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History of the Ownership of Mineral Rights
H. J. Gruy
The United States of America is the only country in the world in which the gold, oil or natural gas, and other minerals in the ground belong to the surface owner who owns the land in fee simple. In all other countries these underground minerals belong to the King or to the state. It is my opinion that this has been a great blessing to the USA in that this wealth has flowed through the people and enriched them rather than the state. Great wealth flowing to the state, particularly in less developed countries, tends to lead to corruption of politicians and bureaucrats that are handling the money, resulting in a very wealthy political class often among very poor people. If the royalties go to the landowner, he educates his children. They often become entrepreneurs and may start oil field services and own workover rigs. They then start drilling companies and become independent oil and gas producers. As they prosper, they start businesses so that the entire country prospers. When the royalties go to the government none of these good things result. Let us begin with Texas because it is a state with great mineral wealth. Texas under Spanish and Mexican rule owned all the minerals under 27 million acres, more or less, and retained this wealth in 1836, after the battle of San Jacinto. Texas originally continued to operate under Spanish law; however, in 1840, Texas adopted English common law relative to property rights. The first dispute over mineral properties in Texas arose over salt. In early Texas caravans of wagon trains came to El Sal del Ray Lake in Hidalgo County and transported the salt to market in Mexico. In 1862, during the war between the states, a joint resolution of the legislature ordered the governor to take possession of the salt deposit. In 1866, the constitutional convention undertook to return the salt rights to the surface owners. The resolution reads: "Resolved, That the state of Texas hereby releases to the owner of the soil all mines and mineral substances that may be on same, subject to such uniform rights of taxation as the legislature may impose." This ordinance was brought forward in the constitutions of 1869 and 1879. In 1912, the Texas Supreme Court ruled that this relinquishment was retroactive. The effect was to release minerals which the State had granted in prior years. In 1907, the first statutes providing for the surface to be sold and mineral rights reserved were enacted. The second salt war involved a man named Charles H. Howard, who filed claims on salt lakes in El Paso County, Texas, some 90 miles northeast of the town of Elizario. Villagers had for years taken the salt free. Howard charged a fee for the salt which enraged the people and resulted in Howard, together with John McBride and John Atkinson, being shot to death before an adobe wall in 1877. In Texas, initially, Spanish law in common with general law reserved mineral rights to the state. An act of the legislature dated June 3, 1837, reads as follows: "Provided, that no lands granted by this government shall be located on salt springs, gold or silver mines, copper or lead, or other minerals, or any island of the republic". However, a tract of 640 acres granted to Peter Pauly, a colonist of the Fisher and Miller's colony, contained a salt spring near the Colorado River in central Texas. David and Gideon Cowan and James Alexander purchased the land from Pauly on September 18, 1855. D. Hardeman, William P. Hardeman, and William B. Coffee sued, alleging that there was valuable saline upon the land of which the defendants had wrongfully taken possession, and from which they were manufacturing salt, to the damage of the plaintiffs. The court ruled for the plaintiffs saying that the grant was null and void because of the existence of the salt spring. J. Moore for the Texas Supreme Court in Cowan v. Hardeman, 26 Tex. 217 (1862) wrote as follows:
Think of the havoc this law would have caused, if the title to the land failed because oil or gas was found to underlay it! A large part of Texas would belong to the government. In California, the 1848 Treaty of Guadeloupe Hidalgo by which Mexico formally relinquished its northern territories to the USA guaranteed that the rights to property would be respected. The US Congress passed the California Land Act of 1851, which set up a commission to adjudicate private land claims which was to be governed by "the laws, usages, and customs of the government from which the claims derived." Between 1848 and 1858, there were many lawsuits between surface owners and miners, who were digging or wanted to dig for gold on agricultural or grazing lands. The courts upheld the state ownership of the minerals based on the Spanish law. The Fremont family which had large land holdings continued to attempt to claim mineral rights unsuccessfully. The California legislature favored the mining interests, and in 1850, passed what was known as the Possessory Act which allowed settlers to claim 160 acres of public land, but not lands that contained mines or precious metals. An amendment allowed prospecting on land already claimed by others for agriculture or grazing. In 1855, the Fremonts procured a resurvey of the Las Mariposas grant. The new survey included some gold bearing lands not within the original survey. The Fremonts leased the new lands to their foreman, a man named Boggs. In April 1857, Boggs sued to eject the miners off his land and originally won as the judge overlooked or disregarded the expressed authorization of the Possessory Act. However, in January 1858, the Supreme Court reversed the decision and held for the miners, and also went on to rule that the minerals had passed from Mexico to the United States and not to California. After the decision was reversed, the personnel on the Supreme Court changed. Two new members, Joseph Baldwin and W.W. Cape, replaced two members who resigned. Baldwin had represented the Fremonts, and the third member, Stephen J. Field, had been the lone dissenter in the case which the Fremonts lost. Fremont's attorney filed for a rehearing, warning that civilization depended on the security of property rights which, if destroyed, would result in barbarian life of the wilderness. The rehearing of Boggy v. Mercer Mining Co. resulted in a victory for the landowners. There was a question of why the court reversed itself so soon. It was alleged that Fremont gave Justice Baldwin $100,000 to rehear the case and gave Stephen J. Field $50,000 to insure a favorable ruling. The surface owners' title to the minerals in California has been reaffirmed by a 1955 Federal District court decision in Blue v. McKay. The doctrine of Field's decision, although it misconstrued prior laws, resulted in the surface owners obtaining title to underlying minerals in New Mexico and Arizona. In 1854, Congress established the Office of Surveyor General of New Mexico, analogous to the California Land Commission. Until 1863, Arizona was a part of New Mexico, so this commission had authority to settle all claims to lands under the laws, wages, and customs of Spain and Mexico for what is now New Mexico and Arizona, but the act did not mention mineral ownership. The Supreme Court of New Mexico cancelled a Mexican land grant in 1888, because miners were already prospecting there, and stated that Mexican land grants did not convey minerals. However, the court reversed itself in 1903, in a case styled Catron v. Langlin and followed the California precedent to give the minerals to the surface owner. The Arizona legislature's original mining law allowed the public to prospect on private lands. However, the surface owner was to be compensated for damages. The surface owner did not get clear title to minerals until 1925, in a case styled Gallagber v. Bogvillas Land & Cattle Company. The history books credit Colonel Drake with drilling the first well drilled for oil at Titusville, Pennsylvania, and completing it on August 19, 1859. However, people in Parkersburg, West Virginia, and Marietta, Ohio, dispute his claim. They claim that Drake was a promoter and wanted publicity while the oil producers in Ohio and western Virginia (West Virginia was not split off until later) were selling oil for $30 per barrel with no transportation charge and wanted to keep quiet to reduce competition. By 1858, Parkersburg had a commercial trade in oil. The local crude was 27/28 degrees Baume and was being used as lubricating oil for steamboats and railroads. The first oil wells were drilled for saltwater, according to David McKain and Bernard L. Allen's book Where It All Began, The Story of the People and Places Where the Oil Industry Began - West Virginia and Southeastern Ohio. They claim that wells were being drilled for oil in both western Virginia and Ohio before Drake's well. The following is from the above mentioned book on page 2: "In 1814, while drilling for salt, oil was hit on Duck Creek by Mr. McKee, just north of Marietta, according to a local physician and scientist Dr. S.P. Hildreth." The first recorded commercial use of natural gas was in 1826, when the city of Fredonia, New York, used gas for lighting. The gas was piped to the city by a 25-mile wooden line constructed from hollowed logs. George Washington learned of oil and gas seeps in western Virginia while fighting Indians in the 1750's. After the French and Indian war, Washington received lands for his war service. He selected 250 acres around a burning oil and gas spring in Malden, West Virginia. Drake and the other early drillers for salt and oil in southeast Ohio and western Virginia bought the lands on which they drilled. After oil booms started they could no longer buy land so they leased the oil and gas rights, giving the landowners a fraction of the oil free from the costs of production. I can find no references to any state of federal claims to the oil or gas. The land grants described were headed, "GEORGE the second, by the grace of God, of Great Britain, France and Ireland, king, defender of the faith, and so forth. To all to whom these presents shall come, greeting." The area to be granted was described and along with these words, "together with all lands, islands, soils, rivers, harbors, mines, minerals, quarries, woods, marshes waters, lakes, fishings, hawkings, huntings and fowlings, . . . " So it appears that the British Crown did not reserve anything in the grants to the U.S. colonies, and apparently the colonies did not reserve the mineral when it made grants to the citizens. The Louisiana Purchase and other territories were brought into the Union specifically under the same laws that applied to the existing states. So the surface owners in the USA own the minerals. Canada and Australia still reserve the mineral rights to the British Crown. ACKNOWLEDGMENT I want to acknowledge the assistance of Judge William T. Hart, United States District Court, Northern District of Illinois; David H. Oldham, Attorney at Law, Houston, Texas; Dr. Robert W. Chase, Marietta College, Marietta, Ohio; and R.G. Hindman, P.E., Houston, Texas. REFERENCES 1. Giles, Bascom, "Origin of Texas' Mineral Policy," Lots of Land, Published by the Steck Company, Austin, Texas, pp 295-300. 2. Graham, Don, The WPA Guide to Texas, 1940, p. 563. 3. McKain, David L. and Allen, Bernard L., PhD, Where It All Began - The Story of the People and Places Where the Oil Industry Began, West Virginia and Southeastern Ohio, In cooperation with the oil and gas museum, Parkersburg, West Virginia, 1994. 4. Pennybacker, Anna J. Hardwicks, New History of Texas for Schools, 1895, pp 212-253. 5. Reicly, Peter L., "Western Courts and The Privatization of Hispanic Mineral Rights Since 1850: An Alchemy of Title," Columbia Journal of Environmental Law, 1998, pp 1-24. 6. Texas Supreme Court, "Cowan v. Hardeman, 26 Tex.," 1862, pp 217-224.
©H. J. Gruy and Associates, Inc., 1999
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This page was last updated on Saturday, February 08, 2003, at 07:21:41 PM. Copyright © 1994-2008 by Swift Energy Company. |
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