Real Estate & Property Law

Court Considers Mineral Rights

By Alan Ackerman

GJ Sentinel

The Colorado Court of Appeals is considering a lawsuit questioning whether the state owns mineral rights beneath land it condemned for construction of Interstate 70 east of Rifle.

Gypsum Ranch Co. LLC appealed the case after Ninth Judicial District Judge James Boyd issued a summary judgment in January in favor of the Colorado Department of Transportation.

At issue are leases for oil and gas beneath about 70 acres the state acquired from Agnes Hunt. Although the state took over the land in 1975 through condemnation, it took more than a decade for the state and Hunt to reach a settlement over fair payment for the property. The state paid $110,000.

Gypsum Ranch contends that when it later bought the Hunt estate, it became owner of the mineral rights beneath the condemned right of way. It maintains that eminent domain includes only the subsurface estate needed for support of highway features built on the right of way.

Gypsum Ranch also has sued Antero Resources, which has been drilling for natural gas between Silt and Rifle. Antero land man Bill Pierini previously has said the company executed leases with both Gypsum Ranch and CDOT, to ensure it didn’t proceed with drilling only to find out later it didn’t have a proper lease. Antero suspends lease payments in such cases until the dispute is resolved.

Pierini said that as a general rule, CDOT doesn’t own the mineral rights beneath the highway where Antero is drilling.

However, Boyd wrote in his judgment that CDOT employees said in affidavits that the agency commonly obtained both surface and mineral estates in the 1970s and 1980s, except where prior owners expressly reserved the mineral estates.

Boyd found that nothing in the Hunt condemnation order or record of proceedings distinguished between the surface and mineral estate.

More recently, mineral rights have received more careful attention and become far more valuable in western Garfield County, thanks to the arrival of widespread natural gas development.

The Hunt condemnation proceedings included a substantial dispute over the value of gravel deposits, and Hunt’s contention that they must be considered as part of the condemnation, Boyd wrote. Those deposits are part of the mineral estate, he wrote.

Each State has an individual statutory framework dealing with ownership rights retained by the condemnee when property is taken for right of way. It may be argued that the mineral rights are not needed for the right of way, therefore they are retained by the owner losing surface rights for the roadway. Therefore, most States maintain a statutory framework delineating what is being take and what, if anything, is being retained.

Full post as published by National Eminent Domain Blog on January 02, 2009 (boomark / email).