* People own surface rights, companies own minerals below
* Jobs and economic development vs environmental protection
By Andy Greder
PINE CITY, Minn., Dec 13 (Reuters) - Mike Picek has always intended to pass along his hunting land and log cabin in the woods of northern Minnesota to his children and grandchildren - a plan now in jeopardy due to mining interests.
"All these years, I've been set on giving it to them, and now I could lose it," said Picek, an entrepreneur for 50 years.
Picek owns the surface rights to his land near Ely, a gateway to the popular Boundary Waters Canoe Area Wilderness, but the state held the mineral rights beneath it and sold them in June, leaving him and many other landowners waiting to learn if mining companies will be digging into their land.
The next move is up to the mining companies, which are looking for copper, nickel and other metal deposits in the Arrowhead region near Lake Superior.
Drilling would mar the wild nature of the landscape and could diminish the quality of hunting, Picek and other landowners say. If profitable deposits are discovered, the mining companies could negotiate to lease or acquire some or all of their land.
The contentious lease sales in Minnesota reflect a broader conflict between environmental groups and companies looking for or transporting natural resources in the United States.
Proponents see jobs and the potential for billions of dollars in economic development from mining metals in Alaska, iron ore in Wisconsin, and moving oil from Canada to Texas.
Skeptics consider the potential for catastrophic environmental damage or accidents.
Twin Metals Minnesota believes 32,000 acres it controls near the Boundary Waters could be one of the largest precious metal deposits of its kind in the world, containing palladium and platinum.
Twin Metals is majority-owned by Duluth Metals Limited and believes the project could eventually add hundreds of jobs and millions of dollars in economic development.
In Minnesota, the state acquired land because of tax forfeits years ago and when it re-sold the surface rights to buyers such as Picek, it retained the mineral rights.
As a result, the state controls the mineral rights on more than 12 million acres (4.9 million hectares), said Aaron Vande Linde, a former transactions manager at the Minnesota Department of Natural Resources' Lands and Minerals Division.
The sale of rights to minerals and other resources currently generates about $25 million a year for Minnesota's public elementary and secondary schools.
The June sale covered dozens of land parcels totaling 22,000 acres (8,900 hectares), including the rights under Picek's land.
After the sale, more than 140 people signed a petition asking Minnesota to delay a planned October sale of mineral leases on 9,500 acres and conduct an environmental impact study.
Three companies bid on parcels in October and on Dec. 6, the state's executive council delayed a decision on awarding mineral rights leases to give a state appeals court an opportunity to decide if the state should conduct an environmental review.
SEARCHING FOR UNDERGROUND TREASURE
After winning bids, mining companies use indirect methods such as sensors carried by helicopters and airplanes, and direct methods with permission from the surface owner to take test samples, at times drilling hundreds of feet down.
If the results are favorable, a multi-year program will determine if a mine should be set up based on the size of the deposits, the market demand and environmental protection plans, the Minnesota Department of Natural Resources said.
The filing of an exploration plan would trigger more state actions, said Kathy Lewis, assistant director at the Lands and Minerals Division.
Larry Dewester, a retired teacher who lives near Grand Marais in northeastern Minnesota and has land in the June lease sales, said he was not satisfied with the state's communication with landowners, but believes property owners have little recourse.
"You have large mining interest and huge state interest operating against little guys like us that basically are powerless," Dewester said.
It is unclear if the rules will be changed. Democrats took control of the Minnesota legislature in the November election and have not released their plans for 2013.
Vande Linde said the state properly notifies homeowners. A notice of intent is published at least 90 days prior to a sale. No leases are issued without notice of the pending sale and about 10 percent of land offered is actually leased, he said.
Dewester said it is too little, too late for surface owners.
"Everything is ready (for the state) to drop the ax before they tell you what is going on," Dewester said.
Charlie Chernak, a real estate broker from Ely, said more people are asking about the status of mineral lease rights and purchases have been limited where the rights are severed. The result is a potentially lost value in lake homes, he said.
"They want to be near the wilderness and peace and quiet and loons and not listening to drill rigs off in the distance," Chernak said of landowners.