MT Supreme Court Decision: No Possessory Interest until Proven Gilded
NOTHING IN THIS ARTICLE SHOULD BE CONSTRUED AS LEGAL ADVICE AND THE READER SHOULD NOT RELY ON THE STATEMENTS CONTAINED HEREIN.
On November 26th, 2019, the Montana Supreme Court decided a case involving a multibillion-dollar copper and silver deposit located in Montana’s Cabinet Mountain Wilderness. Mines Management, Inc. v Fus, 2019 MT 276. The Court’s decision hinges on how an unpatented mining claim is validated, and demonstrates the potential consequences of an unvalidated claim. If you are a real estate professional in Montana, hard rock mining is an industry worth knowing about.
Hard Rock Mining — Big Business in Montana
Montana’s state motto is “Oro y Plata,” Spanish for gold and silver. Many Montanans — for whom the word ‘mining’ calls to mind copper kings and ghost towns, or possibly the Balkan boom and coal plants — are surprised to learn that Montana still has an active industry of mining everything from gold to granite. According to the Bureau of Business and Economic Research at the University of Montana, mining was the fourth fastest growing industry in Montana in 2017, with $100 Million in overall economic growth. Last year, hard rock mining (which does not include oil and gas revenue) was estimated to account for an overall economic output of at least $2.7 billion in Montana, with exploration alone accounting for at least $37 million in economic activity (source).
The Difference between a Patented and Unpatented Mining Claim
The result of Mines Management, Inc. v Fus permits Mines Management, Inc. (“MMI”) and its affiliates to proceed with their copper and silver mining operation, but to understand the court’s reasoning, first we need to distinguish between a patented and unpatented mining claim.
A patented mining claim is a right to the land and minerals granted to a claimant by the Federal Government, making it private land. You can think of a patented mining claim as a deed from the government. The claimant owns it from then on, and Uncle Sam won’t get it back. Patented mining claims have the advantage of giving the owner right to both the minerals beneath the land and exclusive possessory interest in the land above-ground. See the definitions at the end of this article if you’d like to brush up on the meaning of possessory interest.
In 1994 Congress put a moratorium on issuing mining claim patents, which remains in place today (source). Most patented mining claims have changed hands since the original claimant received the patent, but the “patented” moniker is still used, likely because it indicates that at some point the claim was determined valuable. In any case, it has a better ring than “vacant land” for a potential purchaser.
An unpatented mining claim is a right asserted by an individual for the right of possession to a parcel of Federal land (BLM or Forest Service), for the specific purpose of searching for and extracting valuable minerals. You can think of an unpatented mining claim as a lease from the Federal Government. The Federal Government still owns the land, and if you don’t keep renewing your ‘lease,’ it will expire.
Until an unpatented mining claim is validated, discussed below, there’s not much the claimant can do to keep other people off the land. Other people can obtain unpatented claims in the same area. The general public can also keep using the land for purposes like hiking and camping, so long as they don’t interfere with exploration activities. Reciprocally, there is a higher burden on owners of unpatented mining claims to remediate exploratory digs and other activities, so as not to interfere with public enjoyment of the land.
It’s nice to feel validated
Once the owner of an unpatented mining claim finds evidence of a valuable ore, the unpatented mining claim becomes valid. Referring back to the analogy of a residential lease, it’s a bit like a landlord saying, “I gave 10 people keys to the house, if you can find a bed, it’s yours to sleep in and I’ll make sure nobody else disturbs you. If you don’t find a bed before the others, you can keep walking around but you can’t sleep there or disturb anyone sleeping.” Fortunately, residential lease terms like this can only be found in the Bay Area of California. For mining claims, however, it’s the standard system.
Having a valid claim creates implications for who is allowed to access the land above and below the claim, which is crucial to the outcome of the case we’ll examine below. Anyone, including the owner of an unpatented mining claim, can request a determination of the validity of a claim from the land manager overseeing it (such as the BLM). In practice, these determinations are mostly requested by the claim owners themselves, or other claimants in their area.
The test for validity is called the “prudent man test,” and relies on what a hypothetical prudent person would believe is the commercial viability of an unpatented mining claim. The result of this test determines who an unpatented claim owner can keep away from their claim (or, retroactively, who trespassed or stole from the claim owner). We’ll use two examples to illustrate this concept:
The owner of an unpatented mining claim does a test drill and finds low levels of copper about 100 feet below the surface. The copper itself isn’t enough to warrant extraction and processing, but based on the geology of the area and minerals near the copper, there’s good reason to believe that larger (economically viable) deposits will be found nearby, if someone dug down. At this point, the claim owner has a possessory interest in the claim against other persons with mining claims in the area. The claim owner still can’t keep hikers and hunters off the property, but she can keep the owners of other unpatented mining claims in the same area from disturbing her claim (these are called rival claimants).
The owner of an unpatented mining claim digs a test pit and finds an exposed vein of gold. Digging a few more feet demonstrates the vein continues and widens. At this point, the claimant has a possessory interest in the claim against anyone, including the general public.
These rules make sense. If you haven’t exposed any deposits but any prudent person (albeit with knowledge of mining exploratory techniques) would agree that there are probably deposits where you say they are, then the only people you need to worry about keeping away are people with the desire and ability to mine the land. If valuable deposits are exposed to the surface, you wouldn’t want anyone with a rock hammer to be able to walk up and leave with a valuable chunk of the ore you discovered. Inferring a bit, it appears the objective of these laws is to reasonably protect the interests of unpatented mining claim owners while interfering as little as possible with the activities of other miners and public land users.
Can a Patented Mining Claim Owner Tunnel through an Unpatented Mining Claim?
In Mines Management, Inc., MMI wanted to tunnel under 1,126 unpatented mining claims to reach its patented mining claim in the Cabinet Mountain Wilderness. Some of the owners of the unpatented claims contested MMI’s right to do such, claiming that they had valid unpatented claims that allowed them to prevent MMI from crossing the parcels of land where their claims were located.
If the unpatented mining claim owners are correct that there’s valuable ore underneath their claim, it’s understandable that they wouldn’t want another mining company digging through their claim. From their perspective, MMI is saying they’re “just passing through,” while conveniently pocketing any valuable minerals they find on the way to their own patented claim.
From the perspective of MMI, these unpatented mining claim owners haven’t shown that the area MMI wants to tunnel through has anything valuable in it, so there’s nothing they can do to keep MMI from passing through. Furthermore, if the unpatented claims are valid to the extent of preventing through-access by MMI, the unpatented claim owners stand to make a great deal of money by charging MMI a steep fee in exchange for easement rights.
The Montana Supreme Court’s decision in this case is in line with precedent. In its review of the case, the Court paid close attention to the evidence of valuable minerals submitted by the unpatented mining claim owners. From their opinion (note that POPS 11, 12 and 24 are the unique names of unpatented mining claims, and Arnold Bakie was a defendant in the case):
“Bakie submitted records of quartz deposits on various claims to the trial court, although none of these records indicate the presence of quartz deposits on the Subject Claims at issue. Additionally, Bakie submitted affidavits and assay reports to the District Court purportedly establishing discovery of valuable mineral deposits on the Subject Claims; however, the reports reflect a total of only three discovery points throughout the entire 1,126 claim block, none of which are located on the Subject Claims. Although Bakie originally claimed in an affidavit that an assay he submitted was from a single discovery on POPS 12, he recanted this claim at a 2008 deposition when he clarified that his discoveries were actually on POPS 11 and 24. Bakie further testified that he was unaware of valuable mineral discoveries on any other Subject Claims.”
⁋6 Mines Management, Inc. v Fus, 2019 MT 276.
In other words, the Defendants hadn’t submitted evidence that any of the claims MMI wanted to tunnel through contained valuable ore. The Defendants argued that they had submitted enough evidence to prevent other miners from accessing their claim. The Montana Supreme Court did not address whether that was true, instead pointing out that a more stringent version of the test needed to be applied, one which the Defendants had certainly failed:
“However, this relaxed prudent man standard only applies as between rival claimants. When the contest is between a mineral locator and another party challenging the mineral nature of the land, the standard is to be more stringently applied, requiring the physical exposure of a valuable vein or lode deposit within the claim boundaries.”
⁋21, ibid.
MMI was not seeking to extract quartz and did not have its own unpatented claims over the area in question. For the purposes of the prudent man test, the courts consider MMI to be more akin to a recreational hiker than a miner competing with the defendants. Presumably, if MMI had its own unpatented mining claims in the area where they wanted to build a tunnel, the outcome of this case may have been different.
If you or a client have questions about validating mining claims or concerns about access to property, I strongly encourage you to contact an attorney and address those concerns before they become a matter of litigation. In matters of law and money, the old cliché is so often true that a stitch in time saves nine.
Don’t worry about sounding professional. Sound like you. There are over 1.5 billion websites out there, but your story is what’s going to separate this one from the rest. If you read the words back and don’t hear your own voice in your head, that’s a good sign you still have more work to do.
Be clear, be confident and don’t overthink it. The beauty of your story is that it’s going to continue to evolve and your site can evolve with it. Your goal should be to make it feel right for right now. Later will take care of itself. It always does.