ACCESS RIGHTS � From Start to Finish �
Access Rights: Start to Finish Kerry O. Irwin � Dinsmore & Shohl LLP � 250 West Main St., Suite 1400 � Lexington, Kentucky 40507 � (859) 425-1034 � Kerry.irwin@dinsmore.com � 3 �
Access Rights: Start to Finish Drafting Access Rights » Avoid using forms (and form language). � The End (Spoilers) � » Use subject matter experts. � » There is no substitute for knowing your client’s business. � 4 �
Access Rights: Start to Finish Access Rights: The Coal Company’s Perspective: � » Ensure that they have the full scope of rights that they need to conduct their operations safely and efficiently. � » Allocate risk for potential liabilities at end of mining and reclamation. � � 5 �
Access Rights: Start to Finish The Landowner’s Perspective: � » Guard against risks arising from the coal company’s operations. � » Allocate risk for potential liabilities at end of mining and reclamation, including long-term environmental liabilities. � � 6 �
Access Rights: Start to Finish Scope of Presentation � Easements � Option and Exploration Agreements � Coal Leases � Post-Termination Issues � Other Issues and Agreements � » Cooperation Agreements � » Permit Access for Reclamation � » Haulroad Agreements � � 7 �
Access Rights: Start to Finish Easements Appurtenant � Easements in Gross � » Created for the benefit of the » Personal to the holder of the dominant estate, i.e ., the servient easement, rather than being estate is burdened for the benefit of connected to a particular dominant the dominant estate. � estate � » In the context of mineral rights, » Easement holder has the right to mineral owners typically benefit from use the servient estate regardless of an easement that burdens the what property the easement-holder severed surface estate such that the might own. � mineral owner is granted the right of » A typical example of an easement reasonable use of the surface for the in gross is a pipeline or utility line purpose of extracting the minerals. � easement. � 8 �
Access Rights: Start to Finish Implied Easements Express Easements (Not Ideal) � (Ideal) � By implication, the right to occupy An express easement can specify and use so much of the surface the location, purpose, scope and as may be reasonably necessary duration of the easement, for the beneficial and profitable together with the respective rights production of the minerals and obligations of the dominant accompanies a grant of mineral and servient estates’ owners. � rights. � � � 9 �
Access Rights: Start to Finish Option and Exploration Agreements �� Option and Exploration Agreements typically include : � » The exclusive right to conduct “I think this is the beginning of exploration in, on or under certain a beautiful friendship.” � properties; and � » An exclusive option to lease or purchase those properties. � 10 10 �
Access Rights: Start to Finish Coal Company Strategies: � Exploration Rights � » Ensure grant is broad enough to allow operator to determine whether sufficient mineral reserves are present and economically Coal Company � recoverable. � » Require landowner to give sufficient reps and warranties as to title. � 11 11 �
Access Rights: Start to Finish Landowner Strategies: � » Limit the duration of the option to Exploration Rights � ensure operator conducts diligence in timely and workmanlike manner and that the landowner’s covenant of Landowner � exclusivity is limited. � » Require a deposit to cover damage to the property; can be applied to purchase price upon exercise of option. � 12 12 �
Access Rights: Start to Finish Coal Leases � Coal Lease Access Rights: � » Surface Access Rights � » Reclamation Access Rights � “ I’m the only cause I’m » Post-Termination / Expiration � interested in.” � 13 13 �
Access Rights: Start to Finish The General Grant: � “It is intended by the Parties that Lessee Coal Leases � shall, during the term of this Lease, have the right in connection with its mining operations to exercise all of the mining Surface Access Rights � and surface and other rights in and to and appurtenant to and connected with the Leased Premises which Lessor now has or which Lessor has a right to lease or let.” � - Lack of specificity can create ambiguity . � 14 14 �
Access Rights: Start to Finish Coal Leases Surface Access Rights � The Specific Grant: � “[…] all necessary or convenient rights and privileges […] including, but not limited to, the right to: (i) use sand, water and gravel on the Leased Premises; and (ii) divert water courses; (iii) construct and operate on the Leased Premises roadways, haulways, water drainage courses, sediment ponds, and any other improvements or structures necessary or convenient for the mining, storing, processing and shipping of coal on and from the Leased Premises and from any property now or hereafter owned, leased or controlled by Lessee adjacent to the Leased Premises; and (iv) make such other use of the Leased Premises as shall be convenient for the mining, transporting, storage and processing of said coal, including the placement of overburden from any coal mined by Lessee from the Leased Premises and from any property now or hereafter owned, leased or controlled by Lessee adjacent to the Leased Premises.” � 15 15 �
Access Rights: Start to Finish Coal Leases Surface Access Rights � Right to Remove Timber : � “Lessee shall have the right to remove the timber, surface, subsoil and other strata overlying the coal to be mined hereunder by the surface mining method or for any other use of the surface needed for conducting its mining operations upon the Leased Premises within the boundaries of the Leased Premises as may be necessary for the efficient mining of said coal, subject, however, to the following conditions […]” � 16 �
Access Rights: Start to Finish Coal Leases Surface Access Rights � Foreign Overburden � � “In so far as Lessor has the right to grant such rights, Lessee shall have the right to use the surface of the Leased Premises for the placement of overburden from adjoining coal lands being mined by Lessee, or its affiliates if necessary.” � 17 �
Access Rights: Start to Finish Coal Leases Surface Access Rights � Railroad Infrastructure � “[T]he right to enter into an agreement with any railroad company covering the construction, maintenance and operation of spur tracks, tipple sidings and side tracks for storage of loaded or empty railroad cars, and for the construction, maintenance, and operation of loading ramps, bins, etc. on the Leased Premises to be used in connection with operations under this Lease […]; provided , however, that no such agreement shall impose any obligation or liability whatsoever on Lessor.” � 18 �
Access Rights: Start to Finish � � The grant of certain reclamation access Coal Leases � rights in a coal lease has almost reached the point of being boilerplate, but changes in environmental laws require Reclamation Access rights � greater scrutiny of this category of access rights. � 19 19 �
Access Rights: Start to Finish Coal Leases Reclamation Access Rights � » Coal company’s perspective : compliance with reclamation obligations under its permits is compulsory; if it can’t access the property, the lessee risks sanctions from regulatory agencies. � » Landowner’s perspective : permitting the lessor to access the property to conduct reclamation activities benefits the land and lessens the lessor’s potential long-term liability for noncompliance and environmental liabilities. � 20 �
Access Rights: Start to Finish Coal Leases Reclamation Access Rights � “Upon the termination, expiration, or cancellation of this Lease for any reason whatsoever, Lessee does and shall have the right to re-enter the Leased Premises without additional charge or cost for such period of time as is necessary for the purpose of doing any and all reclamation work that may be necessary to obtain full reclamation bond release or to otherwise comply with all reclamation obligations imposed upon Lessee by appropriate governmental authorities.” � 21 �
Access Rights: Start to Finish Coal Leases Reclamation Access Rights � � “Lessee shall have the right, without additional consideration, to reenter the Premises after termination of this Lease for such period of time as is necessary for the purpose of performing or completing reclamation according to its permits or to otherwise comply with all reclamation obligations imposed upon Lessee by appropriate governmental authorities.” � 22 �
Access Rights: Start to Finish Coal Leases Reclamation Access Rights � � “Lessee shall, after the effective date of surrender, cancellation or termination of this Lease, remain liable for any damages or obligations to third parties or governmental agencies, whether known or unknown, matured or unmatured, discovered or yet to be discovered, including reclamation or cleanup obligations on the Leasehold arising out of Lessee’s operations or activities on the Leasehold, and shall hold Lessor harmless should it incur any obligations or liability incidental to or arising out of Lessee’s operations or activities.” � 23 �
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