owners of separate mineral rights in the same land must exercise their respective rights with reasonable regard for the rights of other owners.
B. (1) A reservation of mineral rights in an instrument transferring ownership of land must include mention of surface rights in the exercise of the mineral rights reserved, if not otherwise expressly provided by the parties.
(2) In the absence of particular provisions in the instrument regulating the extent, location and nature of the rights of the mineral owner to conduct operations on the property, the requirements of this Subsection are satisfied by inclusion of the following language in the reservation of mineral rights:
"The transferor (Seller) shall exercise the mineral rights herein reserved with reasonable regard to the rights of the landowner, and shall use only so much of the land, including the surface, as is reasonably necessary to conduct his operations. Such exercise of mineral rights shall be subject to the provisions of Articles 11 and 22 of the Louisiana Mineral Code. The transferee (Buyer) recognizes that by virtue of the mineral reservation herein made, the mineral owner shall have the right to use so much of the land, including the surface, as is reasonably necessary to explore for, mine and produce the minerals."
This new statute requires the mineral rights owner and the surface rights owner to address the extent to which the mineral rights owner may use the surface of the land to explore and produce the minerals.
PURCHASE AGREEMENT FORM:
The Louisiana Residential Agreement to Buy or Sell form in Lines 33 through 35 provides two options for the Seller and Buyer in transferring property to address the mineral rights issue. If the first checkbox is selected, the form provides the Seller may convey any mineral rights to the Buyer without warranty of title to the minerals. This means the Seller is transferring the mineral rights he may have but is not warranting or guaranteeing to the Buyer that there are any mineral rights which he may be able to convey to the Buyer. In this event, surface rights do not need to be discussed as the owner of the minerals is/may be the same as the owner of the surface.
If a second checkbox is selected the mineral rights owned by the Seller are to be reserved by the Seller, or if the Seller is conveying a portion of mineral rights to the Buyer. For example, the Seller may wish to retain 50% of the mineral rights and convey 50% of the mineral rights to the Buyer. The Seller might also fill in 100% in Line 34 if the Seller is reserving all mineral rights. If this checkbox is selected, surface rights need to be addressed.
Lines 34 - 35 of the form provides the Seller shall waive any right to use the surface of the Property being sold for any reserved mineral activity or use. This means the Seller is agreeing that the Seller shall have no access to, or use of, the surface of the Property and that any drilling or production of minerals shall not be on the surface of the Property being sold. Mineral production can be conducted by directional drilling from adjacent property.
The Louisiana legislature, through the recently enacted statute and the Louisiana Real Estate Commission through the relevant language in the standard purchase agreement form have attempted to reduce instances where the owner of surface rights and the mineral rights owner fail to address the extent of exercise of surface rights by the mineral owner. The use of the surface rights by a mineral owner should be addressed in the Purchase Agreement and correspondingly in the Act of Sale.
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