It is important to understand which rights are included in a property purchase.
There are two types of surface rights that you should be aware of: mineral.
Surface rights sound the same as they sound: they are your rights and rights to use the land’s surface. The type of property that you own will determine if you have surface rights. This means that you can either develop the land or keep it as it is.
Anything beneath the surface is subject to mineral rights. This includes coal and any other commodities that can be mined. You don’t have any right to control what happens with these natural resources if you don’t hold them.
A Brief History of Mineral Rights
The surface rights of a property do not necessarily mean that you have mineral rights. The United States has “split estates,” which is a term that means that surface rights and minerals are separate entities. People can either own or sell mineral rights.
The United States is unique among other countries because both individuals and corporations can own mineral rights. These rights are not only available to the government. As a way to encourage settlers to move West, this was started in the 19th century with the
homestead and development acts. Today, the General Mining Law still governs mineral rights.
If you live in an area that has a lot of energy resources and is looking to purchase land to mine them, it is important to check if the property you are buying includes mineral rights.
While not all areas are going to have the same amount of minerals, certain areas will be rich in certain types.
Here is a list of a few examples of minerals that are abundant.
- Oil — Alaska. California. Colorado. Louisiana. New Mexico. North Dakota. Oklahoma. Utah. Texas. Wyoming
- Natural gas – Appalachian Basin in Arkansas, Colorado, and Louisiana, Montana. Nebraska. New York. North Dakota. Ohio. Oklahoma. Pennsylvania. South Dakota. Texas. West Virginia. Wyoming
- Coal — Primarily found in the Midwest and Appalachian regions, the Gulf Coast region, and the West
- Gold — Alaska, California
- Silver — Alaska and Arizona, California. Colorado, Idaho. Montana, Nevada. New Hampshire. New Mexico. North Carolina. Oklahoma. Oregon. Pennsylvania. Texas. Utah. Virginia.
- Copper — Arizona and Utah, New Mexico. Montana and Nevada.
- Iron — Michigan and Minnesota
- Uranium — Alabama. Alaska. Arizona. California. Colorado. Idaho. Nebraska. Nevada. New Jersey. New Mexico. North Dakota. Oklahoma. Oregon. Pennsylvania. South Dakota. Texas. Utah. Virginia. Washington.
How can you make a profit?
You have two options if you own mineral rights to your land: you can sell them or lease them. Each option has its pros and cons. You can either collect royalty interest or work interest to make money. You can choose which option you prefer.
In either case, you must get them in front of a lot of potential buyers to maximize mineral rights. This will ensure that you get the best deal. Professionals like PheasantEnergy can help you navigate this process.
A lawyer is a good idea to keep on top of your investment and review whether or not it is worth continuing with the agreement. Exxon Mobil is not the easiest company to work with. As a now 110-year-old lease shows, it can be almost impossible. It is important to carefully consider the terms of your lease.
What if you don’t own the mineral rights?
Your property doesn’t have to be mineral-rights owned. You can still make money as the owner of the surface rights if someone else holds the mineral rights. You are entitled to ingress and egress. These rights may vary by state, but you could be entitled to compensation from the company that comes onto your land to take the minerals.
Your land could be affected by mining operations. You may be entitled to damages compensation. The company may be allowed to enter and leave your land. Talk to a lawyer to find out what your rights as a surface-right owner are.
Are You the Mineral Rights Owner?
You will need to establish whether mineral rights are yours to sell, lease, or use them at some point in the future. This research should be done BEFORE purchasing the property. Otherwise, you will remain with the property.
In some cases, you can determine the owner of a property by performing a title look. However, it is best to perform a Mineral Rights Search. You can determine if the mineral rights were ever reserved by the previous owner by looking at the land ownership records.
It’s a smart idea to hire the assistance of a title company or independent abstractor to do the title and mineral rights search for you before closing on the deal.
After the historical deeds have been collected from the county office, an experienced eye will be required to examine them to determine how mineral rights were transferred over time.
This is the tricky part: in many cases, the chain of title does not include any statement about who owns the current mineral rights. Except if it explicitly states that the mineral rights were excluded from the sale, they will generally be assumed to be included with the transfer of property from one owner.
Another wrinkle in the process is that even though a dee states that mineral rights are included in the sale, this could be incorrect.
If any of the landowners from the original land grant held back the transfer, it is safe to assume that those mineral rights are not being included in the transfer to you.
To be sure that mineral rights can be transferred, it is important to review and examine historical records and deeds. This will ensure that they have not been separated from surface rights in a previous conveyance.
It is possible to find out if the mineral rights have been withheld or transferred to another party.
Mineral Rights Leasing
One common way to convey mineral rights in some states is for the property owner to lease them to a third party (usually an exploratory company).
This method is sometimes difficult to find. These leases are usually in place for as long as production continues. A two-year lease can be extended for any number of years beyond the term, provided that the minerals are still being excavated.
If the leaseholder does not release the lease or discharge it after expiration, the lease could remain on the records, making it difficult to determine when the lease expired. To confirm the end of the lease term, contact the leaseholder to request a discharging of the lease.
Legal Disclaimer: This article is not intended to be taken as legal advice. Understanding the legalese behind property conveyances and reading old land records requires special attention to detail. It can be overwhelming to go through hundreds of documents from decades ago or even centuries back. This is especially true for an untrained eye.
While you are thinking about this topic, another question that you should consider is
Are mineral rights relevant to your purchasing decision?
Except for drilling/fracking on a neighboring parcel, which could affect the use of the parcel’s surface, in most cases, the mineral rights will not be used. The ownership of mineral rights could be irrelevant if the owner does not intend to drill or mine the land.
You may not be able to own both the mineral rights and the surface rights if you own property in an energy-rich region. You still have the possibility of making a profit, regardless of whether you own one or two of these rights. This assumes that you bought it at the correct price and place