Tuesday, January 20, 2015

Who the mineral rights on my land? A common question in Kingman Arizona Real Estate

Selling Kingman Arizona Real Estate is always interesting. On one of the disclosure statements when you are selling your land there is a question of who owns the mineral rights. Most of the time you assume that you own the mineral rights that are associated with your land. I am always asked about who owns my mineral rights on land we are selling or buying. Most people would be shocked that they don't even own the minerals that are under their own house and theoretically the ones that own the mineral rights can come in and insist on taking them.

The most likely answer is the BNSF Railroad and it all goes back to the building of the transcontinental railway sometime around 1864. The railroad came through Kingman in approximately 1881 and this is when Kingman was established.

The massive amount of capital investment (over $100,000,000 in 1860 dollars) needed to build the railroad was obtained by selling government guaranteed bonds (granted per mile of completed track) and railroad company bonds and stock to interested private investors. The land grants, financial incentives and bonds would hopefully cover most of the massive initial capital investment needed to build the railroad. The bonds would be paid back by the sale of government granted land and prospective passenger and freight income. It was far from a given that the railroads to the thinly settled west would make enough money to repay for their construction and operation for a long time. In addition to the railroad land grants which the railroads sold at low cost to help pay back their government backed bonds (all were repaid) the 37th United States Congress (1861-1863) passed the Homestead Acts which were several United States federal laws that sold an applicant 160 acres of unclaimed government owned land, typically called a "homestead", at low cost when the applicant did some prescribed work on it. There was now a strong and relatively low cost incentive for the settlement of the west which many thousands took advantage of. The railroads started new population growth and potential population growth induced many other railroads to be built and connected to the transcontinental railroad to serve communities and states off the original main track.

The Government in order to help fund the private railroad deeded land to the railroad and issued government guaranteed bonds. After many surveys to determine a route they gave a 400-foot right of way corridor (along with additional lands needed for all sidings, stations, rail yards, maintenance stations,) etc. on which to build the railroad were made by the Congress. Extensive land grants of alternate sections (one section is one square mile) of government-owned lands along the tracks for 10 miles on both sides of the track — 6,400 acres per mile of track — were also granted to be used and/or sold by the companies. Grants were not allowed or given in cities or at rivers or on non-government property. While some of this land had potentially exploitable minerals, was good farm or forest land, and quite valuable, much of it was essentially valueless desert. Railroad-allocated land not sold in three years was to be sold at the prevailing government price for homesteads: $1.25 per 1 acre if there were any buyers.

However when the railroad sold the land to help fund the coast to coast expansion they retained (did not transfer the mineral rights) 

A few years ago Warren Buffet through Berkshire Hathaway purchased the BNSF railroad for 12 billion dollars. They then transferred all real holdings to Chase holdings. Since this point it is now very difficult to purchase mineral rights from the railroad.

A few large subdivisions in town where you do own the mineral rights is Stagecoach Trails near Yucca which is primarily 40 acre parcels. Brooks and Clark Realty was able to purchase the mineral rights with the land and now mineral rights are transferred unless held by the previous owner in specific language on the deed.

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