Mineral ownership: overview

What’s mine is mine

23 February 2017

In the light of recent changes to the law and moves to frack for shale gas, Richard Lashmore explores the often complex issues around mineral ownership

Not so long ago, an article on mineral ownership would have been a subject for dusty books, even dustier lawyers and half-remembered lectures. In recent years, however, new commercial opportunities such as shale gas extraction, greater awareness of the potential value of mineral interests and developments in the law have changed this.

In this article, I will cover 4 topics:

  • manorial rights after October 2013;
  • the relationship between surface development and separate mineral ownership, as well the conflicts that can ensue;
  • the ownership of mine and quarry voids;
  • mineral ownership and shale gas extraction.

Although I cannot provide all the answers, I should be able to point the way to some of the right questions.

Manorial rights

Until 12 October 2013, manorial rights were overriding interests in terms of land registration, and valid whether or not they were noted in the title. Since then, on the 1st registration of previously unregistered land the freehold estate will be free of the manorial rights if no caution is recorded. For registered land where no protective notice is registered, a transferee for valuable consideration will take the land unencumbered by manorial rights.

Understanding a few concepts will help to clarify the nature of the manorial mineral rights protected and the effect that these have on the owner of the surface land.

A manor can be regarded in a number of ways: a title as in “lord of the manor”; freehold manorial lands associated with the manor; or an incorporeal hereditament – an intangible or non-visible right – and the associated manorial rights. It is these manorial rights that have required protection by registration since 2013. The incorporeal hereditament constituting a manor could be registered until 2003 but, while the register still exists, further entries are not possible.

It does not matter how long ago separation of rights occurred, it can still be valid: I have investigated titles going back to the 15th and 16th centuries that potentially have major current commercial implications

It was the lord of the manor rather than the Crown that could grant estates referred to as “copyholds”. These were 1st created in the Middle Ages, and subsequently by statute in Enclosure Acts. Under copyholds, any minerals in the land, which essentially include everything beneath the surface, were owned by the lord of the manor, but the copyholder was entitled to the right of possession. This meant that neither the lord of the manor nor the copyholder could exploit such minerals without the other’s cooperation, and any commercial royalty payment would conventionally be split between the 2 parties. This default position could be varied by local custom, but applied in the vast majority of cases.

A copyhold could become a freehold by the process of enfranchisement. This was originally done by conveyance of the latter by the lord of the manor to the copyholder, but in the 19th century, a series of Copyhold Acts provided a statutory framework for enfranchisement.

These statutory enfranchisements retained the status quo in relation to the lord of the manor’s ownership of the minerals and the former copyholder’s right of possession, unless there was a specific agreement to the contrary.

On 1 January 1926, all remaining copyholds were enfranchised by the Law of Property Act 1922, which, like its 19th-century predecessors, retained the separate rights of ownership and possession in minerals. The 1922 act and older copyhold acts also provide that the lord of the manor’s rights to minerals will not prevent the construction of roads, drains or buildings.

Surface development

When it comes to freehold land that has never been a copyhold or subject to enfranchisement, the law is different.

Freehold ownership effectively includes all substrata to the centre of the earth, but separate ownership of minerals is commonplace. Where such a separation of rights has occurred, it does not matter how long ago it took place, it is still potentially valid; indeed, I have investigated separation of mineral titles going back to the 15th and 16th centuries that potentially has significant current commercial implications.

The law on registered land largely reflects Common Law, but although freehold mines and minerals are not subject to compulsory registration, they can be, and increasingly are, registered on a voluntary basis. So while a note of a mineral reservation may appear in the property register of title, that does not necessarily mean that a separate mineral freehold ownership does not exist. The Land Registry indemnity does not apply to mines and minerals unless there is a specific note of their inclusion.

There is no single test of the meaning of “mines and minerals”, rather a series of tests and pointers

Any note in the property register is often quite uninformative because the minerals included in any reservation are a matter of interpretation. Earl of Lonsdale v Attorney General [1982] 1 WLR 887 included a review of all the previous authorities and confirmed the position that there is no single test of the meaning of “mines and minerals”, but rather a series of tests and pointers as follows.

  • The expression “mines and minerals” can have a wide meaning, signifying everything below the surface, though this is not the primary meaning.
  • “Mines and minerals” is not a definite term.
  • A vernacular test in which the commercial practices and usage of land and mineral agents at the time of the reservation is of significance.
  • One of the questions in the case was whether the substances in question were of exceptional use and value.
  • Another was whether working rights were included in the reservation. Those reserved by underground methods only might indicate that minerals that would be worked from the surface alone are excluded.
  • A mineral reservation would not include the common soil of the district such that it would entirely swallow up the freehold.
  • The tests of the intentions of the parties are objective.

Interference with 3rd-party mineral ownership is a trespass and can be restrained by an injunction, so the mineral owner may be in a position to ransom the developer. The developer may also face this issue in relation to foundations, services or, perhaps most significantly, large-scale cut-and-fill operations.

Separate mineral ownership may not be apparent, or a mineral owner could be difficult to trace, and as a mineral reservation requires interpretation there is inherent legal uncertainty; resolving disputes when the development and funding timetable is tight can thus be a serious issue for the developer.

The developer needs to consider:

  • acting early and planning a strategy, as timing is a significant issue, and not dealing with matters until later can enhance a mineral owner’s ransom position;
  • researching the issues and being well informed on the engineering requirements and geology of the development, as well as the legal effect of the particular reservation;
  • if former copyhold land is involved, getting behind the registration of the notice, checking who owns the manor and the terms of enfranchisement and any enclosure award; the Land Registry may not have carried out any analyses of the application for the notice and will have depended on information provided by the applicant;
  • it is important to be commercial and review strategy regularly; keep the work commercially proportionate but do not ignore the possibility of improving your negotiating position, for instance by taking the argument to an aggressive mineral owner;
  • it is vital to remember that insurance is an option and no steps should be taken that might prejudice the ability to obtain cover, such as contacting 3rd-party mineral owners without proper consideration.

Where a mineral reservation includes working rights, it is possible that the freehold mineral owner may also claim that surface development would interfere with the exercise of those rights. This probably presents another possibility for ransom.

The correct approach in such cases is for damages to be an adequate remedy, measured according to what a reasonable person would accept rather than a ransom. That being said, specific legal advice and a strategic approach to negotiation are also important.

Void ownership

One specific form of surface development in which mineral ownership can be an issue is tipping into void spaces created by quarrying. Who owns that space – the owner of the minerals that have been extracted, or the surface owners?

The position underground is well established by case law. Where there is reservation of “mines and minerals” rather than just “minerals”, then the containing chamber is included and belongs to the mineral owner. However, notwithstanding hundreds of years of case law, there is no legal authority on the ownership of a void created by surface workings. The most sensible view appears to be that this takes effect as a lowering of the surface and the void belongs to the surface owner. This is supported by some obiter or non-binding comments in a recent High Court judgment, Mclean Estates v Earl of Aylesford [2009] EWHC 697 (Ch).

Shale gas

The Supreme Court case Bocardo SA v Star Energy UK Onshore ltd [2010] UKSC 35 involved a diagonally drilled oil well at a depth of 800ft and confirmed that, at deep levels, unauthorised interference with freehold ownership is nonetheless an actionable trespass.

In Bocardo, only nominal damages were awarded because it was accepted that the oil company would be entitled to compulsory rights under the Mines (Working Facilities and Support) Act 1966. It was confirmed that compensation under the act is based on compulsory purchase principles and would therefore represent the loss in value to the land or mineral owner rather than the benefit obtained by the oil company.

Notwithstanding hundreds of years of case law, there is no legal authority on the ownership of a void that has been created by surface workings

It might appear that this provides a legal solution for the shale gas industry. Rights that can be obtained include exploration, working and ancillary wayleaves. The grant must be expedient in the national interest but given the potential economic significance of shale gas extraction this should not be an issue. The rights that can be acquired include rights to search, rights to work, removing restrictions on working, and the grounds for application include the persons unreasonably refusing to grant the necessary rights or demanding unreasonable terms.

However, the application process is complex, lengthy, potentially expensive and rarely used. It starts with an initial application to the appropriate Secretary of State to establish a prima facie case, and only after that is the matter referred to the high court.

The 1966 act does provide a legal solution to the problem of obtaining exploration and working rights for shale gas but this may not be a timely, economical or practical one, hence the provisions of sections 43 to 49 of the Infrastructure Act 2015, which came into effect on 12 April 2015.

The 2015 act includes statutory rights to use deep-level land at least 300m below the surface for the purpose of exploiting petroleum or deep geothermal energy, in particular deep-level horizontal drilling. Trespass is prevented by statutory authorisation. For this purpose, petroleum includes “any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata”, under section 1a of the Petroleum Act 1998.

The rights are widely drawn and include passing substances through, or putting any substance into, land, installing infrastructure and the ability to leave deep-level land in a condition different to that before the exercise of the rights.

The Secretary of State has power to make regulations requiring companies to pay the owners of the land and others for the benefit of the areas in which the land is situated. Note there are statutory procedures as to notice.

There is, however, no effect above on surface interests or subterranean interests down to 300m and so, while the 2015 act provides a solution for the widespread horizontal bores involved in shale gas extraction, other rights are a matter of negotiation or the use or threat of use of the 1966 act.

Richard Lashmore is Partner and head of the Mines and Minerals Unit at Knights Professional Services Ltd

Further information

Download a complete “Mineral ownership: overview” PDF