Student Post: Changing Property Rights in Mid-Stream

Property rights have evolved as people began to realize that mineral rights can be owned separately from the surface rights. But the only way an owner of surface rights does not also get to own the mineral rights is when someone sells the land and seperates the two. That is a decision that the landowner makes at some point in order for the mineral rights and surface rights to be separated. The fact that splitting the two property rights is a choice that the landowner makes argues for no change in the status of the mineral rights vs. the surface rights owners.

Unfortunately, in Kentucky, courts and legislatures decided arbitrarily to change the status of property rights when they pitted surface owner against mineral rights owners. The Kentucky Supreme Court opened Pandora’s Box when they ruled in the 1956 landmark case Buchanan v. Watson (290 S.W.2d 40), effectively changing property rights midstream by holding that surface owners couldn’t prevent mineral rights owners from using strip mining to mine coal pursuant to broad form deeds. The Kentucky legislature then stepped in to try to prevent it, but the Kentucky Supreme Court held that law unconstitutional in 1987, and thus protected the mineral property rights.

However, the Kentucky legislature in 1988 ratified an amendment to the constitution which effectively restricted mineral rights owners from strip mining and invading the surface rights owner’s property rights. Now, in 1993 the Kentucky Supreme Court upheld that law, a full 37 years later. This effectively enhanced the rights of the surface owners at the expense of the mineral rights owners.

Is that fair to change property rights midstream?

Changing the nature of property rights in midstream is a bad idea. First of all, making a change in property rights holders in mid-stream distorts the values of these rights, and set a bad precedent that includes allowing courts to change property rights long after the owners of those rights have calculated their values decades earlier.

If I own property and do not want mineral rights owners to invade my surface rights, all I need to do is not sell them! Or stated another way, not buy land that only has surface rights attached to them. That is a choice I make as a rational decision maker, a calculated decision make at the time of purchase. But to change the rights of millions of property owners by a single stroke of a few pens is bad policy as it signals to property owners that you MIGHT be buying these rights, but beware that the courts or legislature can always change them.

Property rights are one of the significant pillars of a civilized world, and from the beginning of time until 1993 they could be counted on by rational decision makers and potential owners to provide stable expectations as to what was actually owned. Now that the Kentucky courts and legislature has decided that property rights no longer are sacred, who knows what you are really buying now when bidding on property?