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Protecting rights.

CANADIAN MINERS' OVERTIME

Overtime rate of pay for Canadian miners was the issue in Echo Bay Mines Ltd. v. N.W.T. (Labour Standards Board) [1991] 79 N.W.T.R.

Echo bay Mines operates the Lupin mine at Contwoyto Lake, Northwest Territories, that is accessible only by air from Yellowknife, or from the Arctic Coast via Coppermine. Remoteness necessitates an irregular work schedule. Miners are flown in every two weeks for 12-hr/d shifts and flown out for a 2-week rest.

A Labor Standards Board officer issued a permit for the irregular work hours pursuant to Sect 8 of the Labor Standards Act, which included more stringent conditions for the calculation of overtime in a work period that included a general holiday than the previous permits had. Echo Bay objected and petitioned to the Board. Echo Bay said an exemption should be given it for the general holiday since the company's rest-and-vacation time exceeded that required by law.

The board denied the petition holding that the Act was concerned with the miners' work conditions and not the quality and quantity of rest, which it found irrelevant. Seeking to quash the Board's decision because the board failed to consider Sect. 9 of the Act, Echo Bay sought judicial review.

The Supreme Court of the Northwest Territories agreed with Echo Bay,. Whilst the Board gave more consideration to Sect. 9 (a) and (b), it was in error in giving proper weight to Sect. 9 (c), the quality and quantity of rest was basic to the welfare of the miners at it had a bearing on their safety.

Supreme Court Justice de Weerdt quashed Board's decision and remanded to it for further consideration.

PROTECTING RIGHTS

Where there has been a separation of mineral estate ownership (and rights to mine) from the surface estate ownership, many states have devised mineral statutes to ensure that reserved and deeded mineral rights are either used or forfeited. If forfeited, they are returned to the surface estate. These statutes are usually called dormant mineral, mineral lapse, or marketable title statutes. These statutes generally specify that if the minerals are not actively pursued by some manner of evaluation, exploration, or mining activity, within a specified time limit, the two estates may be reunited by legal action into one fee-simple estate by the surface owner. The purpose behind these statutes is to prevent dormancy of the minerals and to any remove encumbrances to the titles so land can be put into productive use.

Although Indiana's dormant mineral statute is one of the best known, having made its way to the U.S. Supreme Court for constitutional challenge, and being upheld (Texaco v. Short, 1982), Georgia's mineral lapse statute, which is similar in nature and requirements, with only work and time variations, underwent two trials in late 1990. The mining companies involved were Reynolds Metals and Georgia Marble. In the Reynolds case the decision was in favor of the mining company retaining its mineral interest. In the Georgia Marble case, the mining company lost its mineral estate, which was returned to the surface owner.

The Georgia statute is misnomered as an "adverse mineral possession" statute (it is really a lapse statute). The surface owner, in order to recapture the mineral estate, need not assert any acts of dominion over the surface estate or the minerals below it, but is required only to allege and show that he has a deed to the property's surface, that the mineral rights have been severed from the fee-simple estate, and that the requirements of non-use or nonpayment of taxes for a seven-year period by the owner of the mineral rights have indeed been established.

Reynolds Metals--

As the Georgia Supreme Court stated in the case of Parker v. Reynolds Metals Co., the Georgia statute "has two purposes: to encourage the use of the state's mineral resources, and the collection of taxes, or to encourage the use of land free of interference by the holders of mineral rights who, neither use them, nor pay taxes upon them."

In the Parker v. Reynolds Metals Co. case there was a variation in that there was no actual separation of ownership of the surface and subsurface mineral estates. Parker owned 249 acres in Wilkinson County, Ga., in fee-simple: i.e. He owned both surface and the minerals. In 1965, Parker had signed a mining lease agreement transferring his minerals to Reynolds Mining Co. (now Reynolds Metals).

The pertinent part of the lease at issue stated: "Reynolds shall have and hold the Leased Land for the purposes set forth in this Mining Lease Agreement for a term of 50 years from and after the date first above written and for such longer time after such term has ended as Said Minerals are produced from the Leased Land by Reynolds; provided, however, that a temporary cessation of production due to unavoidable casualty, causes beyond the control of Reynolds, or ordinary and usual shutdowns for repairs and development of mines or excavations upon the leased land shall not operate to terminate this Mining Lease Agreement..." Since the agreement was made in 1965, Reynolds had neither mined nor paid taxes on the mineral land or the minerals in it. The plaintiffs filed their action on Oct. 19, 1988, claiming that title to the mineral rights had reverted to them through adverse possession, and as a consequence of Reynolds inactivity for seven years.

The incongruity of Parker's claim in adversely possessing the minerals under his land was that one cannot adversely claim what one already has possession of.

An important and applicable part of the Georgia statute in this case was the exception in Subsection (f) which states: "nothing in this Code section shall apply to a lease for a specific number of years, nor to an owner of mineral rights who has leased the mineral rights in writing to a licensed mining operator." (Reynolds was a licensed mine operator.)

But lessor Parker claimed that the lease was not for a "specific number of years" in accordance with the statute's subsection (f), and that its term was unlimited, i.e. perpetual or forever, and consequently it violated the Rule against Perpetuities.

The Court probably would not have entertained Parker's action and complaint except for the question of "perpetuity" of the lease-contract between Parker and Reynolds, which might have lead to its voidance by the Court if it were found to be in violation of the Rule. [According to Black's Dictionary of Law, "perpetuity" means "any limitation or condition tending to take the subject (property) out of commerce or to take away and suspend the power of alienation (right to sell or transfer title) for a period beyond the life, or lives, in being and 21 years thereafter. Such a limitation of property renders it unalienable beyond the period allowed by law."]

The lessor further claimed that the lease was too vague, indefinite, and uncertain to be enforced.

The Supreme Court interpreted the leasehold as "an interest in the mineral rights for 50 years, which can then continue for the duration of any mining activities that begin during the initial 50-yr period. If no mining is started during the 50-yr period, then the lease will terminate at the conclusion of that time. If mining is started during the 50-yr term, the lease will continue beyond that term for so long as the mining continues, but will cease once those activities stop, although mere interruptions in mining caused by casualties, causes beyond the control of Reynolds or temporary shutdowns for repairs or development will not end the lease. The lease could therefore continue indefinitely. ... If mining were to stop after the 50-yr limit for any reason, except those listed in the lease, the mineral rights would revert back to the plaintiff (Parker) automatically without the action of this or any other statute. The agreement thus creates a lease to mine for a 50-yr period and gives the defendant (Reynolds) an option to continue that must be exercised by mining within that period, and if this is done, the lease will last indefinitely. Clearly, this agreement is not too vague to be enforced."

The Court found that even though the lease should be extended indefinitely after the initial 50-yr year period, it was not violative of the Rule against Perpetuities. Had the lease been found to be a "perpetual option", it would have violated the rule and the lease would have been void. The Court held it be only a perpetual lease, or a perpetual right to renew the lease, and did not violate the Rule.

In summation, the Supreme Court of Georgia held:

* the mineral lease, with initial 50-yr period that could be extended indefinitely if lessee began mining within that period and operated continuously was one for a specific number of years and thus was not subject to Georgia statute allowing owner of the surface estate to recover the mineral interests upon non-use and nonpayment of taxes for seven years by the owner of the mineral rights, and

* the lease did not violate the Rule against Perpetuities under the law of the State of Georgia.

Georgia Marble--

In Georgia Marble Co. v. Whitlock, the surface owners bought an action against the mining company, which had owned the mineral estate/rights since 1924, to gain title under Georgia's mineral-lapse statute (O.C.G.A. 44-5-168). The statute in pertinent part states: "the owner of the real property in fee-simple may gain title to such mineral rights by adverse possession if the owner of the mineral rights has neither worked or attempted to work the mineral rights, nor paid any taxes due on them for seven years immediately preceding the filing of a petition to gain title by adverse possession." The trial court found for the surface owners, which reunited the surface and mineral estates. Georgia Marble appealed to Georgia's Supreme Court.

Georgia Marble admitted that it had neither worked, nor attempted to work the mineral rights. It alleged that it had paid taxes on those rights, hence had retained them. The question of whether those taxes had been properly paid was the issue before the courts.

The evidence showed that in the early 1970s the county tax officials had changed the billing procedures for property taxes. Before the change in procedure, the county would not individually list all taxpayers' properties but merely show on the tax digest a lump-sum valuation and the amount of taxes due. Georgia Marble had made an agreement with the county tax officials to avoid the loss of unmined mineral interests under 44-5-168, to file a general annual tax return for all mineral rights owned by Georgia Marble without specifying those rights in any way, and by paying an annual lump-sum as the taxes for the unspecified rights from 1982-1987. Georgia Marble returned the company's unspecified mineral interest values which ranged from $75,000-110,000.

The county tax digests indicated only the lump-sum valuation of properties and tax due thereon. Consequently, the court found it necessary to look at other evidence to determine whether the company had paid taxes on the specific mineral interest in this case.

The trial court held that 44-5-168 would be satisfied either if Georgia Marble had returned the mineral interest or if tax officials had considered and valued it, and that in either of those two events, it would be reasonable to infer that Pickens County tax officials included the tax due in the interest in the lump-sum reflected on the tax digests.

The court found that Georgia Marble had never returned its mineral interest in the Whitlocks' property, and that Pickens County tax officials had never considered and valued the mineral interest.

The agreement between owner of mineral interest and county tax officials that the owner could pay taxes on lump-sum valuation to protect all of its mineral interests from loss by adverse possession did not constitute the payment of taxes due on mineral interest in a specific property, and thus did not preclude fee owners from gaining title to mineral interests by adverse possession, where such an agreement was in violation of taxing laws.

In its final issue, Georgia Marble argued that the statute was unconstitutional and effected an uncompensated taking of property. Although the statute had been previously upheld as constitutional, the Supreme Court pointed out that under the statute, "the State had not taken Georgia Marble's property. Georgia Marble had simply failed to make any use of it or pay taxes on it, and let its rights in the property lapse. The statute offered three ways for the mineral owner to protect its property; viz, work it; attempt to work it in a 7-yr period; or pay taxes on it. The state has the |police power' to condition the permanent retention of those property rights on reasonable conditions that indicate a present intention to retain those rights."

The court concluded that the statute did "not work a taking of property without just compensation."

Conclusion--

To preserve your company's mineral interests and rights, know the particular state's dormant lapse mineral statute requirements; conform to the work required; and determine whether paying taxes alone will suffice to maintain the mineral interest. If the mineral interests are not appraised by local tax officials, request a tax amount be set on the mineral estate.

R. Lee Aston is a mining engineer, geologist, and attorney. He is adjunct professor of mining and environmental law at the University of Missouri-Rolla and a member of the Indiana, Georgia, and Montana bars. For more information contact: Aston Mining & Environmental Law, P.O. Box 34, Elberton, GA 30635.
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Title Annotation:Assays from the Legal Vein; mines and minerals industries
Author:Aston, R. Lee
Publication:E&MJ - Engineering & Mining Journal
Date:Jun 1, 1992
Words:2267
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