Matt Hanka

The combination of ferrous and non-ferrous mineral and mining resources have long made Northeastern Minnesota a mining powerhouse.  Minnesota has been a leading producer of iron ore and taconite for decades.  Large quantities of Minnesota’s high grade ferrous mineral resources were mined over time, but substantial quantities of lower grade iron ore remains.  New technologies allow iron to be recovered from the waste of past mining, called tailings.   Accordingly, iron ore will remain important for Minnesota’s economy for decades to come.

With that said, there is increased interest in Northeastern Minnesota’s non-ferrous mineral resources, such as copper, nickel, platinum, palladium, gold and other valuable minerals sometimes called “strategic” metals.  Strategic metals are used for wiring, battery technologies and components for wind and solar energy production.

State mining policy provides balance

The Minnesota legislature determined that it is the “policy of the state to provide for the diversification of the state’s mineral economy through long-term support of mineral exploration, evaluation, environmental research, development, production, and commercialization.” See Minn. Stat. § 93.001.  

State lawmakers specifically determined that strategic metals are important by legislating that “[t]he business of mining, producing, or beneficiating nonferrous metallic minerals is declared to be in the public interest and necessary to the public welfare…”  See Minn. Stat. § 93.43(a).  Minnesota Rules, Chapter 6132 states that the purpose and policy with regard to strategic metals is to “control possible adverse environmental effects … to preserve natural resources … while promoting orderly development of … mining” so that such mining is “conducted in a manner that will reduce impacts to the extent practicable, mitigate unavoidable impacts and ensure that the mining area is left in a condition that protects natural resources.” 

As the Chapter 6132 language outlines, the state’s policies balance the economic benefits of mining with protection of vital natural resources.  For example, an environmental impact statement (EIS) is required for all new mining operations in Minnesota.  An EIS is an analytical analysis that describes a proposed action in detail, analyzes its significant environmental impacts, discusses appropriate alternatives to the action and possible impacts, and explores the methods by which potential adverse environmental impacts of an action could be mitigated.  See Minn. Stat. § 116D.04.  Environmental review also allows an opportunity for public input related to a proposed project. 

Mineral rights

A landowner’s ownership of surface rights does not necessarily mean that the landowner owns the mineral rights.  “Severance” is the separation of the ownership of minerals from the ownership of surface rights.  Severance can occur through a land transfer and deed language.  Severance occurs through a conveyance of only minerals, or by a conveyance of surface rights with a reservation of mineral rights.  After severance, the surface rights and minerals are held by separate title.  The mineral rights become a type of real property that may be sold, transferred or inherited independent of a surface estate.

Unless excluded in the severing deed language, the holder of a mineral estate maintains a right to use the surface lands as may be reasonably needed to reach and remove any of the reserved minerals.  This gives a holder of a mineral estate a right to enter the land, explore for minerals that may exist on the land and ultimately mine any minerals that are discovered. However, so called “entry rights” are tempered by legal doctrine that give the holder of the surface estate a right to compensation for damage that may occur through mining and exploration.  A lease between the surface owner and the mineral owner will typically deal with the specifics of such compensation.

Mineral rights leasing

The majority of Minnesota mineral rights are privately held, either by individuals or businesses.  The federal government also holds a significant amount of mineral rights.  But, the state is the largest single owner of mineral rights in Minnesota. 

The DNR Division of Lands and Minerals manages the state’s mineral rights.  The DNR holds mineral rights for public and private parcels.  The legislature authorizes the DNR to “execute leases to prospect for iron ore and other ores upon lands belonging to the state or in which the state has an interest and for the mining of the ores.”  See Minn. Stat. § 93.14.  The legislature has authorized leasing of nonferrous metallic minerals as well.  See Minn. Stat. § 93.25.

Annual auctions are conducted by the DNR for state-owned mineral right leases.  The winning bidders pay the state an annual fee during mineral exploration.  As part of the lease agreement, if actual mining occurs, the mining company pays a per-ton royalty to the state.  Minimum royalty rates are established by statute.  See Minn. Stat. § 93.20, subd. 3.  State royalty rates are market rates, often as high, or higher, than royalty rates negotiated in private mineral leases.

State royalties are used to benefit state education funds.  The Permanent School Trust Fund was established to ensure a long-term source of funds for public education in the state.  The fund consists of the accumulated revenues generated from the land.  And, according to the DNR, minerals have generated 80 percent of the historical total revenue for the Permanent School Trust Fund.

What about sand and gravel?

Is sand and gravel a “mineral”?  Historically, the issue of sand and gravel has come up in the context of road construction and building materials.  However, the question has surfaced more in recent years because of the use of silica sand in hydraulic fracturing for extraction of oil and gas.

The short answer to whether sand and gravel are minerals is that it largely depends upon the language of the operative grant of rights.  If the only language in the operative document is that “mineral rights” are reserved or conveyed, then the Minnesota Supreme Court has held that whether sand, gravel, limestone or shale constitute “minerals” depends upon the parties’ intentions and the surrounding circumstances of the grant.  See Vang v. Mount, 220 N.W.2d 498 (Minn. 1974).  In short, if a dispute arises about the extent of the rights, then getting an answer could mean litigation.  Facts that may be relevant to a court’s determination may be the value of the substance, the intent of the parties, the effect that extraction of the substance might have on the surface and the surrounding circumstances of local custom or usage.

The lesson here is that in Minnesota, if parties intend to convey or reserve the right to extract sand or gravel, then they should not rely upon a conveyance or reservation that simply states that “minerals and mineral rights” are conveyed or reserved.  The conveyance or reservation should specifically state that there is an intent to convey or reserve sand or gravel extraction rights.

Conclusion

Minnesota’s legislative policies and regulations, along with continued exploration and new mining technologies, mean that mining will continue to expand in an efficient and environmentally responsible way.  Iron ore remains one of the foundations of Minnesota mining.  However, valuable strategic mineral mining is poised to become a significant contributor to the economy while feeding the global need presented by the expansion of green technologies. 

Matt Hanka is an attorney at the law firm of Fryberger, Buchanan, Smith and Frederick, P.A. concentrating his practice in the areas of civil litigation, construction, land use and administrative law.  Matt can be reached at (218) 725-6815.