Mineral Leases: Ownership of Water Sights

摘要

For a recitation of the facts of this case see the summary of the Court of Appeals opinion at 165 O.&G.R. 788. Held: reversed. The court adds mat Inspiration's interest in the minerals arose from a lease of the owner of five patented mining claims owned by Patterson. Pursuant to those mining claims, there are mill sites under federal law where the mining claimant may make use of the surface for mining and milling purposes. The relationship between Inspiration, as lessor, and the Partnership, as lessee determines the ownership of the water rights. If Inspiration is the owner of the water rights at the time the lease terminates, than Hydro is the present owner, but if the Partnership is the owner of the water rights, than Gray is the present owner. The Court of Appeals opinion is that the water rights developed on Inspiration's mill sites are "appurtenant" or "necessarily linked" to the associated patented and unpatented federal raining claims. Hydro argues that without the water rights it will necessarily lose the mill sites and therefore lose its ability to mine. While federal lands are involved, water rights are determined by looking to state law. New Mexico follows the doctrine of prior appropriation which gives priority rights to the party who first diverts the water to a beneficial use. Subsequent to the Court of Appeals decision, the New Mexico Supreme Court issues an important water law decision. Walker v. United States, 2007-NMSC-038, 142 N.M. 45, 162 P.3d 882. The central feature of New Mexico's water rights system is the separate and distinct ownership of a water right from the ownership of the land. Thus, an owner of land does not necessarily have within its bundle of sticks, a water right. The one exception to the separate nature of a water right is a water right that is used in conjunction with irrigated acreage. This exception is legislatively recognized, while there is no such recognition for a mining exception. In Walker, the court said that having a water right did not necessarily mean that one has a grazing right. This case is the converse proposition, namely does the ownership of an interest in land carry with it a water right where the water is allegedly necessary to the use of the land. The New Mexico Supreme Court answers that question as it did in Walker, namely that unless specifically mentioned a conveyance of a interest in land, be it surface or mineral, will not necessarily convey a water right. In this case the quitclaim deed from Inspiration to Hydro does not explicitly convey distinct water rights. So even if Inspiration owned the water rights at the time of lease expiration it did not convey those rights to Hydro. Even if necessary for the beneficial use of the land, a water right will not follow the conveyance of that land with the sole exception for the conveyance of irrigated land. The court adds that Hydro's dire consequences argument regarding the loss of its mill sites is overstated since federal regulations allow a mining claimant a number of uses in order to keep the mill site, other than direct mining activities. The Supreme Court also rejects the Court of Appeals finding that Hydro has title to the water rights because the Partnership was an agent of Inspiration due to the leasehold agreement. The Court of Appeals suggests that a leasehold relationship creates a presumption of agency, while the New Mexico Supreme Court says that the cases implicate the opposite presumption. An agency relationship shouldnot be inferred from a lease that is silent on the subject be it a mineral lease or some other type of lease. While a lessee may owe some express and/or implied duties to the lessor, those implied duties do not create an agency relationship. The principal/agency relationship is fiduciary in nature and almost all courts reject the notion that an oil and gas, or mining, lease creates a fiduciary obligation on behalf of the lessee. Since the Partnership was not an agent of Inspiration and tha