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TITLE TO URANIUMAND OTHER MINERALS

(STILL CRAZYAFTER ALL THESE YEARS)1

DEJA VOUS ALL OVER AGAIN2

BY: PETER E. HOSEY3

JACKSON WALKER L.L.P.SAN ANTONIO, TX

The more things change, the more they staythe same. Along with oil and gas, hardminerals and uranium enjoyed record highprices in the late 1970s and early 1980s.

1 Simon & Garfunkel.2 Particular thanks are given to my colleague,Mr. Jordan Smith, whose assistance in thepreparation of this paper was invaluable and isgreatly appreciated.3 Peter E. Hosey is a Partner in the San Antonio,Texas office of Jackson Walker L.L.P. Hereceived a Bachelor of Arts degree from TheUniversity of Texas at El Paso in 1976, and is a1979 graduate of St. Mary’s University School ofLaw. He practices primarily in the areas of oiland gas, title and transactional matters, realestate law, business law, and internationalbusiness law. He has served since 1998 on theJoint Editorial Board for the development of TitleExaminations Standards established by the RealProperty, Probate and Trust Law and Oil, Gasand Energy Resources Law Sections of theState Bar of Texas, which are published in theTexas Property Code. He is a member of theSan Antonio Bar Association (has been severaltimes President and Treasurer of the NaturalResources Committee of the San Antonio BarAssociation), a member of the American BarAssociation and the State Bar of Texas. He isalso a member of the College of the State Bar ofTexas. He is a frequent lecturer and writer onoil, gas and land title issues. He recently spokeat the 50th Annual Rocky Mountain Mineral LawFoundation Institute, the State Bar of Texas, 23rd

Annual Advanced Oil, Gas and EnergyResources Law Course, and the 2007 Universityof Houston Advanced Oil and Gas Short Course.He is currently an Adjunct Professor of Law atSt. Mary’s University School of Law, teachingTexas Land Titles.

However, by the mid 1980s the run of highprices was over.

Joining in the collapse of the price ofhydrocarbons and hard minerals, the priceof uranium also fell, due primarily to the lossof the market for processed uranium(yellowcake-U308). The nuclear powerindustry no longer constructed new powerplants.

Times have changed, or have they? Alongwith the recent rise in the price of oil, gasand other commodities, the price of coal,uranium and other hard minerals has alsorisen significantly. Fueled by renewedinterest in nuclear power due to concernsabout the contribution of fossil fuels toglobal warming, uranium reached a high of$95 per pound in December 2007. But likeoil and gas, the price of uranium has alsofallen sharply in recent months and currentlytrades at $46 per pound (November 2007).

Despite such price volatility, there isrenewed interest in lease activity for hardminerals, especially uranium. Titleexaminers may once again be confrontedwith determining the ownership of thesesubstances. This paper will discuss thestatus of Texas law as it pertains to theownership of hard minerals, particularlyuranium.

Determining title to uranium and other hardminerals has caused Texas courts muchgrief over the years as they have tried todevine the intention of the parties ininterpertating the language of theinstruments creating these interests.Unfortunately for title examiners, title tothese substances cannot always beascertained from the language of the grantor reservation. Facts outside of the record,such as the method of extraction, determinethe intention of the parties and thereby theownership of these substances. As a result,the attributes of ownership determine title,rather than the title determining theenjoyment of the interest owned. The useof evidence outside of the four corners of

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the instrument has played a major role inthe determination of the title to thesesubstances.

I. INTRODUCTION

The confusion created by the TexasSupreme Court in this area is the result ofan attempt to balance two competinginterests: the right of the surface owner topreserve the integrity of the surface of theland; and the right of the mineral owner toexplore and produce these severed mineralsubstances.4 Although, this article focuseson rights to uranium, the title examinershould know that previous decisions by theTexas Supreme Court have classified theownership of other substances as a matterof law. A list is provided below, but will notbe discussed in detail.5

4 See Friedman v. Texaco, Inc., 691 S.W.2d586, 589 (Tex. 1985) (“We conclude that theTexas law on whether uranium was included in aconveyance or reservation of ‘minerals’ wasunsettled prior to our decision in Acker, and nodefinitive rule existed.”).5 See, e.g., Sun Oil Co. v. Whitaker, 483 S.W.2d808 (Tex. 1972) (fresh water not included inmineral estate reservation of "oil, gas, and otherminerals"); Heinatz v. Allen, 217 S.W.2d 994(1949) (devise of "mineral rights" held not toinclude limestone and building stone); Atwood v.Rodman, 355 S.W.2d 206 (Tex. Civ. App.—ElPaso 1962, writ ref'd n.r.e.) ("oil, gas, and otherminerals" did not include limestone, caliche, andsurface shale); Union Sulphur Co. v. Texas GulfSulphur Co., 42 S.W.2d 182 (Tex. Civ. App.—Austin 1931, writ ref'd) (solid sulfur depositsconveyed by ordinary oil and gas lease);Praeletorian Diamond Oil Ass'n v. Garvey, 15S.W.2d 698 (Tex. Civ. App.—Beaumont 1929,writ ref'd) (gravel and sand not intended to beincluded in lease for "oil and other minerals").Practitioners should also be aware of amisstatement in Moser v. U.S. Steel Corp.,indicating that Reed v. Wylie classified near-surface lignite, iron and coal as part of thesurface estate as a matter of law. See Reed v.Wylie, 597 S.W.2d 743, 745–46 (Tex. 1980)(holding that lignite found within “seven or eightfeet from the top of the surface” is “at thesurface” as a matter of law, and therefore owned

II. AN OVERVIEW OF URANIUM INTEXAS

A. Uranium Deposits in Texas

The South Texas coastal plain containsmineralized uranium deposits, the majorityof which are located in seven majorsandstone formations: the CarrizoFormation, the La Para and La BahiaMembers of the Goliad Formation, theOakville Formation, the Dillworth andDeweesville Members of the WhitsettFormation, and the Soledad Member of theCatahoula Formation. The bulk of uraniumexploration and production has taken placein a region known as the South TexasUranium Province, a segment located justsouth of the San Marcos arch. Mostcommercial deposits of uranium are locatedin large river channel systems, known as“mega-channels,” where clastic sedimentshave been deposited over time.

Uranium mineralization and thedevelopment of these deposits are possibledue to the presence of fault structures in thearea. These fault systems run in anortheast-southwest direction across SouthTexas and contain rising H2S gas, which isessential to the solution method ofextracting uranium. The gas serves as areducing agent causing the uranium toprecipitate when the gas and oxidizedsolutions come into contact.

B. Methods for Producing Uranium

Depending on the depth of the depositsbeneath the surface, hard minerals havebeen typically extracted by one of twomethods: open pit mining or the in-situleaching process.6 Open pit mining is used

by the surface owner; not holding that “nearsurface lignite, iron and coal is part of thesurface estate as a matter of law,” as indicatedby the court in Moser). See Moser v. U.S. SteelCorp., 676 S.W.2d 99, 101 (Tex. 1984).6 See Martin v. Schneider, 622 S.W.2d 620, 621(Tex. App.—Corpus Christi 1981, writ ref’dn.r.e.), disapproved of by Plainsman Trading Co.

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in mining coal, lignite, limestone, and othernear-surface substances that can only beextracted by digging through the surface.In-situ leaching (ISL), or solution mining, isa method of extracting minerals such asuranium and copper by pumping leachingsolution into boreholes drilled into the oredeposit. The uranium-bearing solutionmigrates to a well bore where it is pumpedto the surface and processed withoutemploying expensive drill-and-blasttechniques, underground mining or open pitmethods. The processed uranium is knownas “yellow cake.” (U3O8).

Uranium deposits closer to the surface havebeen exploited using the open pit method,while deeper concentrations of uraniumhave utilized the fault structures andoxidized groundwater to extract the mineralthrough in situ leaching methods. SouthTexas uranium is generally extracted usingthe ISL method.

C. Conveying Title to Uranium

Unfortunately for title examiners, parties donot always specifically reference thesubstances conveyed or reserved. Theyoften utilize form instruments containingboilerplate language, without further thoughtbeing given to what is meant. The mostcommon boilerplate phrase is the term, “andother minerals.” This phraseology appearsin all form oil and gas leases and manygrants and reservations in form deeds andother instruments. The court mustdetermine the title to a particular substancethrough the interpretation of the words “andother minerals,” where a substance hasbecome valuable and one of the partiesseeks to exploit it. In accordance with therules discussed below, the court may holdthat the substance belongs to the mineralowner, or is a part of the surface estate.

v. Crews, 898 S.W.2d 786, 791 (Tex. 1995)(“The solution, or in-situ method, entails nodestruction or depletion of the surface. On theother hand, the surface, or pit mining methodrequires destruction of the surface.”).

This issue is more than the allocation ofmonies. The real fight is over the use,preservation or destruction of the surfaceitself. The courts have applied a generalintent, rather than a specific intent and havebeen sympathetic to the view that the feeowner would not have intended to conveythe minerals, the exploitation of which wouldalso destroy the surface and the surfaceowner’s ability to use the land for anypurpose. It has been this analysis whichhas animated the Texas Supreme Court formore than thirty years when determiningtitle to uranium and other hard minerals.

III. DETERMINING THE INTENT OF THEPARTIES

In order to determine the ownership ofuranium and other hard mineral substances,the court must derive the intention of theparties in the severance instrument byexamining the document in its entirety andharmonizing the provisions of the document.The court must ascertain the intention of theparties by what was said in the instrument,not by what was meant but not said. This isknown as the “four corners doctrine.”7

When the intention of the parties is clearand the document specifically conveys orreserves uranium, coal or lignite, the courtwill enforce the terms of the documentwithout evaluating the circumstancessurrounding the transaction. Title examinersneed only look to the recorded documentsand the applicable case law to determinewhether the surface or mineral owner hastitle to the specific substance.8

The problem has arisen where the intentionof the parties is not clear from the languageof the severing document, such as wherethe language “and other minerals” is used todescribe the interests being conveyed orreserved. As a result, the four cornersdoctrine as enunciated by the TexasSupreme Court in Luckel v. White cannot be

7 Luckel v. White, 819 S.W.2d 459 (Tex. 1991).8 See supra note 3.

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used, since the four corners of thedocument are silent as to the intention ofthe parties. Texas courts have failed toconsistently adhere to a clear legaldefinition when deciding which substancesare included in this phrase.9 When facedwith this boilerplate language, the TexasSupreme Court has looked to extrinsicevidence outside of the terms of therecorded documents in order to determinethe intention of the parties.10

IV. DEFINING “MINERALS” UNDERTEXAS LAW

It is important to note that certain rules ofconstruction normally relied upon tointerpret ambiguous mineral deeds havebeen expressly rejected under Texas law.For example, courts have refused to applythe rule of ejusdem generis11 to the phrase

9 Compare Moser v. U.S. Steel Corp., 676S.W.2d 99, 102 (Tex. 1984) (establishing,without defining, the “ordinary and naturalmeaning” test as the legal mechanism fordetermining ownership to “other minerals” underTexas law for mineral severances executed afterthe date of the Moser opinion), Heinatz v. Allen,217 S.W.2d 994, 997 (1949) (applying theordinary and natural meaning test toconveyances of “minerals”), and Psencik v.Wessels, 205 S.W.2d 658, 661 (Tex. Civ.App.—Austin 1947, writ ref’d) (defining“minerals” to include “what that word means inthe vernacular of the mining world, thecommercial world, and land owners at the timeof the grant”), with Acker v. Guinn, 464 S.W.2d348 (Tex. 1971) (applying a fact-based surfacedestruction analysis to determine ownership tospecific unnamed substances).10 Klein v. Humble Oil & Ref. Co., 86 S.W.2d1077 (1935).11 Under the ejusdem generis doctrine, a generalword or phrase, like “and other mineral”, whichfollows a list of specific words or phrases will beinterpreted to include only those substanceswhich are similar to those specifically stated.For example, in an oil and gas lease thatconveys “oil, gas and other minerals,” thegeneral term “other minerals” would beinterpreted to include only those minerals thatare similar to oil and gas. Arguably, this wouldnot include solid minerals, such as uranium.

“oil, gas and other minerals.” To do sowould limit the mineral estate to ownershipof only those hydrocarbons similar to oil andgas.12 The Texas Supreme Court has alsodeclined to interpret “minerals” according tothe technical scientific definition. This wouldprovide the mineral estate with everysubstance beneath the surface, “even thesoil itself.”13 The court has also confirmedthat ownership to an unnamed substancewill not depend on whether the parties hadknowledge of the substance’s value,14 oreven its existence, at the time the severingdocument was executed.15

Generally, the Texas Supreme Court hasutilized two very different rules ofconstruction to determine ownership tothose substances not specifically mentionedin the severing instrument: (i) the “ordinaryand natural meaning” test; and (ii) the“surface destruction” test.

12Southland Royalty Co. v. Pan Am. PetroleumCorp., 378 S.W.2d 50 (Tex. 1964); Luse v.Boatman, 217 S.W. 1096 (Tex. Civ. App.—FortWorth 1919, writ ref’d).13 Heinatz v. Allen, 217 S.W.2d 994, 997 (1949).14 The “exceptional characteristics” test focuseson whether the unnamed substance in questionwas considered valuable at the time of theconveyance. If the mineral was of no significantvalue at the time it was severed from the surfaceestate, then it must not have been on the mindsof the grantor and grantee when the documentwas executed; thus, it was not included in thesevered mineral estate. Conversely, if theunnamed substance did possess a marketablevalue at the time the document was executed, itmust have been included in the mineral estate.15 Acker v. Guinn, 464 S.W.2d 348, 352 (Tex.1971) (adopting a general intent approach todetermining ownership, resulting in actualknowledge of a substance’s existenceirrelevant); Cain v. Neumann, 316 S.W.2d 915,922 (Tex. Civ. App.—San Antonio 1958, no writ)(concluding that actual knowledge of theexistence of uranium under the surface at thetime of the conveyance should not beconsidered when making a determination ofownership).

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A. “Ordinary and Natural Meaning” Test

Under the ordinary and natural meaningtest, courts presume that the parties werefamiliar with the ordinary and naturalmeaning of the terms used in the severinginstrument.16 The Texas Supreme Courthas held that the ordinary and naturalmeaning of “minerals” does not requireapplication of the scientific or technicaldefinition of the word as it may be used byin the scientific community.17 But as we willsee, the Court has failed to delineateexactly what is involved in applying theordinary and natural meaning test.18

Generally, application of this test results incourts defining minerals on a substance-by-substance basis. Even though ownership isdetermined this way, it is preferable to thecase-by-case determination of the surfacedestruction test described below.

B. “Surface Destruction” Test

The surface destruction test looks toevidence outside of the four corners of themineral deed to determine the general intentof the parties to the severance.19 Thesurface destruction test focuses on themethods of production that couldreasonably be used to extract the unnamedsubstance and asks whether anyreasonable method of developing the

16 Heinatz v. Allen, 217 S.W.2d 994, 997 (1949).17 Id.18 Compare Moser v. U.S. Steel Corp., 676S.W.2d 99 (Tex. 1984) (“[A] severance ofminerals in an oil, gas and other minerals clauseincludes all substances within the ordinary andnatural meaning of that word, whether theirpresence or value is known at the time ofseverance.”), with Heinatz v. Allen, 217 S.W.2d994, 997 (1949) (“[G]ravel and limestone are notminerals within the ordinary and natural meaningof the word unless they are rare and exceptionalin character or possess a peculiar propertygiving them special value, as for example sandthat is valuable for making glass and limestoneof such quality that it may profitably bemanufactured into cement.”).19 Acker v. Guinn, 464 S.W.2d 348 (Tex.1971).

mineral would consume, destroy, or depletethe surface.20 This requires a two-stepfactual determination of the substance’sproximity to the surface and the reasonablemethods available for extraction.Ownership is determined as a matter of fact,rather than by the court as a matter of law.

The application of the surface destructiontest will depend upon the date that themineral estate was severed from thesurface. Consequently, ownership tovaluable minerals, such as uranium, cannotbe determined by a simple examination ofthe title documents. If the surfacedestruction test is applied, ownershipbecomes an issue of fact and title to theunnamed substances will be based uponthe location of the substance to the surfaceand the reasonable methods for extractingthat substance.

V. EVOLUTION OF THE TWO-TESTSYSTEM

Since 1919, Texas courts have disagreedwhether the method used to extract asubstance should be considered in adetermination of title to that substance. InLuse v. Boatman, the Fort Worth Court ofAppeals held that a reservation of the “coaland mineral, and the right to prospect forand mine the same” included oil and gas aspart of the reserved mineral estate.21 Theappellate court concluded that “it makes nodifference whether the means used forextracting the mineral sought is that of pickand shovel or other implement used forexcavating, or by drill or bit.”22

Thirty years after Luse, however, themethod used for extracting a substancebecame one of the factors to be consideredwhen determining the intent of the parties toa severance of “mineral rights.” In Heinatz

20 Plainsman Trading Co. v. Crews, 898 S.W.2d786, 790 (Tex. 1995).21 Luse v. Boatman, 217 S.W. 1096, (Tex. Civ.App.—Fort Worth 1919, writ ref’d).22 Luse, 217 S.W. at 1101.

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v. Allen, the Texas Supreme Courtconcluded that the term “mineral rights”should be interpreted according to its“ordinary and natural meaning.”23 The courtidentified four factors to consider whendetermining whether a given substance iswithin the ordinary and natural meaning ofthe word “minerals” and included as part ofthe mineral estate: (i) the nature of thesubstance, (ii) its relation to the soil, (iii) itsuse and value, and (iv) the effect of itsremoval upon the surface of the land.24

Under later decisions, the fourth factor ofthe “ordinary and natural meaning” test—theeffect of a substance’s removal on thesurface of the land—became the exclusivefactor for determining whether a substancebelongs to the owner of the mineral estateor the owner of the surface estate.25

One of the first cases dealing specificallywith uranium is Cain v. Neumann.26 InCain, the San Antonio Court of Appeals heldthat title to uranium was included in amineral lease executed in 1918, whichconveyed a twenty-five year determinablefee interest in ‘all of the oil, gas, coal andother minerals in and under’ the land.27 Thecourt concluded that the use of the term“other minerals” reveals “an unrestrictedgrant of minerals, including uranium.”28

A. Adoption of the Surface DestructionTest

1. Acker v. Guinn

In 1971, the Texas Supreme Court firstemployed the “surface destruction” test as

23 Heinatz v. Allen, 217 S.W.2d 994, 997 (1949).24 Id. at 995–96 (holding that the surfacedestruction test is “not decisive” of title tounnamed minerals but is merely a factor to beconsidered when making that determination).25 See Acker v. Guinn, 464 S.W.2d 348(Tex.1971); Reed v. Wylie, 597 S.W.2d 743(Tex. 1980).26 Cain v. Neumann, 316 S.W.2d 915 (Tex. Civ.App.—San Antonio 1958, no writ).27 Id. at 921–22.28 Id.

the sole factor for determining whether theparties to the transaction intended for anunnamed substance to be included in thesevered mineral estate.29

In Acker v. Guinn, the owners of anundivided one half interest “in and to all ofthe oil, gas and other minerals in and under,and that may be produced,” brought adeclaratory judgment action to determineownership of the iron ore located under theproperty. Iron ore deposits were located inoutcrops at the surface and extendedapproximately fifty feet below the surface.30

Furthermore, the evidence showed that theiron deposits under the land “must bemined” by open pit mining methods.31 TheTexas Supreme Court affirmed theappellate court’s decision in favor of thesurface estate owner, but based its holdingon the surface destructive effect strip miningthe iron ore would have on the surfaceestate.32

Acker holds that “a grant or reservation of‘minerals’ or ‘mineral rights’ should not beconstrued to include a substance that mustbe removed by methods that will, in effect,consume or deplete the surface estate.”33

Through application of the surfacedestruction test, the Court sought toascertain the “general intent” of the partiesto the transaction. The Court rationalizedthat a surface owner would not convey asubstance, the production of which woulddeprive the owner of the beneficial use ofthe surface estate.

2. Reed v. Wylie (Reed I & II)

The surface destruction test was furtherexpanded in 1977, and again in a substituteopinion in 1980, with the Court’s decisions

29 Acker v. Guinn, 464 S.W.2d 348, 352(Tex.1971).30 Id. at 351–52.31 Id. at 351.32 Id. at 352.33 Id.

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in Reed I and Reed II.34 Both Reed I andReed II involved a 1950 deed reservation byWylie of a one-fourth interest “in and to alloil, gas and other minerals on and under theland and premises herein described andconveyed.”35 Reed, the surface owner,initiated a declaratory judgment todetermine whether Wylie retained a one-fourth ownership interest to coal and lignitethrough the 1950 reservation.36

In Reed I, the court first made a distinctionbetween substances located “at the surfaceof the land” and those located “near thesurface.”37 If a substance is located “at thesurface,” the surface destruction test neednot be applied, and the surface ownerretains the rights to that substance as amatter of law.38 If, however, the substanceis “near the surface,” the surface ownerretains the rights to that substance if he orshe proves that it could only have beenextracted through surface-destructivemethods at the time the severing instrumentin question was executed.39 Thus, Reed Iplaced the burden of proof on the surfaceowner to demonstrate: (i) the location of thesubstance; and (ii) if that substance isshown to be near the surface rather than atthe surface, the surface destruction testmust be satisfied.40 Reed I establishes thedate of the conveyance as the time fordetermining whether all available methodsof removal were surface-destructive.41 Thecase was then remanded for the trial courtto apply the newly formulated surfacedestruction test.42

34 Reed v. Wylie, 554 S.W.2d 169 (1977),modified, 597 S.W.2d 743 (Tex. 1980).35 Reed v. Wylie, 554 S.W.2d 169, 171 (1977)(“Reed I”), modified, 597 S.W.2d 743 (Tex.1980).36 Id. at 170.37 Id. at 172.38 Id. at 173.39 Id. at 172.40 Id. at 173.41 Id.42 See id. (indicating that there was no evidenceregarding the lignite’s location to the surface).

In 1980, the Supreme Court modified itsopinion in Reed I with a subsequent reviewof the Reed v. Wylie case (“Reed II”).43 InReed II, the court broadened the applicationof the surface destruction test by vestingtitle to near surface lignite, iron or coal in thesurface estate owner if the surface owner isable to prove that any reasonable removalmethod will result in the destruction of thesurface.44 Furthermore, the time fordetermining whether any available methodsof removal are surface-destructive wasextended from the moment of theconveyance to any time between the date ofthe conveyance and the institution of suit.45

The court rationalized that this extension oftime was necessary in order to avoid “a factquestion as to the state of the art of removalof the substance upon some particular datein the past,” and to keep the parties fromhaving to use expert testimony to establishwhat mining methods were used for aspecific substance on the date ofseverance.46

The irony of the court’s rationalization isapparent to any litigant who has been aparty to a title dispute where the Reed IIsurface destruction test was applied. Costlyexpert testimony is still required to establishthe depth of the substance at issue and thereasonable methods of extraction that havebeen available from the time of theseverance to the time of the courtproceeding.47 Although the court sought toavoid a rule that “would have a veryunstabilizing effect upon land titles,”48 experttestimony remains crucial to a jury’sdetermination of ownership to uranium andother hard minerals under the surfacedestruction test. Furthermore, though the

43 Reed v. Wylie, 597 S.W.2d 743, 747 (Tex.1980) (“Reed II”).44 Id.45 Id.46 Id.47 See, e.g., Reed I, 554 S.W.2dat 172 (requiringqualifications for expert testimony regardingdepth of lignite and reasonable methods usedfor producing lignite).48 Reed II, 597 S.W.2d at 747.

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extended timeframe was intended to avoidpresenting evidence of past miningpractices, for surface owners the date ofseverance remains the most likely time itwould have been reasonable for surfacedestructive mining methods to have beenavailable. Solution mining at ISL may nothave been an available extraction method atthe time of the severance.

Most important, Reed II reaffirmed andfurther clarified the rule announced in ReedI, that any substance “at the surface”—presumably, at least “7 to 8 feet,”49 butpossibly even “twenty to twenty-two feet”50

below the surface—belongs to the surfaceestate owner as a matter of law, negatingapplication of the surface destruction test.51

The depths provided above are based onthe summary judgment evidence consideredby the court in Reed II. The courtconcluded that “at the surface” meant “adepth shallow enough that it must havebeen contemplated that its removal wouldbe by a surface destructive method.”52

Unfortunately, the court failed to clarify aspecific depth that would constitute “at thesurface” as a matter of law for everysubstance. In future title disputes, it ispossible that this grey area created by thecourt will provide the greatest advantage tosurface owners and their successors whowish to challenge title to hard minerals, suchas uranium.53

49 Id. at 745–46 (holding that lignite was “at thesurface” as a matter of law based on summaryjudgment evidence of low grade lignite, or“smut,” as close as seven to eight feet from thesurface).50 Id. (concluding surface owner owned lignitedeposits as a matter of law based on summaryjudgment evidence of high grade hard lignitedeposits as close as twenty to twenty-two feetfrom the surface).51 Id. at 747.52 Id. at 746.53 See, e.g., Martin v. Schneider, 622 S.W.2d620, 621 (Tex. App.—Corpus Christi 1981, writref’d n.r.e.), disapproved by Plainsman Trading

On a positive note, the Court did firmlyestablish that substances not “at thesurface,” but located within 200 feet of thesurface, are “near the surface” as a matterof law and the surface destruction test muststill be applied.54 However, the Court againfailed to clarify whether the mineral owner isvested with title to substances locateddeeper than 200 feet as a matter of law.Perhaps a substance located deeper than200 feet will be considered a mineral basedon the Court’s analysis. However, the Courtdid not prohibit a surface owner fromseeking to establish title to a substancelocated deeper than 200 feet through theapplication of the surface destruction test.Practitioners should be aware of thisadditional “grey area” in the “near surfacesubstance” analysis.

As its final modification to the surfacedestruction test, the Court declared that if asubstance is determined to belong to thesurface owner, the surface owner owns thatsubstance to any depth at which it may befound.55

In 1986, the Corpus Christi Court of Appealsin Atlantic Richfield Co. v. Lindholm,56

applied the Reed II test to pre-1983conveyances (1934 and 1949), ignoring theapplication of the Texas Uranium Surface

Co. v. Crews, 898 S.W.2d 786, 791 (Tex. 1995)(providing a brief analysis of uranium depositstwenty feet beneath the surface). Martin v.Schneider, a case decided by the Corpus Christicourt of appeals, provides some guidance forhow a court may classify the depth of uraniumdeposits relative to the surface. Despite notultimately applying the surface destruction testbecause NPRI interests were at issue, the courtin Martin observed that uranium ore depositswere located on the property “at an averagedepth of 55 to 66 feet, with the shallowestdeposit at 20 feet;” and, further, that both ISLand open-pit methods had been used to extractthe uranium. Id. at 621.54 Reed II, 597 S.W.2d at 747.55 Id.56 Atlantic Richfield Co. v. Lindholm, 714 S.W.2d390 (Tex. App.—Corpus Christi 1986, writ ref’dn.r.e.).

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Mining and Reclamation Act,57 which hadbeen enacted after Acker. It had beenargued that the Act rendered the surfacedestruction test unnecessary.

B. Return to the Ordinary and NaturalLanguage Test

1. Moser v. U.S. Steel Corp.

In 1983, the Texas Supreme Court in Moserv. U.S. Steel Corp., acknowledged the titleuncertainty created by the fact-intensivesurface destruction test and abandoned itas the standard for determining the intentionof the parties to the severance document.58

In Moser, the surface owners filed suit toquiet title to uranium deposits discovered ona 6.77 acre tract of land.59 The severancedocument executed in 1949 reserved to themineral owner:

[A]ll of the oil, gas, and otherminerals of every kind andcharacter, in, on, under and thatmay be produced from said tract ofland, together with all necessaryand convenient easements for thepurpose of exploring for, mining,drilling, producing and transportingoil, gas or any of said minerals.60

The lower court applied the surfacedestruction test, and the jury concluded thatno reasonable method of mining theuranium was available in 1949 that wouldhave resulted in destruction of the surface.The mineral owner prevailed. The court ofappeals affirmed, holding as a matter of lawthat ISL mining was the only reasonablemethod for mining uranium at the time oftrial.61

57 TEX. NAT. RES. CODE ANN. § 131.001 (Vernon2008).58 Moser v. U.S. Steel Corp., 676 S.W.2d 99(Tex. 1984).59 Id. at 100.60 Id. at 101.61 Id.

The Texas Supreme Court opined thatthirteen years of using the surfacedestruction test “has resulted in titleuncertainty.”62 The court held that “title touranium is held by the owner of the mineralestate as a matter of law.”63 The courtannounced a return to the “ordinary andnatural meaning” test for interpreting theterm “other minerals”.64 While Moser wasan abandonment of the surface destructiontest approach of Acker and Reed I and II,the court refused to abrogate its previousdecisions. In withdrawing its opinion datedJune 8, 1983, the court on June 27, 1984determined that the ordinary and naturalmeaning test would only be appliedprospectively from June 8, 1983, the date ofthe original Moser opinion. The surfacedestruction test would still be used tointerpret a severance of “other minerals”executed prior to Moser.65 The prospectiveapplication of Moser and the ordinary andnatural meaning test has resulted in thefragmentation of Texas land title law andperpetuated the confusion about who ownsthese substances: the mineral owner or thesurface owner?

Under Moser, title to a substancedetermined to be a mineral “within theordinary and natural meaning of the word” isowned by the owner of the mineral estate asa matter of law.66 The court concluded thatMoser applies to any substance notpreviously considered and classified as amatter of law in previous decisions. Inaddition, the court specifically held thaturanium is a mineral as a matter of lawunder the ordinary and natural meaningtest, although the rule is applicableprospectively only.67

Moser also imposes strict liability for surfacedestruction on those mineral estate owners

62 Moser, 676 S.W.2d at 101.63 Id.64 Id.65 Id. at 103.66 Moser, 676 S.W.2d at 101.67 Id. at 102.

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who receive title to a substance through agrant of “other minerals” rather than througha specific reference.68 Strict liability is notimposed upon the mineral owner whoacquires its interest through a specificreference to the substance in the severancedocument. In those instances, the mineralowner’s liability is restricted to negligentlyinflicted damage to, or excessive use of, thesurface estate. The court reasoned that theparties presumably contemplated suchsurface destruction at the time of the grantor reservation.69

C. New Life for the Surface DestructionTest

1. Friedman v. Texaco, Inc.

Friedman owned 694 acres in fee simpleand executed a lease of oil, gas and otherminerals to Magnolia Petroleum in 1939.70

Twenty years later, Friedman conveyed thesurface estate to Martin and reserved all ofthe “the oil, gas and other minerals, in andunder said tract of land.” Martin, the surfaceowner, later executed a lease to Texaco,which specifically granted Texaco the rightto produce uranium.71

In Friedman, title to uranium wasdetermined to remain with the surfaceestate pursuant to the surface destructiontest, because extraction of the uranium“could” be accomplished through surfacedestructive strip mining methods.72

The Friedman court affirmed its earlierruling in Moser that the ordinary and naturalmeaning test applies only to severances of“other minerals” which occur after June 8,1983. Friedman, however, went one stepfurther. The court held that, not only wouldthe surface destruction test remain thestandard for interpreting general

68 Id.69 Id. at 103.70 Friedman v. Texaco, Inc., 691 S.W.2d 586(Tex. 1985).71 Id. at 587.72 Id. at 589.

conveyances of oil, gas and other mineralsas outlined in Reed II, but that the surfacedestruction test would also be applied toany severance that predated the Ackeropinion. Thus, the surface destruction testremains the standard for determining title tounnamed substances as to any severanceexecuted prior to June 8, 1983. Under allpost-Moser severances, title to uranium willbelong to the mineral estate owner as amatter of law, while title to unnamedsubstances severed after June 8, 1983 willbe governed by the ordinary and naturalmeaning test.73

2. Plainsman Trading Co. v. Crews

Despite the Moser court’s effort to minimizeapplication of the surface destruction testwhen determining rights to unnamedsubstances in conveyances of “otherminerals,” ten years later in PlainsmanTrading Co. v. Crews,74 the Supreme Courtapplied the surface destruction test todetermine the rights of a non-possessoryroyalty interest (“NPRI”) holder to uraniumproduction proceeds, where those rightswere acquired prior to the severance of themineral estate.75

In 1949, the property at issue in Plainsmanwas conveyed in fee simple with areservation by the grantor of an NPRIinterest in the land. Fourteen years later onMarch 14, 1963, a deed was executedconveying the surface estate and anundivided one half interest in the minerals toCrews. On August 27, 1987, Crewsexecuted a mineral lease which expresslygave the lessee the right to produceuranium from the property.76 Plainsman,owner of the other undivided one-halfmineral estate, and the NPRI holder filed adeclaratory judgment action to determine

73 Id.74 Plainsman Trading Co. v. Crews, 898 S.W.2d786, 788 (Tex. 1995).75 Id.76 Id.

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ownership to the uranium which Crews’mineral lessee intended to extract.77

The issue in Plainsman was whether anon-participating royalty interest createdprior to June 8, 1983, while the grantor wasthe fee simple titleholder, is extinguishedonce the surface owner has succeeded tothe ownership to near surface uranium.78

The NPRI owner argued that surfacedestruction is irrelevant because the non-participating royalty interest is a non-possessory interest, which precludes theinterest holder from producing the mineralshimself and “merely entitles [the] owner to ashare of the production proceeds, free ofthe expenses of exploration andproduction.”79

The court upheld the lower court’sapplication of the surface destruction test,vesting title in the uranium to the surfaceowner.80 But the majority further concludedthat the holder of the NPRI had no interestin the surface owner’s uranium because anon-participating royalty interest is carvedout of the mineral estate.81 As pointed outin the dissenting opinion, the traditionalconflict between a surface owner’s rightsand a mineral owner’s right to reasonableuse of the surface for purposes of mineralproduction is not at issue in the case. Anon-possessory interest has no implied right

77 Plainsman, 898 S.W.2d at 788.78 Id.79 Id. at 789.80 Id. at 788.81 Id. But see Ernest E. Smith, RecentDevelopments in Conveying & ReservingMineral Interests, B-14 Sept. 1987 (arguing that“the surface destruction test should not be usedin construing a grant or reservation of royalty inoil, gas and other minerals, regardless of date,”because “such a person has no right toauthorize mining or to interfere with surfaceuse”). Ernest Smith further argues that the“ordinary and natural meaning test should beused in construing grants and reservations ofroyalties and other nonparticipating interests,irrespective of the date of the instrumentscreating them.” Id.

to surface access. 82 More important, theroyalty owner was granted the non-possessory interest in 1949, before themineral estate was severed in 1963.

The decision in Plainsman is significant forseveral reasons. First, the court concludedthat Rule 277 of the Texas Rules of CivilProcedure mandates the broad formsubmission of issues to a jury and upheldthe submission of broad jury instructionsconcerning the application of the surfacedestruction test.83 In Plainsman, the jurywas asked:

Do you find from a preponderance ofthe evidence that the uraniumlocated on the Tom Crews Ranch islocated within 200 feet or less of thesurface and that any reasonablemethod of extracting and producingthe uranium under the Tom CrewsRanch available on March 14, 1963or at any time thereafter wouldconsume, deplete or destroy thesurface of the Tom Crews Ranch?84

The jury instruction further stated that thesurface would be consumed, depleted ordestroyed if “use of the surface soil isaffected to such a degree that the utility ofsuch land surface for farming, grazing,timber production or other beneficial use isdestroyed or substantially impaired.”85 The

82 See Plainsman, 898 S.W.2d at 792(Gammage, J., dissenting) (contending thatapplication of a rule of general intent—thesurface destruction test—is not warranted in aconveyance of a royalty interest because royaltyowners have no implied right to use the surfaceestate); see also Martin v. Schneider, 622S.W.2d 620, 622 (Tex. App.—Corpus Christi1981, writ ref’d n.r.e.) (refusing to apply thesurface destruction test to royalty interestsconveyed by the surface owner because theunderlying policy of protecting the surface estateis not furthered).83 Plainsman Trading Co., 898 S.W.2d at 790–92.84 Id. at 790.85 Id.

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court upheld this broad jury instruction,which was specifically at issue on appeal.86

In essence, the surface owner’s burden ofsatisfying the surface destruction test hasbeen made easier by Plainsman. Thesurface owner need only show that thesurface need not be destroyed completelybut only “substantially impaired.”

VI. PROBLEMS WITH APPLYING THESURFACE DESTRUCTION TEST TOURANIUM

The Plainsman decision highlights theinherent problem in applying the surfacedestruction test as enunciated in Reed II touranium. As noted earlier, uranium can beextracted by both surface destructive andnon-surface destructive methods (e.g. ISLmethods). Because Reed II changed thetest announced in Acker and Reed I from“must” be extracted” using surfacedestructive methods to “could be extracted,”the fact that a mineral estate lessee intendsto use nondestructive in situ leachingmethods to produce uranium is notconclusive to a determination of ownershipunder the surface destruction test.87 In

86 Id. (reasoning that the “substantially impaired”language was permissible because it was usedin Acker). It is important to note that Reed IIwas an attempt to clarify the surface destructiontest described in Acker and Reed I. In Reed II,however, the court plainly states: “The test nowis whether any reasonable method … willconsume, deplete or destroy the surface.” ReedII, 597 S.W.2d at 747. The “substantiallyimpaired” language is not used.87 See, e.g., Martin v. Schneider, 622 S.W.2d620, 622 (Tex. App.—Corpus Christi 1981, writref’d n.r.e.), disapproved of by PlainsmanTrading Co. v. Crews, 898 S.W.2d 786, 791(Tex. 1995). (observing the following facts wereapplicable to a determination of ownership ofuranium under the surface destruction test: “(1)Uranium ore deposits are found below the landin question at an average depth of 55 to 66 feet,with the shallowest deposit at 20 feet. (2) Twomethods of extraction are available, both ofwhich have been employed on appellants' landsince 1979. The solution, or in-situ method,entails no destruction or depletion of the surface.

Plainsman, evidence was presented at trialthat solution mining rather than open pitmining would be used to extract theuranium.88 Nonetheless, the court appliedthe pre-Moser rules since the mineral estatewas severed in 1963. Friedman confirmedthat the surface destruction test appliesretrospectively, even to severancedocuments executed prior to the Ackerdecision.89

Having two separate tests for determiningownership to uranium and other unnamedsubstances has resulted in uncertainty forsurface owners, legal practitioners andmineral owners and their lessees. Whendetermining which estate owns title to hardminerals under the natural and ordinarymeaning test, the outcome will favor theowner of the mineral estate. Conversely,when the Reed II surface destruction test isapplied to a conveyance of “other minerals,”the surface owner has an increased chanceof establishing title by submitting theseissues of fact to a jury under the surfacedestruction test.

This fragmentation of Texas mineral title lawhas had the greatest impact upon mineralestate owners and lessees who areinterested in exploring and extracting in situuranium deposits. Lessees interested inproducing uranium must be aware thatmineral estates severed prior to the Moserdecision may not contain rights to uraniumdeposits even if ISL methods of extractionare proposed.

On the other hand, the surface, or pit miningmethod requires destruction of the surface. (3)As of 1963, the time of the Schneider-Martinconveyance, surface mining was the onlyavailable means of extraction.”). Had Martinbeen decided after Plainsman and the surfacedestruction test been applied by the court, thesurface owner would have likely establishedownership to uranium that had already beenextracted the by mineral estate lessee.88 Plainsman Trading Co. v. Crews, 898 S.W.2d786, 791 (Tex. 1995).89 Friedman v. Texaco, Inc., 691 S.W.2d 586,589 (Tex. 1985).

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A. Land Patents—An Exception to theSurface Destruction Test

Schwarz v. State

There is one notable exception. If the Stateof Texas issued a patent that reserves “allof the minerals,” the Texas Supreme Courthas held that the State of Texas “hasalways claimed all of the substancescommonly classified as ‘minerals’ and onlygives away those substances by an expressrelease or conveyance.”90 Surfacedestruction is irrelevant.

It is as Justice Ray stated in his concurringopinion in Schwarz: “The ill-begottenjourney begun by the court fourteen yearsago in Acker v. Guinn, has now come nearlyfull circle. Its wake is a trail of irreconcilablecases.”91

VII. DETERMINING WHICH RULESAPPLY TODAY

Although the court has repeatedly statedthat certainty and stability in land titles areimportant, title examiners are not provideddefinitive rules from which the title touranium and other hard minerals may bedetermined through an analysis of theprovisions of the recorded documents.92

Rather, title may be determined throughevidence obtained outside of the record,including facts which may not be known tothe title examiner.

A. “Other Minerals” InstrumentsExecuted Before June 8, 1983

If the general term “and other minerals” isused in an instrument executed prior toJune 8, 1983, ownership of uranium and

90 Schwarz v. State, 703 S.W.2d 187, 191–92(Tex. 1986).91 Schwarz, 703 S.W.2d at 191–92 (Ray, J.,concurring) (citation omitted).92 See Moser v. U.S. Steel Corp., 676 S.W.2d99, 101 (Tex. 1984); Reed v. Wylie, 597 S.W.2d743, 747 (Tex. 1980) (“Reed II”).

other hard mineral deposits located “at” thesurface will be owned by the surface owneras a matter of law. The ownership ofsubstances which are located “near” thesurface will be determined by the surfacedestruction test announced in Reed II. Titlewill be determined on a case-by-case basis.If any reasonable method of extractionwould consume, deplete or destroy thesurface, the court presumes that thecontracting parties intended to excludethese unnamed substances from themineral grant or reservation, and they willbe owned by the surface owner.

Furthermore, in the event the severancedocument predates June 8, 1983 and thesubstance is located deeper than twohundred feet, it is the belief of this authorthat the application of the Reed II surfacedestructive test may be utilized by thesurface owner in order to determine title tothe unnamed substance. However, thepossibility that these substances which arelocated at depths greater than 200 feet maybe economically extracted using surfacedestructive extraction methods is debatable.

B. “Other Minerals” InstrumentsExecuted After June 8, 1983

Any conveyance or reservation of “otherminerals” executed after June 8, 1983,conveys or reserves the uranium to themineral owner as a matter of law pursuantto Moser. Title to other hard mineralsubstances will vest according to theordinary and natural meaning test discussedin Moser. This rule will also apply in casesof pre-1983 severance documents, wherethe interest has merged into the fee afterJune 8, 1983.

Under the post-Moser rules, a minerallessee taking under a general conveyanceis not permitted to make use of the surfaceto the extent allowed by the “reasonableuse” and “accommodation” doctrines. Themineral estate owner is subject to strictliability for surface damages regardless of

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the necessity or reasonableness of thesurface use.

VIII. CONCLUSION

In Reed II, the Texas Supreme Court said ofthe surface destruction test: “It might resultin the ownership of the substance onadjacent tracts being different dependingupon the testimony of experts as to thestate of the art at the date of theinstrument.”93 Despite the court’s attempt toavoid this undesired result through itsreformulation of the surface destruction testin Reed II, this is precisely what hashappened. Until the Texas Supreme Courtadopts a uniform approach for analyzing“other minerals” language in mineraldocuments regardless of the date ofexecution, title uncertainty is inevitable withrespect to title to uranium and other hardminerals.

Where the severing document is specific asto the identification of the substance to beconveyed or reserved, the court will enforcethe terms of the document. Where thesevering document is silent as to intent,such as using the term “and other minerals,”the title examiner must determine the dateof the severance document. If theseverance document is dated beforeJune 8, 1983, the substance will not begranted to nor reserved by the mineralowner if the substance is (i) at the surface;(ii) near the surface (200 feet) and at thedate of the severance or at any time untilthe date of suit, any reasonable method ofextraction would consume, destroy ordeplete the surface. That substance shallbe vested in the surface owner at all depthswhere it is found.

Where the severance document is executedon June 8, 1983 or thereafter, the naturaland ordinary meaning of the substance willbe given effect although the instrument

93 Reed II, 597 S.W.2d at 747 (critiquing thesurface destruction test as outlined in Reed I).

refers to the substance only as “and otherminerals.” In that event, uranium will bedeemed to be a mineral as a matter oflaw.94 This rule also applies where theseverance document predates June 8,1983, but the mineral and surface estateslater merge and are conveyed or reservedafter June 8, 1983.95

The title examiner should not take the risk ofdetermining title to these substances, butshould advise the client according to therules set out in Reed II and Moser. Whenthe client asks for a definite answer to thequestion, “Whose uranium is it?,” you cansay, “Uranium – Myranium.”

For an excellent discussion of theseconcepts, please see Laura Burney’s article,“Oil, Gas, and Other Minerals” Clauses inTexas: Who’s on First?.96

94 Moser v. U.S. Steel Corp., 676 S.W.2d 99(Tex. 1984).95 Friedman v. Texaco, Inc., 691 S.W.2d 586,589 (Tex. 1985).96 Laura H. Burney, “Oil, Gas, and OtherMinerals” Clauses in Texas: Who’s on First?, 41SW. L.J. 695 (1987).