Michigan’s Dormant Minerals Act
The translated Latin subtitle reads "ignorance of the law is no excuse." This legal maxim rings especially true for owners of severed oil and gas mineral interests in the context of Michigan's Dormant Minerals Act. The Act provides for the loss or abandonment of severed oil and gas mineral interests to the owner of the overlying surface lands unless specific steps are taken to utilize or retain such interests.
To simplify, the Act requires owners of severed oil and gas mineral interests to "use it or lose it." Non-compliance with the Act is either a blessing or a curse depending on whether one is a surface owner or owner of severed oil and gas mineral interests.
Oil and gas interests are deemed severed when the ownership of such minerals is distinct from the ownership of the overlying surface lands. The Act only applies to severed oil and gas mineral interests; no other minerals are covered. Moreover, the Act is inapplicable where oil and gas interests and the overlying surface lands are under common ownership or where the severed oil and gas interests are owned by the government.
To encourage the productive use of oil and gas, and to deter dormancy, the Act requires that severed oil and gas interests be sold, leased, mortgaged or transferred by written instrument in the register of deeds office in the county where the interest is located at least once within every 20 years. Alternatively, an owner of severed oil and gas interests may record (in the county where such interests are located) a notice, in a manner prescribed by the Act, of the owner's intention to retain the severed interests. This notice must be filed within 20 years of any prior notice, or the occurrence of any of other record activity required by the Act. In the absence of such record activity within the 20-year period, the severed oil and gas interests are deemed abandoned with title automatically vesting in the surface owner.
As with most rules, there are exceptions. An owner of severed oil and gas interests can prevent abandonment, despite the absence of required record activity. Specifically, abandonment can be prevented under the terms of the Act if, within a 20-year period, 1) a drilling permit for an oil and gas well covering the severed interests has been issued by the state; 2) actual production or withdrawal of oil or gas occurs from the severed interests, or from lands covered by a lease to which that interest is subject, or from lands pooled, unitized, or included in operations thewith; or 3) the interest is used in underground gas storage operations.
The Act, which has withstood legal challenge to its constitutionality, provides a trap for the unsuspecting: through mere inaction owners of severed oil and gas interests risk the deprivation of property, property of potentially considerable financial value if it is subsequently the subject of successful oil and gas exploration and production. The fact that an owner was unaware of the Act, or its implications for non-complicance, is immaterial and provides no legal defense against abandonment.
For owners of severed oil and gas interests, and to ensure the retention of such interests, compliance with the Act is critically important. Although it imposes no obligations on owners of surface lands overlying severed oil and gas interests, their awareness of the Act, and the consequences for noncompliance, is equally as important. Surface owners may ultimately determine, by researching both the records of the Michigan Department of Environmental Quality and the register of deeds office in the county where the interests are located, that they have acquired, without cost or effort on their behalf, title to the oil and gas interests underlying their property.
Aaron K. Bowron is an attorney with Zirnhelt, Bowron & Wiggins, PLC, which maintains offices in Traverse City, Cadillac and Oakland County. He counsels and represents both landowners and oil and gas companies throughout the state in drafting, negotiating and litigating oil and gas matters. He can be reached at email@example.com.