The South Dakota Dormant Minerals Act - Attorney Blog | Natural Resources, Commercial Law

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The South Dakota Dormant Minerals Act

The South Dakota Dormant Minerals Act

How to Recover Lost or Orphaned Mineral Rights

South Dakota Farmers Union 2012 Workshop

43-30A-1.   “Mineral interest” defined. In this chapter, unless context otherwise requires, the term, “mineral interest,” includes any interest in oil, gas, coal, clay, gravel, uranium, and all other minerals of any kind and nature, whether created by grant, assignment, exception, reservation, or otherwise, owned by a person other than the owner of the surface estate.

-Broad range of materials covered with the catch all “of any kind and nature.” Also notice that the term “interest” is used which can mean outright ownership, leases, or other real property arrangements.

43-30A-2.   Abandonment by nonuser and failure to file statement–Vesting in surface owner. A mineral interest shall, if unused for twenty-three years, be deemed to be abandoned, unless a statement of claim is recorded in accordance with § 43-30A-4. Title to an abandoned mineral interest shall vest in the owner of the surface estate in the land in, or under, which the mineral interest is located on the date of abandonment.

-Straightforward explanation that the surface owner gets title to the interest if it is unused for 23 years.

43-30A-3. Acts constituting use of interest. A mineral interest is deemed to be used if:

  1. Minerals are produced under that interest;
  2. Operations are conducted thereon for injection, withdrawal, storage, or disposal of water, gas, or other fluid substances;
  3. In the case of solid minerals, there is production from a common vein or seam by the owners of the mineral interest;
  4. Any conveyance, valid lease, mortgage, assignment, order in an estate settlement proceeding, inheritance tax determination affidavit, termination of life estate affidavit, or any judgment or decree that makes specific reference to the mineral interest is recorded in the office of the register of deeds for the county in which the mineral interest is located;
  5. The mineral interest is subject to an order or an agreement to pool or unitize;
  6. Taxes are paid on the mineral interest on behalf of the owner;
  7. A statement of claim is recorded in compliance with § 43-30A-4;
  8. Its owner or lessee uses the mineral interest in a manner pursuant to, or authorized by, the instrument creating the mineral interest; or
  9. A proper instrument describing the mineral interest has been recorded prior to an affidavit recorded under prior law pursuant to § 43-30-7, in the office of the register of deeds for the county in which the mineral interest is located.

-This is a broad range of possible ways for the mineral interest holder to prove “use.” The legislature seems to be conservative in deeming an interest to be abandoned. Almost anything in that 23 year period can be counted as use and thus disqualify the surface owner’s abandonment claim.

43-30A-4.   Statement of claim–Recording–Contents–Effect. A statement of claim shall:

  1. Be recorded for the owner of the mineral interest prior to the end of the twenty-three-year period set forth in § 43-30A-2, or within two years after July 1, 1985, whichever is later. A joint tenant, but not a tenant in common, may record a claim on behalf of himself and other joint tenants;
  2. Contain the name and address of the owner of the mineral interest and a legal description of the land on or under which the mineral interest is located;
  3. Be recorded in the office of the register of deeds for the county in which the mineral interest is located.

A mineral interest is deemed to be in use on the date of recording if the recording is made within the time provided by this section.

-If a statement of claim has not been made in the county office within 23 years in accordance with this section, the mineral interest is abandoned.

43-30A-5.   Circumstances where failure to file statement does not extinguish interest. Failure to record the statement of claim within the time period provided in § 43-30A-4 does not cause a mineral interest to be extinguished if the owner of the mineral interest meets all of the following requirements:

  1. Owns one or more mineral interests in the county in which the mineral interest in question is located at the time of the expiration of the time period provided in § 43-30A-4;
  2. Inadvertently failed to preserve the mineral interest in question; and
  3. Within sixty days after completion of the publication of the notice provided for in § 43-30A-6, recorded a statement of claim.

-Ways that the mineral interest owner can preserve their claim. Notice that there is still a broad range of possibilities allowing for the interest holder to retain their rights. They have 60 days after publication to file a statement of claim.

43-30A-6.   Notice by surface owner required–Contents–Proof of service. In order to succeed to the ownership of a mineral interest upon its lapse, a surface owner shall give notice of the lapse of the mineral interest by publication. The publication shall be made once each week for three weeks in the official newspaper of the county in which the mineral interest is located. If the address of the mineral interest owner is of record or can be determined upon reasonable inquiry, notice shall also be made by mailing a copy of the notice by registered or certified mail, return receipt requested, to the owner of the mineral interest within ten days after the last publication is made.

The notice shall state the name of the record owner of the mineral interest, a description of the land on or under which the mineral interest involved is located, and the name of the person giving the notice.

A copy of the notice and an affidavit of its service, if recorded in the office of the register of deeds for the county in which the mineral interest is located, is prima facie evidence in any legal proceeding that such notice has been given.

-The surface owner can obtain the interest by publishing an ad in the county newspaper where the interest is recorded. Mailing a notice is also required, but this might not reach the owner for a variety of reasons (they might have moved, or might be deceased).

43-30A-7.   Waiver of provisions. The provisions of this chapter may not be waived until the expiration of the twenty-three-year period provided in § 43-30A-2.

43-30A-8.   Government owned interests exempt. This chapter does not apply to any mineral interest owned by any governmental body or agency thereof.

-Provisions can be waived after the 23 year period and any government mineral interests cannot be claimed by deeming the interests abandoned.

43-30A-9.   Prospective and retrospective application. This chapter is both prospective and retrospective in its application.

-Deals with the future and past applications of the act, largely irrelevant as it has been more than 23 years since 1985.

43-30A-10.   Water rights unaffected. The enactment of this chapter shall not be construed as creating any right to water or the use thereof nor as affecting any existing legislation with respect to water or water rights, except as expressly may be provided herein, nor shall anything herein contained affect or be construed as affecting vested water rights.

-Even though water rights weren’t specifically mentioned, the legislature wanted to make sure that nothing in this act was construed to deal with water.

Other notes:

The US Supreme Court held these acts to be constitutional in Texaco, Inc. v. Short in 1982.

Some states have decided to strike down these acts:

  • Illinois (unconstitutional taking) Wilson v. Bishop (1980)
  • Minnesota (law as written violated due process, but the underlying taking was allowed) (Contos v. Herbst, 1979)
  • Nebraska (held unconstitutional because law operated retroactively) Wheelock v. Heath (1978).

The South Dakota Supreme Court has recently provided its first decision on the subject of dormant and lapsed mineral interests.  Please see my article and blog on this website on this recent case.

In North Dakota, the law is very similar but more developed, as the legislature has had more reason to review what does and doesn’t work in the law. The period of dormancy is 20 years instead of 23, but the procedure for the surface owner is basically the same: publication in a newspaper for 3 weeks in the county where the mineral interest is held, and sending a letter to the last known address if that can be found.

Some Important Clarifications in the North Dakota Law:

  1. Interest, royalty, bonus payments, etc. paid to an account on behalf of a person that cannot be located do not count as “use.” There is nothing specifically allowing these types of payments in the South Dakota statute, but the North Dakota law specifically disqualifies them from the list.
  2. A statement of claim filed by someone other than the mineral interest holder is not effective unless accompanied by a reference to the name of the record owner. This type of prohibition was not spelled out in the South Dakota law.
  3. Specific steps for conducting a “reasonable inquiry” into the whereabouts of the record owner are included in the North Dakota law. The surface owner or their agent must conduct a search of:
    1. The county recorder’s records for the existence of any uses as defined in section
      38-18.1-03 by the owner of the mineral interest;
    2. The clerk of court’s records for the existence of any judgments, liens, or probate
      records which identify the owner of the mineral interest;
    3. The social security death index for the last-known residence of the owner of the
      mineral interest, if deceased; and
    4. One or more public internet databases to locate or identify the owner of the
      mineral interest or any known heirs of the owner. The owner or owners of the
      surface estate are not required to conduct internet searches on private fee
      internet databases.

In addition to having more detailed legislation on the topic of dormant minerals, the North Dakota Supreme Court has weighed in on the issue recently in a few cases. The names of the cases and brief descriptions are below.

Halvorson v. Starr: Surface owner mailed the notice 12 days after the publication run was complete (statute says 10 days).  Surface owner loses because he did not comply with the statute.

Sorenson v. Alinder: Surface owner Sorenson mailed the notice within 10 days to the Alinders at their address of record.  The Alinders had been dead for 10 years.  Since the address was on record, Sorenson didn’t have to conduct a more thorough “reasonable inquiry” to determine if they were alive.
Johnson v. Taliaferro: 2009 “reasonable inquiry” amendment to the statute cannot be retroactively applied without the legislature explicitly saying so.  Surface owner Johnson gets title to the mineral interests.

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