It occasionally may be advantageous to extract material from several leased tracts of land as part of one consolidated mining operation. If extracting materials across the different tracts is carried out sequentially; that is, one tract after another, there should be relatively few problems. Lease provisions may be required to permit material from one tract to be transported across, or processed on another tract, but those sorts of provisions are fairly routine. However, if material is extracted from different tracts at the same time, and comingled during processing or shipping, calculating the amount of material taken from each tract and the resulting royalty amounts due each landowner, may prove to be difficult.

There are generally two ways of dealing with the issues that arise when a mine operator has the right to simultaneously extract materials from different tracts and comingle those materials in the course of its operations. The simplest, with the agreement of the landowners, is to “unitize” the leases, or treat them collectively as a single unit. Royalty amounts are then shared by all landowners on an agreed basis. While this arrangement may provide advantages, there also may be important disadvantages. For example, royalty amounts may not accurately reflect the quantity or quality of reserves on each tract or the adverse effects that mining operations will have on the value of the tracts on which extraction occurs.

Many of these disadvantages may be eliminated by a second method of dealing with the issues of simultaneously extracting materials from different tracts. That method, which is also based upon an agreement with the landowners, authorizes material to be extracted from different tracts and comingled in the course of operations, but allocates royalty amounts among the landowners on the basis of the proportional quantity and quality of material which each contributed to the total. The method of making such an allocation must obviously be agreed upon but there are often sound engineering methods which permit the parties to determine the percentage of the total amount of materials that came from each tract.

The easiest method of making such an allocation occurs with construction materials, like limestone, which for most commercial purposes are homogeneous, or lithologically similar within a particular deposit. In those instances, allocations of royalties may be made on the basis of a comparison of the quantity or tonnage of materials that were extracted and processed from each tract. Such comparisons can be made by measuring (i) the materials that were transported from each tract, or (ii) the area that has been excavated on each tract. As a cross-check, both methods may be used. In any case, the resulting proportions are applied to the total royalty due to determine each landowner’s share.

Not all materials are homogeneous, of course. Economically important characteristics of some materials may vary considerably within a deposit. In those instances the parties must determine the relative value of the materials extracted from the different tracts, as well as the relative quantity or weight extracted. The determination of value is usually based on sampling the deposit and geostatistically analyzing the results. It is not possible in this brief article to address the different types of sampling and analysis that may be appropriate. It is enough to say that if the material being mined varies in value, a reliable way of measuring the value which comes from each tract must be agreed upon.

There are many reasons it may be advantageous for a mining operation to extract material from different tracts of land simultaneously. Having the ability to take material from different tracts may extend the lives of the reserves on all of the tracts, and may permit the operator to blend different portions of a deposit together to produce products with specifications that could not be produced by a single tract. The ultimate goal is to realize those advantages, while at the same time creating a royalty structure that will allow mine operators and landowners alike to pay, and be paid, an amount that is fair and reasonable and, just as important, certain and verifiable.