Land patents: The gift that keeps on giving…

Story in the Denver Post the other day addressed the anger some landowners have over regulations designed to limit the ability of oil and gas companies to drill. The reason is that these landowners, unlike many in the area, have retained ownership of the minerals beneath their land.  The irony is that there wasn’t originally an intent to allow people obtaining farmland to own precious minerals.  The American precedent most relevant for mineral rights owners in Colorado probably originated in the foothills of the Sierra Nevada more than 150 years ago.

At issue back then was the gold under a Mexican land grant that was owned by John C. Fremont, a man famed at the time for having documented the routes west into California and Oregon and for having played a role in conquering California from Mexico.  He had arranged from some property to be bought in the state and he ended up with a property called Las Mariposas in the Sierran foothills.  At the time, the property seemed nearly worthless as the previous owner had not in fact “proved up” on the land in accordance with Mexican law. Whether Fremont really intended to buy or keep the land is disputed, but the fact was, he held the Mexican title.  And a year later, when gold was found a little to the north at Sutter’s Mill, Fremont realized that he had, literally, bought a gold mine.

Fremont’s problem was that ownership of the minerals under the land remained unclear. Fremont contended they were his, other miners claimed they were open for anybody and so the courts had to intercede.

The jumble of American precedents and laws prior to 1848 really had little impact in California.  Generally, the federal government had reserved mineral lands for itself; mining of such lands would be done under a leasing arrangement.  But this was unpopular in new states carved out of the older territories: lead and copper mine properties in the upper Midwest were finally sold by Congress in 1846. But in theory, nobody should have been able to own gold in California in 1848.

Part of the reason for confusion was the nature of the Mexican and earlier Spanish land grants. Under Spanish law, minerals were owned by the crown.  Mexican law had allowances for private ownership of valuable minerals, but you had to file proper claims. No mineral claims had been filed on Las Mariposas.  Had the land stayed in Mexico, he would not have owned the gold¹. And in the U.S., had he tried to claim the land, he should have been denied. But under the Land Act of 1851, Fremont had obtained a patent from the federal government for his land. But just what did he own?

The courts gave conflicting opinions, for awhile contending that the mineral rights held by Mexico had been passed to the state of California, and California had allowed miners the right to get the gold where they found it.  But in a self-reversal, the California Supreme Court found that the mineral rights had gone from Mexico to the federal government, but the federal government had not passed those on to the state, and once the government issued a patent, it conveyed all its rights to the patent owner–including the rights to any gold underneath.

The vast wealth Fremont acquired through this ruling would slip through his fingers as inept management of Las Mariposas and somewhat duplicitous attempts to market the property would eventually lead Fremont to lose control of the property. But the precedent his case established meant that all those holding patents from the U.S. government would own all the minerals under their land–at least until the early 20th century, when some land acts separated mineral rights from surface rights. [The apex rule aspect of lode mining would actually complicate this right, but that is its own saga].

Thus it is that folks who homesteaded land on the Plains gained rights to oil and gas they had no idea existed under their property.  In many cases, those rights were passed on undivided as land was sold or inherited.  Those are the lucky landowners who benefit from oil and gas development. Perhaps those rights might have existed without Fremont’s case, but they were clearly established by it. The fact that you might have separate rights to the land’s surface and mineral beneath, although lurking in ancient precedent in English common law, came to the fore in California’s Gold Rush and never fully faded from view again.

¹Actually he wouldn’t have even owned the land, as conditions on the original grant were never properly fulfilled, and the grant had a condition that sale to a foreigner was not allowed.

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