Northeastern Minnesota landowners might not realize it, but many of them have title to only the surface of their property. The rights to the gold, copper, nickel, cobalt, platinum, palladium and other minerals that might be in the bedrock underneath very likely belong to the State of Minnesota.
State of Minnesota leases to explore and mine some of that underground potential will be sold to the highest bidder in mid-January.
Two representatives from the Department of Natural Resources Division of Lands and Minerals, John Engesser and Vicki Sellner, came to the Nov. 18 Lake County board meeting to discuss the leasing program at the request of the commissioners.
The state controls about 12 million acres of mineral rights, mostly in the northern part of the state. That includes rights for sections 16 and 36 or equivalent lands in every township, which are managed for the School Trust Fund. University Trust Fund lands, county tax forfeit lands, consolidated conservation lands and lands under the Volstead Act also have mineral rights controlled by the state.
According to the Minnesota constitution, those rights cannot be sold, not even to the owner of the land above them, but the rights may be leased.
About 13,000 acres in Lake County are active metallic minerals leases. Those leases are in the northwestern part of Lake County along the border with St. Louis County, south of the Boundary Waters Canoe Area Wilderness. The 5,000 additional acres of leases going up for sale are in the same area, T61 R11, Sections 22-26 and 34-36, where Duluth Complex bedrock is located.
The state receives an annual rental rate of $1.50 per acre per year, with the rate going up over the years. The escalating rate is to encourage lessees to move forward with their projects or make the lease available to another company, said Sellner. The bidders in the lease sale compete to offer the state the highest royalty rate above the minimum of 3.95 percent on any ore mined. No royalties for metallic minerals have ever been paid, since no ore deposits have been developed yet.
Over the past 40 years, Lake County's share of the metallic minerals leases has amounted to $74,500. The state's share of rentals was $6.4 million for the same period, with an additional $407,800 for fiscal year 2007-08.
Beyond the extra income, the state has a policy of providing for "the diversification of the state's mineral economy through long-term support of mineral exploration, evaluation, environmental research, development, production, and commercialization," according to Minnesota State Statute 93.001.
The companies that are successful bidders also must acquire property leases and the access rights to do the exploration and sample drilling. The State Department of Health must approve the exploratory activities. DNR approval is also needed. At the end of the lease, all the data collected must be made available to the public.
If a company decides developing a mine is economically feasible, the environmental permitting process begins. Currently, Polymet is the only company at this stage of the process for metallic minerals mining activities in the area. Their operation is planned for St. Louis County.
Since the late 1940s, the Duluth Complex bedrock has been known for its metallic mineral deposits both here and in Canada, where they are found closer to the surface, said Engesser. The DNR's notice of intent for the lease sale stated that "based upon the interest shown by industry, new geologic data, and exploration techniques developed during the past few years, it is felt that within these lands there is potential for the discovery of mineral resources."
With the prices of nickel and copper both dropping recently, Engesser said they'll have to "see how the economy plays out." Unlike the iron ore leases, which are typically negotiated sales and likely to be developed quickly, the public sales of the metallic minerals leases are more speculative and have bidders which are looking at a longer time frame.
Sellner explained that surface interest ownership includes the rights to gravel--and any agates found. Metallic minerals leases aren't about how deep something is underground, she said, but about what is being taken out. Metallic mineral rights leases cover the mining of dimension stone such as granite that is being used for building projects, while the surface owner has the rights to crushed granite.
In Minnesota, companies with mining leases have always offered more than the surface owner expected for access to their property and have not used eminent domain to acquire rights. Out west, eminent domain has been used, and the question of whether that approach could be used here has not been settled, said Sellner.
Couldn't the State of Minnesota budget benefit from a one-time windfall by selling those mineral rights directly to the surface owners? Not possible--the State Constitution doesn't allow it. Sellner did encourage property owners to check their abstracts, however. The state doesn't own all mineral rights, and some private companies are selling the rights they own back to land owners. It still might be possible to own all the way down to China.