MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Oil, Gas and Other Minerals

By: Senator(s) Hyde-Smith (By Request)

AN ACT TO PROVIDE AN ANNUAL ASSESSMENT ON NONPRODUCING MINERAL ESTATES THAT ARE OWNED BY SOMEONE OTHER THAN THE OWNER OF THE SURFACE RIGHTS OF THE LAND; TO PROVIDE THAT THE TITLE TO THE NONPRODUCING MINERAL ESTATE SHALL REVERT TO THE STATE OF MISSISSIPPI UPON FAILURE OF THE OWNER TO PAY THE ASSESSMENT FOR A PERIOD OF THREE YEARS; TO PROVIDE THAT THE OWNER OF THE SURFACE RIGHTS TO THE LAND MAY REDEEM THE NONPRODUCING MINERAL ESTATE; TO PROVIDE THE PROCEDURE FOR NOTICE AND REDEMPTION OF THE NONPRODUCING MINERAL ESTATE; TO PROVIDE THAT MINERAL ESTATES SEPARATED FROM THE SURFACE ESTATE SHALL REVERT TO THE OWNER OF THE SURFACE ESTATE AFTER TEN YEARS OF NONPRODUCTION; TO DEFINE NONPRODUCTION; TO PROVIDE THAT THE OWNERS OF SUCH MINERAL ESTATES SHALL HAVE AN EXCLUSIVE OPTION TO RENEW THE AGREEMENT CREATING THE MINERAL ESTATE; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) There is levied an assessment to be equal to one hundred percent (100%) of the annual property taxes to be collected annually on each nonproducing mineral estate that is located within the county that is owned by any person, firm, partnership, association or corporation other than the owner of the surface rights of the land. If the nonproducing mineral estate extends into more than one (1) county, the annual assessment shall be collected by each county wherein the nonproducing mineral estate is located.

(2) (a) Upon default of the payment of the assessment required in subsection (1) of this section, the tax collector shall give written notice to the owner of the nonproducing mineral estate demanding the payment of the assessment then remaining in default within twenty (20) days from the date of the delivery of the notice. The notice shall be sent by certified or registered mail to the owner of the nonproducing mineral estate or delivered by an employee of the tax collector either to the owner or someone of suitable age and discretion at the owner's place of business or residence. If any person liable for the payment of the assessment fails or refuses to pay the assessment after receiving the notice and demand as provided in this subsection, the tax collector may file a notice of a lien for such assessment with the circuit clerk of the county in which the nonproducing mineral estate is located.

(b) If the owner of the nonproducing mineral estate other than the owner of the land, as provided in subsection (1) of this section, fails or refuses to pay the assessment for a period of three (3) years, his interests in the land and the title to such nonproducing mineral estate shall revert to the State of Mississippi. The owner of such mineral estate shall have six (6) months from the date of reversion in which to redeem his property by payment of the delinquent assessment, interest, fees and costs. If the owner of the nonproducing mineral estate has not redeemed the nonproducing mineral estate within the six-month period, the owner or owners of the surface estate wherein the mineral estate lies may redeem the nonproducing mineral estate as provided in Section 2 of this act.

(3) For purposes of this section, the mineral estate is deemed to be nonproducing if there have been no bona fide drilling or production operations for minerals or no actual production of minerals for a period of ten (10) years. The period of ten (10) years may run continuously or be interrupted. If there are bona fide drilling or production operations for minerals or actual production of minerals, the period shall be interrupted and shall begin to run again on the last day that drilling or production operations are conducted or the last day of actual production. The period shall be interrupted in the case of contracts providing for shut-in rental payments in lieu of production, but if there is no production, the period shall begin to run again at the end of the period for which the last such rental payment was made. For purposes of this section, oil and gas are deemed to be not in production if, in the case of oil production, the well is not located on the regular governmental quarter-quarter section of surface estate where the severed mineral estate lies, or in the case of gas production, if the gas well is not located in the regular governmental one-half (1/2) section wherein the mineral estate lies.

SECTION 2. (1) In order to effectuate the redemption provided for in Section 1 of this act, the owner or owners of the surface estate each shall file a statement of claim with the chancery clerk of the county or counties in which the land within which the nonproducing mineral estate is located after the period of three (3) years has elapsed and the title to the mineral estate has reverted to the State of Mississippi. The owner or owners of the surface estate shall notify the owner or owners of the nonproducing mineral estate by personal service, if they can be found upon reasonable search and inquiry, that the nonproducing mineral estate is subject to redemption by the surface owner or owners. If the owner or owners of the nonproducing mineral estate cannot be found upon reasonable search and inquiry, the owner or owners of the surface estate shall give notice by publication for three (3) consecutive weeks in a newspaper having general circulation in the county or counties in which the land within which the nonproducing mineral estate is located, and, if the address of the owner or owners of the mineral estate is shown of record or can be determined upon reasonable inquiry, by mailing a copy of such notice to the owner or owners of the mineral estate not later than ten (10) days after the first publication. The notice shall state the name of the owner or owners of the mineral estate as shown of record, if known, a description of the land and the name of the person or persons giving such notice. If a copy of such notice, together with an affidavit of service thereof, is promptly filed with the chancery clerk of the county or counties in which the land within which the mineral estate is located, the record thereof shall be prima facie evidence in any legal proceeding that such notice was given.

(2) If, within thirty (30) days after personal service or the last publication of notice, no conclusive written evidence is presented to the chancery clerk that there have been bona fide drilling or production operations for minerals or actual production of minerals for a period of ten (10) years, the nonproducing mineral estate may be redeemed by the owner or owners of the surface estate, and the chancery clerk shall record the statement of claim and the redemption of the nonproducing mineral estate and shall indicate the redemption of the nonproducing mineral estate by marginal notation on the instrument creating the original mineral estate. If conclusive written evidence is presented to the chancery clerk within the stated period of time that there have been bona fide drilling or production operations for minerals or actual production of minerals within the period of ten (10) years, then the reverter to the State of Mississippi and the right of redemption by the surface owner or owners shall not take effect and the chancery clerk shall record the statement of claim but shall not record or indicate on the instrument creating the original mineral estate that there has been a reversion or redemption of the mineral estate.

SECTION 3. (1) Mineral estates separated from the surface estate after July 1, 2000, shall revert to the owner of the surface estate if, after a ten (10) year period, there is no bona fide attempt to drill for or produce minerals or no actual production of minerals. The ten (10) year period may run continuously or be interrupted. If there is attempted or actual production, the period shall be interrupted and shall start to run again on the day after the last day of actual production or the last day actual drilling or production operations are conducted on the property. For contracts providing for shut-in rental payments in lieu of production, the ten (10) year period may be interrupted, but will start to run again at the end of the period for which the last such rental payment was made if there is no production. The possibility of interruption is not limited to the instances stated in this section, but may extend to other circumstances as equity may demand. If the ten (10) year period is interrupted and starts to run again with less than one hundred eighty (180) days remaining in the period, the period shall not expire less than one hundred eighty (180) days after the date on which the period starts to run again.

(2) The surface estate owner to which the mineral estate shall revert by operation of this act is the holder of the surface estate at the time of the reversion.

(3) For purposes of this section, oil and gas are deemed to be not in production if: (a) in the case of oil production, the well is not located on the regular governmental quarter-quarter section of surface estate where the severed mineral estate lies; or (b) in the case of gas production, the gas well is not located in the regular governmental one-half section in which the mineral interest lies.

SECTION 4. The owner of a mineral estate subject to the reverter provided by Section 1 of this act is granted an exclusive option of one hundred eighty (180) days to renew the provisions of the agreement by which he holds the mineral estate. The option period shall be a period beginning one hundred eighty (180) days before the date of reverter. This section shall not be construed to define, limit or restrict the terms of a new agreement, and it is the intent of this section to provide for free and open negotiation between the parties. However, the surface owner of the mineral estate after the reverter may not lease, sell, transfer, sever or otherwise alleviate the mineral estate gained from the reverter for a one (1) year period after the reverter, except with respect to the previous owner of the mineral estate.

SECTION 5. Sections 1 and 2 of this act shall be in force from and after the date that Section __ 112A is inserted as a part of the Constitution by proclamation of the Secretary of State certifying that Senate Concurrent Resolution No. 555, 2000 Regular Session, received the majority vote required by the Constitution. The remainder of this act shall be in force from and after July 1, 2000.