The Pronghorn Press - 2016 | Issue 4

2016 | ISSUE 4

The

Pronghorn Press ~ A WYOMING AGENCY NEWSLETTER ~

INSURING SURFACE DAMAGE

Page

In This Issue

CAUSED BY THE EXTRACTION OF MINERALS

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Insuring Surface Damage Caused by the Extraction of Minerals

The general rule of real property is that the owner of the Land owns both the surface rights and the mineral rights. However, this general rule is more frequently than not abrogated by the fact that the mineral rights have been reserved, pursuant to the patent, or subsequently severed by an express grant. All commitment and policies issued in Wyoming generally include the following exceptions (or a variation thereof):

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Economic Center

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Wyoming Wonderland

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A Personal Note

1. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the Public Records.

2. Any claim to (a) ownership of or rights to minerals and similar substances, including but not limited to ores, metals, coal, lignite, oil, gas, uranium, clay, rock, sand and gravel located in, on or under the Land or produced from the Land, whether such ownership or rights arise by lease, grant, exception, conveyance, reservation, or otherwise; and (b) any rights, privileges, immunities, rights of way, and easements associated therewith or appurtenant thereto, whether or not the interests excepted in (a) or (b) appear in the Public Records or are shown in Schedule B. Both of the above exceptions must be included on all commitments and polices unless a complete mineral search is conducted and as a result of that search it is concluded that the mineral estate has not been severed from the surface estate. However, quite often a buyer and/or lender will want coverage for surface damage caused by the extraction of minerals.

In that instance, what options do we have?

The ALTA 35 series, consisting of the endorsements below, may be a viable option to provide coverage against surface damage. However, before any of the ALTA 35 series endorsements can be issued you must get underwriter approval. The series consists of the following: »» »» »» »»

Our office will be closed in observance of the following holidays: CHRISTMAS HOLIDAY Monday, December 26, 2016 NEW YEAR’S HOLIDAY Monday, January 2, 2017

ALTA 35-06 Minerals and Other Subsurface Substances - Buildings (4-2-12) ALTA 35.1-06 Minerals and Other Subsurface Substances - Improvements (4-2-12) ALTA 35.2-06 Minerals and Other Subsurface Substances - Described Improvements (4-2-12) ALTA 35.3-06 Minerals and Other Subsurface Substances - Land Under Development (4-2-12)

This series of endorsements provides coverage against enforced removal or alteration of certain surface improvements due to the exercise by a mineral or any other subsurface substance (collectively, “Subsurface Substance”) estate owner of the right to use the surface of the Land to extract any Subsurface Substance. The endorsements differ only in the respect of which surface improvements are covered: The ALTA 35-06 provides coverage only for existing buildings; the ALTA 35.1-06 provides coverage for existing buildings Continued on next page The information contained in this document was prepared by First American Title Insurance Company (“FATICO”) for informational purposes only and does not constitute legal advice. FATICO is not a law firm and this information is not intended to be legal advice. Readers should not act upon this without seeking advice from professional advisers. First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo, First American Title, and firstam.com are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.

AMD: 12/2016

©2017 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

INSURING SURFACE DAMAGE CAUSED BY THE EXTRACTION OF MINERALS (Cont.) and other existing surface improvements (but not landscaping); the ALTA 35.2-06 provides coverage for a specified list of existing improvements to be identified in the endorsement; and the ALTA 35.3-06 provides coverage for existing and planned future improvements (but not landscaping). Select the endorsement that best fits the circumstances.

These endorsements may be issued in connection with owner’s or loan policies, and may be issued on both commercial and residential properties. These endorsements are intended for improved property or property under development, as indicated by the names of the endorsements. Before issuing any of these endorsements the following steps must be done: »» Remember that the term Subsurface Substance includes any

subsurface substance that has been severed from the surface estate and therefore is carved out from the legal description or for which there is an exception in Schedule B. Subsurface Substances may include oil, gas, coal, sand, gravel, water, and other materials.

»» Determine whether any Subsurface Substance estate has been

severed from the surface estate. This can be challenging.

Remember, some title plants may not have sufficient historical data to capture estate severances, and some title plants may not be set up to capture severed estates at all. Therefore, determining whether a Subsurface Substance estate has been severed from the surface estate might call for an independent search that goes beyond traditional title searching protocol.

If you have determined that there has been no severance of a Subsurface Substance estate, and there is no exception of a Subsurface Substance from the description of the Land or in Schedule B, then this endorsement is not applicable.

»» If you conclude that the Subsurface Substance estate has been

severed from the surface estate, then consider whether or not you can obtain satisfactory evidence that all Subsurface Substance estate holders have clearly, expressly, and unconditionally waived any right to enter the surface of the Land in a recorded document. As described above, this can be challenging and might call for an independent search that goes beyond traditional title searching protocol. Remember also, there may be off-record assignments or leases of Subsurface Substance estates which a title search would not reveal. If you can obtain satisfactory evidence of the identity of all Subsurface Substance estate holders, and if all Subsurface Substance estate holders have clearly, expressly, and unconditionally waived any right to enter the surface of the Land in a recorded document (which may be the severance instrument itself), then you may issue these endorsements with the approval of a Company underwriter.

»» If you conclude that the Subsurface Substance estate has

been severed (or you are not sure whether there has been a severance) and if the rights of surface entry by all known Subsurface Substance estate holders have not been clearly, expressly, and unconditionally waived in a recorded document, then make an “all facts and circumstances” investigation and analysis, and obtain approval from a Company underwriter to issue these endorsements. In making your investigation, be creative and use the resources at your disposal to gather information. The following factors are a framework to help you analyze the risks of your transaction, and may not be of equal weight, or even applicable at all, depending on your transaction. You should consider the following:

First American Title | The Pronghorn Press | 2016 - Issue 4

• The type of policy involved (owner’s or loan policy) and the

measure of loss for each policy type.

• The loan-to-value ratio if a loan policy (and whether an ALTA

20-06 First Loss endorsement is requested).

• The amount of insurance in the policy.

• Whether or not a prior policy has already provided the

requested coverage, and if so, the type of policy (owner’s or loan policy), the amount of insurance of that policy, and the insurer who issued the prior policy.

• The extent, character, and location of existing improvements

on the property and the length of time those improvements have been in place; and if the property is under development, the extent, character, and location of the planned improvements. Note that some types of improvements, such those involved in energy projects, can present much higher risks than other types of improvements, and therefore may require much greater underwriting justification.

• The identity of the current owner(s) of the Subsurface

Substance estate(s), and the likelihood that such owner(s) will seek to utilize the surface of the Land to develop Subsurface Substances.

• If there has been a partial (but not full) waiver of the rights

of surface entry by some or all of the Subsurface Substance estate holders, the nature and extent of the waiver, and the relative percentage interests of the Subsurface Substance estate holders that have waived rights of surface entry.

• The reason(s) why any absent waiver(s) of rights of surface

entry have not been obtained.

• The nature, quality, and quantity of any Subsurface

Substances on the subject property and in the surrounding area.

• The nature and degree of any past or current Subsurface

Substance activity on the subject property and in the surrounding area.

• The feasibility of future mining or drilling for Subsurface

Substances, and any known plans to do so, on the subject property and in the surrounding area.

• The character of the surrounding area (such as whether it is

heavily developed or largely rural).

• The legal and regulatory status of the property with regards

to Subsurface Substance development (including but not limited to zoning, planning, anti-mining laws, etc.), whether Subsurface Substance development would be permissible under the current status, and the likelihood of a change in status or nonconforming use exemption permitting Subsurface Substance development if not currently permitted.

• The impact of any statutory provisions (such as marketable

title acts, mineral estate reversion statutes, or similar statutes) upon any Subsurface Substance estate holder’s rights.

Continued on next page

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INSURING SURFACE DAMAGE CAUSED BY THE EXTRACTION OF MINERALS (Cont.)

ECON OM I C CEN TER By: Mark Fleming, Chief Economist

• The impact of accommodation doctrines,

principles of equity (e.g., laches, estoppel), or similar legal principles upon the Subsurface Substance estate holder’s rights.

• The existence of an adverse litigation

climate involving Subsurface Substances.

• Whether any restrictive covenants would

limit the ability to develop Subsurface Substance on the property, and whether those restrictive covenants are prior in record priority to the Subsurface Substance estate holder’s interest.

In November, First American Chief Economist Mark Fleming’s research and analysis examined the impact of wage growth on affordability, key factors influencing homeownership rates, and the health of the housing market for Millennial homebuyers.

First American Economic Center November 2016 Research Highlights: »»

http://blog.firstam.com/economics/wage-growth-contributes-to-increasedaffordability-in-most-major-markets

• The existence of open space on the subject

property which a Subsurface Substance estate holder could use for mining or drilling without causing damage to improvements.

• The existence and terms of any surface use

or compatible use agreement between the surface owner and holder(s) of the Subsurface Substance estate(s).

• The existence and terms of any pooling

agreement(s) between Subsurface Substance estate holders.

»» If you are issuing the 35.3-06 endorsement, you

must have satisfactory “Plans” with sufficient detail to enable you to apply the criteria for underwriting analysis set forth above. Insert the identifying information for the Plans into item 2(c) of the endorsement.

Wage Growth Contributes to Increased Affordability in Most Major Markets

»»

Life, Liberty and the Pursuit of Homeownership http://blog.firstam.com/economics/life-liberty-and-the-pursuit-of-homeownership

»»

Buy, Buy Millennials! http://blog.firstam.com/economics/buy-buy-millennials

The ideal of the American Dream and the goal of homeownership will exist as long as supporting higher educational attainment, economic mobility, and long-term national economic growth remain defining tenets of American policy.

- Mark Fleming, Chief Economist

»» Remember that item 4(c) of the endorsement

must be filled in with any Subsurface Substance interests for which you will not be providing coverage. If you will not be excepting any particular Subsurface Substance interests from coverage, insert “none” into item 4(c).

First American Title | The Pronghorn Press | 2016 - Issue 4

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Wyoming Wonderland 8 Christmas Light Displays in Wyoming That Are Pure Magic Hop in the car and check out these Christmas light displays in a few Wyoming cities – they’ll put you right in the holiday spirit!

Christmas Dinners Weren’t So Easy for Pioneers Most modern holiday feasts are a cinch compared to those cooked in the frontier West more than a century ago.

By: Catherine Ross, Only In Your State – Wyoming, November 22, 2016

By: Ruffin Prevost, Gazette Wyoming Bureau, December 24, 2009

http://www.onlyinyourstate.com/wyoming/christmas-light-displays-wy/

http://billingsgazette.com/news/state-and-regional/wyoming/christmas-dinners-weren-tso-easy-for-pioneers/article_cfe0c0f4-f0f5-11de-8188-001cc4c03286.html

America’s 20 Best Small Towns for Christmas Jackson Hole is #4 on the list!

By: Ann Shields, Country Living, October 25, 2016 http://www.countryliving.com/life/travel/g2829/best-christmas-towns-in-usa/

Where and How to Recycle or Dispose of Christmas Trees in Wyoming in 2016 In many urban and suburban areas, Christmas trees are collected from curbside during the first 2 weeks in January.

Christmas Tree Farms, Lots and Activities

By: Pick Your Own Christmas Tree

Northeastern Wyoming | Northwestern Wyoming

http://www.pickyourownchristmastree.org/WyomingChristmasTreeRecyclingDisposal.php

Southeastern Wyoming | Southwestern Wyoming

A Personal Note . . .

As 2016 comes to a close, we ref lect on another year of gratitude, hard work and the ever-changing industry we love. We celebrate our achievements, memorialize the adventure and roll up our sleeves anticipating a new year of challenges and possibilities. The New Year brings with it a positive outlook to fuel our momentum. I have enjoyed supporting our valued Wyoming agents this year and look forward to continuing to build the relationship. I am invested in your success and passionate about being your partner and a valuable resource to you. I am grateful for your business and appreciate your trust in First American Title as your Underwriter. I wish you a happy and healthy holiday and a bright New Year!

Amie Voss VP, CO, MT and WY Agency Manager D: 303.305.3358 | C: 303.304.4397 | abvoss@firstam.com First American Title | The Pronghorn Press | 2016 - Issue 4

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