This post is not legal advice.
In 2015, Maryland enacted a two-year moratorium on hydraulic “fracking.” This moratorium, along with low oil and gas prices, means that Maryland mineral owners will probably not see oil and gas companies looking to lease minerals soon. This lack of opportunities to develop oil and gas interests means some mineral owners will need to comply with Maryland’s Dormant Mineral law to retain ownership of their mineral interests.
What is the Mineral Estate?
In Maryland, a real property owner is assumed to own “from the heavens to the center of the earth.” Real estate includes two separate, severable estates: 1) the surface estate and 2) the mineral interest. A real property owner can own either one or both. The surface estate or property is the right to use the surface and all substances below the surface.
The mineral estate is the ownership rights in minerals found in the real property. Minerals such as oil, natural gas, coal, iron, gold, etc., are considered any organic or inorganic substances which have value, based on their physical properties. Some materials found on or in the surface estate of real property are not considered minerals, such as gravel, sand, and subsurface water, which do not possess exceptional qualities or value. What is a part of the mineral estate will depend heavily on the language used when severing the two estates.
The mineral and surface estates can be severed from one another resulting in different owners for the two estates. One piece of property, therefore, can have different owners for the mineral and surface estates. When the two estates are separated, the mineral estate owner might retain some rights to use the surface estate to develop the mineral estate. In Maryland, this mineral reservation creates a perpetual estate.
Dormant Mineral Act
A dormant mineral law would reunite the surface and mineral estates if the mineral estate was not used for a specific period. The Dormant Mineral Interests Act (Act) is in the Maryland Environment Code, Sections 15-1201 through 15-1206 (2012). The Act only applies to unused mineral interests severed from the surface estate and not to mineral interests owned by the surface owner (Section 15-1203). The Act only applies to mineral interests severed from the surface estate; severed mineral interests are unaffected.
Mineral interests are considered “in use” when there are:
active mineral operations on or below the surface;
payment of taxes related to the mineral interest;
certain legal instruments recorded; or
a deed, judgment, or judicial decree recorded judgment or decree that makes reference to the mineral interest (Section 15-1203(c)(1)(i)-(iv))
The use of an injection well, disposal, or storage in the mineral interest does not constitute use according to the Act (Section 15-1203(c)(2)).
A mineral owner who has not completed one of the four activities above at any point in the last 20 years should contact an attorney to help file the proper notice to preserve their mineral interest. File the notice of intent to preserve in the county where the mineral interest is located. The notice of intent to preserve must include the mineral owner’s name, a legal description of the mineral interest, and the deed, judgment, or judicial decree which created the mineral interest. Filing this notice will help to preserve your mineral interest till you can use it.
If the mineral interest has been unused for at least 20 years and the mineral owner has not filed a notice of intent to preserve it, the surface owner can file to terminate the dormant mineral interest in the circuit court where the mineral interest is located. The resulting judgment is similar to a “quiet title” action. In this instance, a surface owner is filing a lawsuit with a circuit court seeking a court order preventing the dormant mineral estate owner from claiming that he/she retains an interest in the mineral estate.
Conclusion
Because of lower oil and gas prices and the two-year ban on fracking, mineral interest owners will not have the opportunities in many cases to develop existing mineral estates. With that in mind, it’s good to be aware of the dormant mineral laws in Maryland to preserve your ownership interest in the minerals. To learn more about mineral leasing in Maryland, see State Review of Environmental Impacts Could Result in Mineral Leasing Opportunities in Maryland (http://go.umd.edu/MDOilGas).
References
Md. Code Ann. Envir. §§ 15-1201 through 15-1206 (2013).