Depth Severance

Depth severance is the division of rights under the same tract by depth or formation, so that one party holds rights above a stated depth or in one zone and another holds rights below it or in another zone. It can be created by a grant or reservation of minerals or by a transfer of lease rights. The U.S. Bureau of Mines Dictionary of Mining, Mineral, and Related Terms (1968) defines severance generally as "Separation of a mineral or royalty interest from other interests in the land by grant or reservation." A depth severance separates by depth instead of by area.

Federal leases: record title cannot be split by depth, operating rights can

• 43 CFR 3106.10(c): "An assignment of a separate zone, deposit, depth, formation, specific well, or of part of a legal subdivision, will be denied."
• 43 CFR 3106.10(d): "Within the boundaries of a Federal lease, operating rights may only be divided with respect to legal subdivisions, depth ranges, and formations."
• The statute gives the Secretary discretion to disapprove an assignment of "A separate zone or deposit under any lease" unless it is the entire lease or "is demonstrated to further the development of oil and gas" (30 U.S.C. 187a(1)).

So on a federal lease, a depth severance is carried out through operating rights, not record title. The operating rights definition in 43 CFR 3100.5 ties the owner's obligations to "the area or horizons for the interest acquired."

Separate deposits as separate interests

Federal tax regulations illustrate the principle that interests in different deposits under the same land are separate. 26 CFR 1.614-1(a)(5), Example 1: "A taxpayer owns one tract of land under which lie three separate and distinct seams of coal. Therefore, the taxpayer owns three separate mineral interests each of which constitutes a separate property."

State conservation law recognizes zones

In North Dakota, "each zone of a structure which is completely separated from any other zone in the same structure is a pool" (N.D.C.C. 38-08-02), and the Industrial Commission may "divide any pool into zones and establish spacing units for each zone" (N.D.C.C. 38-08-07). Spacing, pooling, and unit orders can therefore apply differently at different depths under the same tract.

Why it matters in mineral title research

• Every interest in the chain has to be mapped by depth as well as by area. An override or working interest limited to certain depths may not burden a well producing from a different zone (see Overriding Royalty Interest).
• On federal leases, the BLM case file shows operating rights transfers by depth range, which have to be reconciled with record title.
• Depth descriptions in different instruments have to be compared against each other for gaps and overlaps, which then have to be resolved (see Curative).