Title to real estate includes title to the surface of the land as well as to the oil, gas, and other minerals located under the surface, often called the “mineral estate.” Title to the minerals may be separated from or “severed from” title to the surface, so that, for example, John Smith may own 100% of the surface of Blackacre but transfer, or convey, to his brother, Bob Smith, 100% of the minerals under Blackacre. Both John and Bob may possess, convey, and pass to their heirs or devisees under a will all or a portion of their interest in Blackacre to other persons. The result, which is not uncommon in Kansas, may be that title to the mineral interest in Blackacre is owned by numerous individuals with each owning a relatively small fractional amount of the total minerals.
In most respects, John Smith’s title to the surface of Blackacre and Bob Smith’s title to the minerals in Blackacre are equivalent property rights in the eyes of the law. However, Kansas, like many other states, has adopted a dormant mineral act, also known as a mineral lapse act, which can have the effect of extinguishing Bob’s title to the mineral estate in Blackacre (and rejoin the mineral estate with the surface estate) if he fails to “use” his mineral interest.
The Kansas Mineral Lapse Act (K.S.A. §§ 55-1601 to 55-1607) is designed to identify the owners of severed mineral interests and incentivize them to “use” their mineral interests. Under the Act, if an owner of a severed mineral interest has not used the mineral interest for a continuous period of 20 years or more, the owner of the surface estate may, after giving notice to the severed mineral interest owner, extinguish the severed mineral interest and reunite the interest with the surface estate.
For severed mineral interest owners, and owners of surface estates subject to severed mineral interests, it is important to understand what constitutes “use” of the mineral interest under the Kansas Mineral Lapse Act. For severed mineral interest owners, this knowledge is key to avoiding lapse and loss of their mineral interest. For owners of a surface estate subject to severed mineral interests, knowledge of what constitutes use of a severed mineral interest may come in handy should the owner one day wish to extinguish the severed mineral interests and reunite them with his or her interest in the surface. Under the Kansas Mineral Lapse Act, a mineral interest is considered to be used when:
(1) Any minerals (including oil or gas) are produced from the property;
(2) Operations are being conducted on the property for the injection, withdrawal, storage, or disposal of water, gas, or other fluid substances;
(3) Rentals or royalties are being paid by the owner of the severed mineral interest to the owner of the severed surface estate for the purpose of delaying or enjoying the use of the mineral rights;
(4) The property is unitized or pooled for oil or gas production purposes with other property that is being used under this definition;
(5) In the case of coal or other solid minerals, there is production from a common vein or seam by the owners of the severed mineral interests, or
(6) Taxes are being paid on the severed mineral interest by the owner. In counties that separately tax severed minerals, “using” a severed mineral interest is as simple as paying annual property taxes on it.
To attempt to extinguish Bob Smith’s severed mineral estate and reunite it with his surface estate in Blackacre, in our example, John Smith would have to give notice to Bob that Bob’s mineral interest has lapsed for nonuse. This requires that John publish notice of the lapse in a newspaper of general circulation in the county where Blackacre is located and, if he knows Bob’s address, by mailing a copy of the notice by restricted mail to Bob within 10 days after publication of the notice in the county newspaper. For 60 days following publication of the notice in the county newspaper, Bob may file a statement of claim in the office of the Register of Deeds of the county where Blackacre is located preserving his mineral interest. If Bob files a statement of claim, his mineral interest will remain valid for at least another 20 years.
If, however, Bob fails to file a statement of claim during the 60-day period, then, under the Mineral Lapse Act, the severed mineral interest reverts to the owner of the surface estate—John in our example. John Smith would therefore take title to the severed mineral interests and would own both the surface and the mineral estates of Blackacre. John must then file a quiet title action in the district court of the county where Blackacre is located to quiet his title to the mineral interest against any claim of Bob in order to obtain marketable title to the mineral interest.
As you can see, the Kansas Mineral Lapse Act may be a trap for the unwary severed mineral interest owner in Kansas. The Act may also be a tool for a surface owner who wishes to reunite severed minerals with his or her surface estate. Sometimes this is the only way the land may be leased and developed for oil and gas purposes. Owners of real estate in Kansas should remain vigilant about the use or nonuse of severed mineral interests, and are strongly encouraged to contact qualified Kansas real estate legal counsel if and when issues of nonuse and mineral lapse arise.
Joseph A. Schremmer
joe@depewgillen.com
February 2017
Depew Gillen Rathbun & McInteer, LC
This article is based on hypothetical facts and is issued for general informational purposes only. It is not intended to be construed or used as legal advice.
